CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Statements in this proxy statement regarding the proposed transaction between Parent and the Company, the expected timetable for completing the
transaction, future financial and operating results, future opportunities for the combined company and any other statements about Parent and the Company managements' future expectations, beliefs,
goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact
(including statements containing the words "believes," "plans," "anticipates," "expects," estimates and similar expressions) should also be considered to be forward looking statements, although not
all forward-looking statements contain these identifying words. Readers should not place undue reliance on these forward-looking statements. The Company's actual results may differ materially from
such forward-looking statements as a result of numerous factors, some of which the Company may not be able to predict and may not be within the Company's control. Factors that could cause such
differences include, but are not limited to, (i) the risk that the proposed merger may not be completed in a timely manner, or at all, which may adversely affect the Company's business and the
price of its common stock, (ii) the failure to satisfy all of the
closing conditions of the proposed merger, including the adoption of the merger agreement by the Company's stockholders and the receipt of certain governmental and regulatory approvals in the U.S. and
in foreign jurisdictions, (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, (iv) the effect of the
announcement or pendency of the proposed merger on the Company's business, operating results, and relationships with customers, suppliers, competitors and others, (v) risks that the proposed
merger may disrupt the Company's current plans and business operations, (vi) potential difficulties retaining employees as a result of the proposed merger, (vii) risks related to the
diverting of management's attention from the Company's ongoing business operations, and (viii) the outcome of any legal proceedings that may be instituted against the Company related to the
merger agreement or the proposed merger. There are a number of important, additional factors that could cause actual results or events to differ materially from those indicated by such forward looking
statements, including the factors described in the Company's Annual Report on Form 10-K for the year ended January 28, 2017 and its most recent quarterly report filed with the SEC. The
Company disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this filing.
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THE SPECIAL MEETING
Time, Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the special meeting
to be held on [], 2017, starting at [], local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109, or at any adjournment or postponement thereof. At the special meeting, holders of Company common stock will be asked to approve the proposal to adopt the
merger agreement, to approve the nonbinding advisory proposal regarding "golden parachute" compensation and to approve the proposal to approve one or more adjournments of the special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
Our
stockholders must approve the proposal to adopt the merger agreement in order for the merger to be consummated. If our stockholders fail to approve the proposal to adopt the merger
agreement, the merger will not be consummated. A copy of the merger agreement is attached as
Annex A
to this proxy statement, which we encourage
you to read carefully in its entirety.
Record Date and Quorum
We have fixed the close of business on [], 2017 as the record date for the special meeting, and only
holders of record of Company common stock on the record date are entitled to vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares
of Company common stock at the close of business on the record date. On the record date, there were [] shares of Company common stock outstanding and entitled to
vote. Each share of Company common stock entitles its holder to one vote on all matters properly coming before the special meeting.
A
majority of the shares of Company common stock that are issued, outstanding and entitled to vote at the close of business on the record date, present in person or represented by proxy,
at the special meeting constitutes a quorum for the purposes of the special meeting. Shares of Company common stock represented at the special meeting but not voted, including shares of Company common
stock for which a stockholder directs voting "
ABSTAIN
", as well as broker non-votes (described below), will be counted for purposes of establishing a
quorum. Because none of the proposals to be voted on at the special meeting are routine matters for which brokers may have discretionary authority to vote, the Company does not expect any broker
non-votes at the special meeting. A quorum is necessary to transact business at the special meeting, including the adoption of the merger agreement and approval of the proposal regarding "golden
parachute" compensation. The special meeting may be adjourned whether or not a quorum is present. Once a share of Company common stock is represented at the special meeting, it will be counted for the
purpose of determining a quorum at the special meeting and any recess or adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum
will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or recessed.
Attendance
Only stockholders of record or their duly authorized proxies or beneficial owners with proof of ownership have the right to attend the special
meeting. If your shares of Company common stock are held through a bank, brokerage firm or other nominee, please bring to the special meeting a copy of your brokerage statement evidencing your
beneficial ownership of Company common stock. If you are the representative of a corporate or institutional stockholder, you must present proof that you are the representative of such stockholder.
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Vote Required
Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of
Company common stock entitled to vote thereon as of the record date. For the proposal to adopt the merger agreement, you may vote "
FOR
,"
"
AGAINST
" or "
ABSTAIN
." Voting "
ABSTAIN
" will not be
counted as a vote cast in favor of the proposal to adopt the merger agreement but will count for the purpose of determining whether a quorum is present.
If you fail to submit a
proxy or to vote in person at the special meeting, or if you vote "ABSTAIN," it will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.
If
your shares of Company common stock are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares
of Company common stock, the "stockholder of record." This proxy statement and proxy card have been sent directly to you by the Company.
If
your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of Company common stock held in "street
name." In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the
stockholder of
record. As the beneficial owner of shares of Company common stock held in "street name," you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following
their instructions for voting. If you hold your shares of Company common stock in "street name," please contact your bank, brokerage firm or other nominee for their instructions on how to vote your
shares. Please note that if you are a beneficial owner of shares of Company common stock held in "street name" and wish to vote in person at the special meeting, you must provide a legal proxy from
your bank, brokerage firm or other nominee at the special meeting.
Under
the rules of the Nasdaq Stock Market, banks, brokerage firms or other nominees who hold shares in "street name" for customers have the authority to vote on "discretionary"
proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to
approving non-discretionary matters, such as the proposal to adopt the merger agreement, the proposal to approve the nonbinding advisory proposal regarding "golden parachute" compensation and the
proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to
approve the proposal to adopt the merger agreement, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other
nominees are not empowered to vote those shares of Company common stock on non-discretionary matters. Shares held by banks, brokerage firms or nominees that are present in person or by proxy at the
special meeting but with respect to which the broker or other stockholder of record is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does
not have discretionary voting power on such proposal are referred generally as "broker non-votes." These broker non-votes will be counted for purposes of determining a quorum, but will have the same
effect as a vote "
AGAINST
" the proposal to adopt the merger agreement. Because none of the proposals to be voted on at the special meeting are routine
matters for which brokers may have discretionary authority to vote, the Company does not expect any broker non-votes at the special meeting.
Approval
of the advisory proposal regarding "golden parachute" compensation and approval of the proposal to approve one or more adjournments of the special meeting, if necessary or
appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement, require a majority of the votes
cast on each of these proposals. For the nonbinding advisory proposal regarding "golden parachute" compensation and the
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proposal
to approve one or more adjournments of the special meeting, if necessary or appropriate if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the
merger agreement, you may vote "
FOR
," "
AGAINST
" or
"
ABSTAIN
." For purposes of each of these proposals, if you fail to submit a proxy or to vote in person at the special meeting, or if you have given a
proxy and vote "
ABSTAIN
," the shares of Company common stock will not be counted in respect of, and will not have any effect on, the proposal.
If
you are a stockholder of record, you may vote your shares of Company common stock, or have such shares voted, on matters presented at the special meeting in any of the following
ways:
-
-
in personyou may attend the special meeting and cast your vote there; or
-
-
by proxystockholders of record have a choice of having their shares voted by proxy by submitting a proxy in one of the following
ways:
-
-
over the Internetthe website for Internet proxy submission is on your proxy card;
-
-
by using a toll-free telephone number noted on your proxy card; or
-
-
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope.
If
you are a beneficial owner of Company common stock held in "street name," you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order
to have your shares of Company common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a
beneficial owner of Company common stock held in "street name" and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee.
A
control number, located on your proxy card, is designed to verify your identity and allow you to submit a proxy for your shares of Company common stock, and to confirm that your voting
instructions have been properly recorded when submitting a proxy over the Internet or by telephone.
Please
refer to the instructions on your proxy or voting instruction card to determine the deadlines for submitting a proxy over the Internet or by telephone. If you choose to submit
your proxy by mailing a proxy card, your proxy card must be received by our Secretary by the time the special meeting begins.
Please do not send in your stock certificates with
your proxy card
. Following the consummation of the merger, a separate letter of transmittal will be mailed to you that will enable you to surrender your stock certificates and
receive the per share merger consideration.
If
you vote by proxy, regardless of the method you choose to submit a proxy, the individuals named as your proxies on the enclosed proxy card, and each of them, with full power of
substitution, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone proxy processes or the enclosed proxy card, you may specify whether
your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.
If
you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares of Company common stock represented
by your properly signed proxy will be voted "
FOR
" the proposal to adopt the merger agreement, "
FOR
"
approval of the nonbinding advisory proposal regarding "golden parachute" compensation and "
FOR
" the proposal to approve one or more adjournments of the
special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
If
you have any questions or need assistance voting your shares, please call D.F. King, our proxy solicitor, toll-free at (866) 796-7179.
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IT IS IMPORTANT THAT YOU SUBMIT A PROXY FOR YOUR SHARES OF COMPANY COMMON STOCK PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. PLEASE COMPLETE,
DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND THE
SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.
Shares Owned by Our Directors and Executive Officers
As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate,
[] shares of Company common stock, representing []% of the outstanding shares of Company common stock on the record date. The
directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock "
FOR
" the
proposal to adopt the merger agreement, "
FOR
" approval of the nonbinding advisory proposal regarding "golden parachute" compensation and
"
FOR
" the proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
Proxies and Revocation
Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, or by returning the
enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person at the special meeting. If your shares of Company common stock are held in "street name" by your bank, brokerage
firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or
other nominee. If you fail to submit a proxy or to vote in person at the special meeting, or if you vote "
ABSTAIN
," or if you do not provide your bank,
brokerage firm or other nominee with voting instructions, your shares of Company common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote
"
AGAINST
" the proposal to adopt the merger agreement.
You
have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later-dated proxy through any of
the methods available to you, by giving written notice of revocation to our Secretary, which must be received by the Company at Five Hundred Staples Drive, Framingham, Massachusetts 01702 by the time
the special meeting begins, or by attending the special meeting and voting in person. Attendance at the special meeting alone will not revoke your proxy.
Adjournments and Recesses
Although it is not currently expected, the special meeting may be adjourned or recessed, including for the purpose of soliciting additional
proxies, if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement or if a quorum is not present at the special meeting. Other than an
announcement to be made at the special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or recess of the special
meeting for the purpose of soliciting additional proxies will allow the Company's stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special
meeting as adjourned or recessed.
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Appraisal Rights
If the merger is completed, record holders of Company common stock as of the record date who submit a written demand for appraisal before the
vote is taken on the adoption of the merger agreement, do not fail to perfect or otherwise effectively withdraw their demand or waive or lose the right to appraisal, do not vote in favor of the
adoption of the merger agreement, hold their shares of Company common stock continuously through the effective time of the merger and otherwise comply with the procedures set forth in
Section 262 of the DGCL may elect to pursue their appraisal rights to receive, in lieu of the $10.25 per share merger consideration, an amount in cash equal to the judicially determined "fair
value" of their shares, which fair value will be determined as of the effective time of the merger and could be more or less than, or the same as, the per share merger consideration for the common
stock. For a summary of the procedures set forth in Section 262 of the DGCL, see "
Appraisal Rights
" beginning on page
[]. An executed proxy that is not marked "
AGAINST
" or "
ABSTAIN
"
will be voted "
FOR
" the adoption of the merger agreement and the stockholder submitting that proxy will lose the right to seek an appraisal of his, her
or its shares of Company common stock.
A
copy of Section 262 of the DGCL is included as
Annex D
to this proxy statement. Failure to follow the procedures set forth
in Section 262 of the DGCL will result in the loss of appraisal rights. We encourage you to read these provisions carefully and in their entirety.
ANY
COMPANY STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO SHOULD REVIEW
ANNEX
D
CAREFULLY AND SHOULD CONSULT HIS, HER OR ITS LEGAL ADVISOR, SINCE FAILURE TO TIMELY AND FULLY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH
RIGHTS.
Solicitation of Proxies; Payment of Solicitation Expenses
The Company has engaged D.F. King to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay D.F.
King a fee of approximately $17,500. The Company will also reimburse D.F. King for reasonable out-of-pocket expenses and will indemnify D.F. King and its affiliates against certain claims, expenses,
losses, damages, liabilities and judgments. The Company may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company common
stock for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees
may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Questions and Additional Information
If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the
enclosed proxy card or voting instructions, please call D.F. King, our proxy solicitor, toll-free at (866) 796-7179.
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Table of Contents
PARTIES TO THE MERGER
THE COMPANY
Staples, Inc.
Five Hundred Staples Drive
Framingham, Massachusetts 01702
(508) 253-5000
Staples
brings technology and people together in innovative ways to consistently deliver products, services and expertise that elevate and delight customers. Staples is in business with
businesses and is passionate about empowering people to become true professionals at work.
We
are committed to providing superior value to our customers through a broad selection of products, easy to use websites and mobile platforms, an integrated retail and online shopping
experience and a wide range of print and marketing and technology services. We pioneered the office products superstore concept by opening the first office products superstore in Brighton,
Massachusetts in 1986 to serve the needs of small businesses, and we currently serve businesses of all sizes and consumers primarily in North America, with additional offices in South America and
Asia. Our delivery businesses account for a majority of our sales and many of our delivery customers place their orders online, making Staples one of the largest internet resellers in the world.
Shares of Staples common stock are traded on The Nasdaq Global Select Market under the symbol "SPLS." The principal executive offices of Staples are located at Five Hundred Staples Drive, Framingham,
Massachusetts 01702, and its telephone number is (508) 253-5000.
For
more information about the Company, see "
Where You Can Find More Information
" beginning on
page [].
PARENT
Arch Parent Inc.
c/o Sycamore Partners Management, L.P.
9 West 57th Street, 31st Floor
New York, NY 10019
(212) 796-8500
Arch
Parent Inc. is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and the
other transactions contemplated thereby. Parent is an affiliate of Sycamore and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger
agreement and the related financing transactions. Upon completion of the merger, the Company will be a wholly-owned subsidiary of Parent. The principal executive offices of Parent are located at 9
West 57th Street, 31st Floor, New York, New York 10019, and its telephone number is (212) 796-8500.
MERGER SUB
Arch Merger Sub Inc.
c/o Sycamore Partners Management, L.P.
9 West 57th Street, 31st Floor
New York, NY 10019
(212) 796-8500
Arch
Merger Sub Inc. is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and
the other transactions contemplated thereby. Merger Sub is a wholly-owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated
by the merger agreement and the related financing transactions. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the
merger, which we refer to as the surviving corporation. The principal executive offices of Merger Sub are located at 9 West 57th Street, 31st Floor, New York, New York 10019, and
its telephone number is (212) 796-8500.
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THE MERGER
This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to
this proxy statement as
Annex A
. You should read the entire merger agreement carefully as it is the legal document that governs the merger.
The
merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to do business following
the merger. As a result of the merger, the Company will cease to be a publicly traded company. You will not own any shares of the capital stock of the surviving corporation.
Overview of the Merger
The Company, Parent and Merger Sub entered into the merger agreement on June 28, 2017. Under the terms of the merger agreement, Merger
Sub will be merged with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. Parent and Merger Sub are beneficially owned by investment funds affiliated
with Sycamore. In connection with the merger, each share of Company common stock issued and outstanding immediately prior to the effective time of the merger (other than the dissenting shares and the
cancelled shares) will be automatically converted into the right to receive the per share merger consideration, without interest and subject to deduction for any required withholding tax.
Following
and as a result of the merger:
-
-
Company stockholders will no longer have any interest in, and will no longer be stockholders of, the Company, and will not participate in any
of the Company's future earnings or growth;
-
-
shares of Company common stock will no longer be listed on the Nasdaq Stock Market, and price quotations with respect to shares of Company
common stock in the public market will no longer be available; and
-
-
the registration of shares of Company common stock under the Exchange Act will be terminated.
Directors and Officers of the Surviving Corporation
The directors of Merger Sub immediately prior to the effective time of the merger will be the initial directors of the surviving corporation.
The officers of the Company immediately prior to the effective time of the merger will be the initial officers of the surviving corporation.
Background of the Merger
The Board, together with members of the Company's senior management, regularly reviews and assesses the Company's business and competitive
landscape and periodically reviews and assesses strategic alternatives available to enhance value to stockholders.
On
August 15, 2016, the Board held a telephonic meeting, with members of senior management and representatives of Barclays and Morgan Stanley present for certain portions.
Barclays has been a long-time financial advisor to the Company and Morgan Stanley had been retained by the Board earlier in 2016 to assist in reviewing the Company's strategic alternatives in the
event that the Company's announced merger with Office Depot, Inc. were not consummated. At the meeting, the Board reviewed the challenging market environment for, and the declining performance
of, the Company's retail business. The Board also reviewed, with the assistance of Barclays and Morgan Stanley, various strategic alternatives for the Company's North American retail business and the
Company as a whole, including the continued execution of the Company's business plan as an independent company; a spin-off of the retail business to stockholders; a spin-off and concurrent sale of the
retail business to
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Party
A, a potential strategic buyer in the Company's industry; a sale of the retail business; and a sale of the Company. The Company's Chief Legal Officer discussed certain antitrust risks of
transacting with Party A. The Board, with Barclays and Morgan Stanley, then discussed the limited number of strategic buyers participating in the Company's industry and the low likelihood that any of
them would be interested in such an acquisition in view of their strategic direction or the absence of a compelling strategic rationale for such an acquisition. The Board determined to continue to
explore the available strategic alternatives and authorized management to hold preliminary exploratory discussions with Party A and three identified potential financial buyers, Parties B, C and
D, that the Board believed would be potentially interested in, and capable of, executing a transaction with the Company.
On
August 18, 2016, Ms. Shira Goodman, the then interim Chief Executive Officer of the Company (who was appointed Chief Executive Officer in September 2016), reached out to
the Chief Executive Officer of Party A to schedule a meeting. A meeting was ultimately scheduled for September 8, 2016.
On
August 24, 2016, Ms. Goodman and Ms. Christine Komola, the Chief Financial Officer of the Company, held preliminary exploratory discussions with Party B, a
financial buyer.
On
September 2, 2016, Ms. Goodman and Ms. Komola held preliminary exploratory discussions with Party C, a financial buyer.
On
or about September 2, 2016, the Company and Party A entered into a mutual confidentiality agreement, which included a reciprocal 12-month standstill provision that would
terminate, as to Party A, upon the signing of a definitive agreement with a third party for the sale of the Company.
On
September 8, 2016, Ms. Goodman and Ms. Komola met with the Chief Executive Officer and Chief Financial Officer of Party A and discussed in general terms a
possible acquisition of the Company's North American retail business. At the meeting, Party A indicated that it would be interested in exploring such an acquisition, particularly if it included the
Staples brand and website URL.
On
September 13, 2016, the Board held a meeting, with members of senior management and representatives of Barclays and Morgan Stanley present for certain portions. At the meeting,
the Board reviewed possible strategic alternatives, including continued execution of the Company's business plan as an independent company; a spin-off of the retail business to stockholders; a
spin-off and concurrent sale of the Company's retail business to Party A; a sale of the Company's retail business; and a sale of the Company as a whole. The Board discussed the interest of Party A in
a possible transaction and
determined that the Company would not be interested in including the Staples brand or website URL in any sale of its retail business in view of the adverse impact such sale would have on the Company's
remaining business. The Company's Chief Legal Officer reviewed certain antitrust risks relating to any such transaction. After reviewing the strategic alternatives, the Board authorized management to
continue to explore the potential separation of the Company's retail business and also authorized management to continue to hold exploratory meetings with the three identified financial buyers that
the Board believed would be potentially interested in, and capable of, executing a transaction with the Company.
On
September 14, 2016, Ms. Goodman communicated to the Chief Executive Officer of Party A that the Board was interested in exploring a possible sale of the Company's retail
business if it were not to include the Staples brand or website URL.
On
September 23, 2016, the Chief Executive Officer of Party A communicated to Ms. Goodman that Party A would be interested in a potential acquisition of the Company's
retail business only if it were to include the Staples brand and website URL.
On
October 14, 2016, Ms. Goodman and Ms. Komola held preliminary exploratory discussions with Party D, a financial buyer.
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On
October 24, 2016, the Company and Party C entered into a confidentiality agreement, which contained a 12-month standstill obligation that would terminate upon the signing of a
definitive agreement with a third party for the sale of the Company.
On
November 30, 2016, Ms. Komola, with representatives of Barclays, had preliminary discussions with management of Party A, and its financial advisor, about the possible
sale of the Company's retail business. At the meeting, Party A indicated that it would be interested in acquiring the U.S. retail business but not the Canadian retail business. Following such
discussions, both parties indicated that they would further evaluate such a transaction.
On
December 6, 2016, the Board held a meeting, with members of senior management and representatives of Barclays and Morgan Stanley present for certain portions. At the meeting,
the Board and management reviewed and discussed the continuing market challenges that made it difficult to forecast the Company's future performance, including the secular decline in office products
sales, the continuing shift in customer preference from retail stores to online sales, and the increased competition
from existing and new market participants. At the meeting, the Board reviewed potential strategic alternatives, including continued execution of the Company's business plan as an independent company;
a spin-off of the Company's retail business to stockholders; a spin-off and concurrent sale of the Company's retail business to Party A; a sale of the retail business; and a sale of the Company as a
whole. The Board reviewed Party A's potential interest in an acquisition of the Company's U.S. retail business if the Staples brand and website URL were included. Legal counsel reviewed certain
antitrust risks relating to any such acquisition, including an assessment of the likelihood of an extended review by federal or state governmental authorities. The Board also reviewed specific
potential financial buyers that it believed would be most likely to have both the financial capability and interest to acquire the Company. The Board determined that the Company should continue to
pursue discussions with Party A regarding the potential sale of the U.S. retail business and also pursue discussions with a selected group of five identified financial buyers (Sycamore and
Parties B, C, D and E) regarding their potential interest in an acquisition of the Company.
Following
the December Board meeting, representatives of Barclays and Morgan Stanley approached the identified five potential financial buyers to assess their interest in exploring a
potential acquisition of the Company as a whole. Also, Ms. Komola informed the Chief Financial Officer of Party A, and Barclays and Morgan Stanley informed the financial advisor to Party A,
that the Board had authorized the Company to share additional information with Party A to assist it in formulating a proposal to acquire the Company's U.S. retail business.
On
December 19, 2016, the Company entered into a Clean Room Agreement with Party A, pursuant to which the Company subsequently provided to selected personnel of, and advisors to,
Party A certain information concerning the Company's retail business.
In
late December, 2016 and early January, 2017, the Company and each of Sycamore, Party B, Party D and Party E, entered into confidentiality agreements, which contained a 12-month
standstill obligation that would terminate upon the signing of a definitive agreement with a third party for the sale of the Company.
On
January 18 and 19, 2017, Ms. Goodman, Ms. Komola and Mr. Jeffrey Hall, the Company's Vice Chairman and Chief Administrative Officer, together with
representatives of Barclays and Morgan Stanley, met with each of the five identified financial buyers to discuss the Company's business. Subsequent to these meetings, the Company furnished to each of
those potential buyers additional information concerning the Company's business to facilitate their assessment of the Company.
On
January 19, 2017, Party A submitted a non-binding preliminary indication of interest for two alternative potential transactions: an acquisition of the Company's U.S. retail
business, excluding the Staples brand and website URL, for $500 million in cash, or the acquisition of the Company's U.S. retail business, including the Staples brand and website URL, in an
all-stock transaction for shares
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representing
up to 15% ownership of Party A, in each case subject to numerous conditions, including the completion of diligence.
On
January 24, 2017, the Board held a telephonic meeting, with members of senior management and representatives of Barclays and Morgan Stanley present for certain portions. At the
meeting, the Board reviewed the preliminary discussions that had taken place with the identified five potential financial buyers and the preliminary non-binding indication of interest received from
Party A for the acquisition of the Company's U.S. retail business. Representatives of Barclays and Morgan Stanley reviewed and discussed certain financial aspects of the proposals from
Party A. After discussion, the Board determined that the proposals from Party A reflected valuations of the Company's U.S. retail business that were too low to act upon and that any
discussions with Party A should be put on hold while the Company explored further the level of interest of potential financial buyers. The Board instructed Barclays and Morgan Stanley to convey
to the financial advisor to Party A that its proposals were too low to act upon. The Board also instructed management, and Barclays and Morgan Stanley, to continue to pursue exploratory
discussions with the identified five potential financial buyers. At the meeting, the Board also determined that it would be advisable, for administrative convenience, to establish a transaction
committee, comprised of at least three independent directors, to, among other things, oversee and direct the process of exploring and considering a sale or other strategic transaction involving the
Company if and when further progress was made in the discussions with the potential bidders.
Following
the January 24 Board meeting, preliminary diligence calls were held between members of management, together with representatives of Barclays and Morgan Stanley, and each
of Sycamore, Party B, Party C and Party E.
On
February 16, 2017, the Board, by unanimous written consent, established a Transaction Committee, which we refer to as the Transaction Committee or the Committee, comprised of
four independent directors, Messrs. Robert Sulentic, Curtis Feeny, John Lundgren and Paul Walsh, with power and authority to oversee and direct the process of exploring and considering a sale
or other strategic transaction involving the Company, with final approval of any such transaction to require action by the full Board.
On
February 17, 2017, the Transaction Committee held a telephonic meeting, with a representative of Wilmer Cutler Pickering Hale and Dorr LLP, which we refer to as
WilmerHale, counsel to the Company, present for certain portions. During the meeting, WilmerHale reviewed with the Transaction Committee the scope of the Board resolutions establishing the Committee
and the directors' fiduciary duties under Delaware law. The Transaction Committee considered and approved a form of letter to be delivered to members of Staples management instructing them that, among
other things, there should be no discussions between management and potential buyers regarding employment, compensation or equity participation of management in connection with any possible
transaction until the Board determined that such discussions were appropriate. The Transaction Committee also discussed the
engagement of financial advisors and legal counsel in connection with a potential transaction. After discussion, the Transaction Committee determined to retain Barclays and Morgan Stanley as financial
advisors to the Board, subject to a review of disclosures from Barclays and Morgan Stanley as to their respective relationships with the identified potential bidders and also the negotiation of the
terms of engagement. The Transaction Committee also determined to engage special Delaware counsel to advise the Transaction Committee and the independent directors with regard to their fiduciary
duties.
Between
February 15 and 21, 2017, Ms. Goodman and other members of management of the Company, with representatives of Barclays and Morgan Stanley, held telephonic
discussions with each of Sycamore, Party B, Party C, Party D and Party E to discuss the business of the Company. Each of these potential buyers was also granted access to a virtual data room
containing selected financial and business information regarding the Company.
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On
February 23 and 24, 2017, Sycamore, Party B, Party C and Party E each submitted to the Company preliminary, non-binding indications of interest for a potential transaction,
subject to various conditions, including the completion of diligence. Sycamore submitted a proposal to acquire the Company for a price of $11.00 per share in cash and indicated that it would require
financial support from its limited partners to complete an acquisition of the Company as a whole. Sycamore also submitted alternative proposals to acquire the Company's North American retail business
for $1.2 to $1.4 billion or the Company's U.S. retail business for $375 to $450 million. Party B submitted a proposal to acquire the Company for a price of $11.15 to $11.55 per share in
cash (including a $1.40 per share cash dividend) and also expressed interest in alternative transactions, including participation in a leveraged recapitalization, an acquisition of the Company's North
American retail and online consumer business, potentially coupled with a corresponding investment in the remaining public company, or an acquisition of the Company's North American delivery and
international businesses concurrent with a sale of the Company's North American retail business to a third party. Party C submitted a proposal to acquire the Company for a price of $11.00 to $11.50
per share in cash, and also expressed interest in investing in the Company as a minority investor or purchasing the Company's North American delivery business. Party C expressed in its proposal an
intention to explore a concurrent or subsequent separation of all or part of the North American retail operations. Party E submitted a proposal to acquire the Company for a price of $10.50 to $11.50
per share in cash. Party D declined to submit an indication of interest and indicated it was not interested in continuing to pursue discussions regarding a potential transaction.
On
February 27, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson & Corroon LLP, which we refer to as Potter Anderson, present for certain portions. At the meeting, representatives of Barclays and Morgan Stanley reviewed certain financial
aspects of the proposals received from Sycamore, Party B, Party C and Party E. It was noted that Party B had requested a 30-day period of exclusivity, which was rejected by the Committee.
Representatives of Barclays and Morgan Stanley informed the Committee that they had not been contacted by Party A regarding a potential transaction with the Company since they had conveyed to Party A
the Board's determination
that its proposals to acquire the Company's U.S. retail business were inadequate. After discussion, the Committee determined that the Company should allow Sycamore and Parties B, C and E to continue
to perform diligence on the Company with the goal of obtaining firmer and higher bids for the sale of the Company. The Committee then began a discussion as to whether there were other potential
strategic bidders that should be included in the Company's strategic process. The Committee also determined to retain Potter Anderson as special Delaware counsel. The Committee also discussed the
prior relationships of Barclays and Morgan Stanley with the Company. Specifically, it was noted that Barclays had served as financial advisor to the Company in connection with its 2015 merger
agreement with Office Depot, which was subsequently terminated, and the sales of the Company's U.K. and European businesses in 2016. It was also noted that Morgan Stanley had been engaged by the Board
in February 2016 to assist in a review of the Company's strategic alternatives and had also been engaged in 2016 to serve as financial advisor to the Company in connection with the sale of the
Company's Australia and New Zealand businesses. After discussion, the Committee determined that it would retain Barclays and Morgan Stanley as financial advisors to the Board in connection with a
potential strategic transaction, subject to review of disclosures as to the relationships of such advisors with the potential bidders and negotiation of satisfactory terms of engagement.
On
March 1, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays and Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. During the meeting, representatives of Barclays and Morgan Stanley reviewed certain financial aspects of a potential sale of the Company's U.S. retail business
to Party A. Legal counsel reviewed potential U.S. antitrust issues that could arise from any sale of the Company's U.S. retail business to Party A. Management of the Company also discussed certain
operational issues
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relating
to the separation of the U.S. retail business from the remainder of the Company. After discussion, the Committee determined to continue to explore with financial buyers the potential sale of
the Company as a whole and to evaluate later in the process whether to re-engage with Party A regarding a possible sale of the U.S. retail business.
On
March 5, 2017, the Transaction Committee held an in-person meeting, with Potter Anderson present for certain portions. A representative of Potter Anderson reviewed for the
Committee their fiduciary duties in considering strategic alternatives and also reviewed possible processes and timelines for a potential transaction.
On
March 6, 2017, the Transaction Committee held an in-person meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. At the meeting, representatives of Barclays and Morgan Stanley reviewed with the Committee the Company's outreach to third parties with respect to a potential
transaction, the preliminary non-binding indications of interest received by the Company, and certain financial aspects of such indications of interest. Representatives of Barclays and Morgan Stanley
also reviewed with the
Committee the limited number of potential strategic buyers. After discussion, it was the consensus of the Committee that the Company should not contact any of such strategic buyers because of the low
likelihood that any of such strategic buyers would be interested in a transaction with the Company (in view of their strategic direction or the absence of a compelling strategic rationale for such a
transaction) and because, in light of that low likelihood, it would be inadvisable to risk the identified financial buyers becoming unwilling to continue to devote the time and resources necessary to
perform diligence on the Company if it became known that potential strategic buyers were included in the sale process. The Committee also discussed the competitive risks of sharing confidential
information with strategic buyers not likely to be bidders.
On
March 6 and 7, 2017, the Board held an in-person meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Anderson
present for certain portions. At the meeting, representatives of WilmerHale and Potter Anderson reviewed with the directors their fiduciary responsibilities in considering strategic alternatives, as
well as various ways in which a sale process might be conducted to comply with such duties, including through a pre-signing market check. The Board reviewed the indications of interest received from
Sycamore, Party B, Party C and Party E on February 23 and 24, as well as the indications of interest received from Party A on January 19. Representatives of Barclays and Morgan Stanley
reviewed certain financial aspects of each of the proposals. The Board then discussed the Company's current and forecasted financial performance and the risks and uncertainties associated with its
forecasts, including the Company's difficulty, during the last five years, meeting its financial guidance due, in large part, to challenging market conditions and trends. The Board also reviewed
potential upside opportunities for the Company's initiatives to increase revenues and profitability, including the initiatives relating to potential tuck-in acquisitions, increased focus on the
mid-market, reductions in operating costs and accelerated growth of products other than office supplies. (See "
Company Financial Forecasts; Other Company
Information
.") After discussion, the Board and management concluded that management should continue to develop such upside opportunities and share them with the financial
bidders, but that they were too speculative, and subject to too many risks and uncertainties, to include in the Company's financial forecasts. The Board then discussed the strategic alternatives
available to the Company, including continuing to execute its business as an independent company, a sale of its retail business and a sale of the Company as a whole. The Board reviewed, with its
financial and legal advisors, the potential execution, antitrust and business risks associated with a sale of the Company's retail business, the significant time that would be required to complete a
separation of the retail business and the risks and uncertainties of retaining and operating its contract delivery business. Representatives of Barclays and Morgan Stanley then reviewed with the Board
the strategic buyers that might be potentially interested in an acquisition of the Company. After discussion, the Board concurred with the recommendation of the Transaction Committee not to contact
any of the strategic buyers
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because
of the low likelihood that any of such strategic buyers would be interested in a transaction with the Company and because, in light of that low likelihood, it would be inadvisable to risk the
identified financial buyers becoming unwilling to continue to devote the time and resources necessary to perform diligence on the Company if it became known that potential strategic buyers were
included in the sale process. The Board also discussed the competitive risks of sharing confidential information with strategic buyers that were not likely to be bidders. The Board determined that the
Company should
allow each of the financial buyers to perform further diligence regarding the Company and should continue to pursue discussions with each of them for a transaction involving the sale of the Company as
a whole.
On
March 17, 2017, the Company provided Sycamore, Party B, Party C and Party E with access to additional financial and business information of the Company in the virtual data
room.
On
March 20, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, WilmerHale and Potter Anderson present
for certain portions. A representative of Barclays reviewed with the Committee the status of the diligence efforts of the bidders. Barclays also discussed the request by Party C that it be
permitted to partner with Party D to submit a bid to acquire the Company. After discussion of the risks and benefits of such request, the Committee determined it would permit Party C to
work with Party D to submit a joint bid. Barclays also discussed an unsolicited inbound call from an additional potential financial buyer, Party F, inquiring about a possible sale
process of the Company, and the Committee authorized Barclays and Morgan Stanley to follow-up with Party F to assess its level of interest in acquiring the Company.
On
March 27, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Representatives of Barclays and Morgan Stanley updated the Committee regarding their discussions with Party F, in which Party F indicated it would not be
interested in submitting a proposal to acquire the Company as they did not view the acquisition opportunity as compelling in view of the business risks. Barclays and Morgan Stanley also provided an
update with respect to the diligence efforts of the other bidders.
On
April 3, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Representatives of Barclays and Morgan Stanley updated the Committee regarding their discussions with the bidders, including that Party C and Party D had agreed
to work together for the purposes of submitting a joint bid to acquire the Company. The Committee also discussed the disclosures provided by Barclays and Morgan Stanley regarding their respective
relationships with the Company and each of the bidders participating in the strategic alternatives process. The Committee determined that such relationships would not impair the ability of either
Barclays or Morgan Stanley to provide impartial advice to the Board and reconfirmed its determination to engage Barclays and Morgan Stanley as financial advisors to the Board, subject to completion of
their respective engagement letters. At the meeting, Mr. Lundgren reported that he had received inquiries from two search firms seeking to ascertain whether he would be interested in exploring
certain positions with Party C, to which Mr. Lundgren had replied that he was not in a position to discuss serving in any such capacity at this time.
From
April 3 to April 20, 2017, management of the Company, with representatives of Barclays and Morgan Stanley, participated in full day, in-person diligence sessions with
each of Sycamore, Party B, Parties C and D, and Party E.
On
April 4, 2017, an article in
The Wall Street Journal
reported that the Company was exploring a potential sale to a number of
financial buyers. On April 3, 2017, the closing price for Company common stock on The Nasdaq Stock Market was $8.66 per share.
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On
April 4, 2017, the Company entered into engagement letters with Barclays and Morgan Stanley to serve as financial advisors to the Board of Directors in connection with a
potential transaction.
On
April 6, 2017, after discussions with Mr. Sulentic and WilmerHale, Mr. Lundgren resigned from the Transaction Committee in order to avoid any appearance of a
potential conflict of interest as a result of the inquiries he had received regarding his potential interest in a position with Party C.
On
April 10, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. At the meeting, representatives of Barclays and Morgan Stanley discussed an inbound call from Party G, a potential financial buyer, inquiring about the sale
process being undertaken by the Company in light of press reports, and the Committee instructed Barclays and Morgan Stanley to follow-up with Party G to assess its level of interest in participating
in the process. Barclays and Morgan Stanley also reported on the diligence efforts of the bidders.
Following
the publication of
The Wall Street Journal
article, the financial advisor to Party A contacted Barclays and Morgan Stanley and
reiterated the proposals made by Party A in January 2017.
On
April 17, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. At the meeting, representatives of Barclays and Morgan Stanley updated the Committee as to the bidders' diligence efforts and also reported that Party G had
informed Barclays and Morgan Stanley that it would not be interested in making a proposal to acquire the whole Company, but might be interested in an acquisition of the Company's contract delivery
business. Barclays and Morgan Stanley then reported on the inbound call from the financial advisor to Party A, and the Committee discussed the potential benefits and risks of a transaction with Party
A.
On
April 24, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. During the meeting, representatives of Barclays and Morgan Stanley
updated the Committee on the continued diligence of the bidders and discussed next steps in the process, including a proposed date of May 22, 2017 for bidders to submit revised bids. In
addition, WilmerHale and Potter Anderson provided a summary of, and there was discussion regarding, the material terms of the form of merger agreement to be provided to the bidders, which terms were
designed to provide for certainty of closing and to enable the Board effectively to respond to unsolicited third party acquisition proposals. The Committee discussed, among other things, a proposed
termination fee of 2.5% of the equity value of the Company to be paid by the Company in the event of a determination by the Board to pursue or accept a superior proposal, which we refer to as the
Company Termination Fee, a proposed reverse termination fee of 7% of the equity value of the Company to be paid by the buyer if the buyer were unable to close by reason of, among other things, an
inability to obtain debt financing, which we refer to as the Buyer Termination Fee, the provisions relating to the Company's ability to solicit and respond to acquisition proposals, the definition of
"Material Adverse Effect", the interim operating covenants and the acceleration of outstanding unvested equity awards 180 days after the closing.
On
April 30, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. At the meeting, representatives of Barclays and Morgan Stanley updated the Committee regarding their communications with the bidders, including a request by
Party B for additional time beyond May 22, 2017 to submit a final bid in order to complete its diligence. Barclays and Morgan Stanley also discussed an inbound call from Party A's financial
advisor, in which the advisor reaffirmed the proposals made by Party A in January 2017. There was discussion about concerns expressed by the bidders as to the achievability of the upside opportunities
from management's growth and profit improvement initiatives, and management informed the Committee
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that
they were working to provide information that could demonstrate their potential achievability. The Committee then discussed the advisability of approaching additional strategic buyers in the
sales process or approaching one or more of the financial bidders regarding a sale of only the retail business of the Company. After discussion, the Committee determined not to extend the proposed bid
deadline for Party B in view of the risk that such an extension would be harmful to maintaining the competitive nature of the process for the other bidders. The Committee noted that no strategic
buyers had approached the Company or its financial advisors even after the April 4th
Wall Street Journal
article concerning a possible
sale of the Company and, after discussion, determined not to approach potential strategic buyers or to reconsider a possible sale of the Company's retail business for the reasons discussed at the
March 6-7 Board meeting.
On
May 1, 2017, the Board held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Anderson present for
certain portions. Representatives of Barclays and Morgan Stanley reviewed the sale process to date and the status of the bidders' diligence efforts, as well as the reiteration of Party A's January
2017 proposal by its financial advisor. It was noted that there had been no substantial inbound expressions of interest from new prospective buyers even after the publication of
The Wall Street Journal
article other than the
approach by Party G. Members of the Committee reviewed for the Board the determinations of the Committee not to extend the proposed bid deadline for Party B and not to approach potential
strategic buyers or to reconsider the possible sale of the Company's retail business, and the Board concurred with such determinations.
On
May 1, 2017, Barclays and Morgan Stanley delivered a process letter to Sycamore, Party B, Parties C and D, and Party E, including a form of proposed merger agreement,
consistent with the material terms discussed with the Board on April 24, 2017, and requested final proposals for the acquisition of the Company, and a mark-up of the merger agreement, by
May 22, 2017.
On
May 2, 2017, an article in
Reuters
reported that a number of financial buyers were exploring an acquisition of the Company.
Also
on May 2, 2017, Party E informed Barclays and Morgan Stanley that it would require eight to 10 weeks of extensive additional diligence in order to submit a final bid
and that it was not in a position to indicate what its offered price would be or whether it would be within the indicative price range provided to the Company in February 2017.
On
May 3, 2017, Parties C and D indicated that they were no longer interested in a transaction with the Company because they did not view a potential acquisition as an attractive
enough investment opportunity to pursue.
On
May 8, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. During the meeting, representatives of Barclays and Morgan Stanley reported that Parties C and D had informed them that they would not be proceeding further in
the sale process and that Party E had indicated it would need up to 10 weeks to submit a bid. After discussion, the Committee determined not to extend the deadline for Party E because of the
potential adverse effects on the competitive nature of the sale process and because the Committee was concerned about the potential significant disruption to the Company's business that would be
caused by an extension of the sale process. Barclays and Morgan Stanley also reported that they had received another inbound call from Party A's financial advisor, in which the advisor indicated that
Party A remained interested in pursuing an acquisition of the Company's U.S. retail operations and that the chief executive officers of the two companies should meet to discuss a possible acquisition.
The Committee determined that such meeting should take place with Party A after the Company's receipt of the final round of bids on or about May 22, 2017.
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During the weeks of May 8 and May 15, 2017, management of the Company, with representatives of Barclays and Morgan Stanley, conducted multiple
additional diligence sessions with Sycamore and Party B.
On
May 15, 2017, the Transaction Committee held a telephonic meeting with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Representatives of Barclays and Morgan Stanley provided an update regarding the diligence efforts of Sycamore and Party B. Barclays and Morgan Stanley also
reported that they had received inbound calls from a foreign strategic buyer, which they believed lacked sufficient financial resources and a sufficient acquisition track record to likely be a
credible bidder, and from a financial buyer, which they believed would likely not have the financial resources to, or interest in, buying the whole Company. After discussion, the Committee determined
not to engage with either party at that time. Ms. Goodman reported that she, Ms. Komola and Mr. Hall were scheduled to meet with Party A on May 30, 2017.
On
May 22, 2017, Sycamore submitted a non-binding proposal to acquire the Company for a price of $11.50 per share in cash and Party B submitted a non-binding proposal to acquire
the Company for
$10.25 per share in cash, in each case subject to conditions including additional diligence. Both proposals were for a merger that would contain no financing condition. Sycamore submitted draft
financing commitments from three financial institutions and indicated that the equity financing would be provided by Sycamore and certain of its limited partners. Party B submitted highly confident
letters from three financial institutions and stated that other subordinated debt financing would be provided by Party B and two other institutional investors in approximately equal proportions. Both
Sycamore and Party B submitted preliminary comments on the draft merger agreement.
On
May 23, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. At the meeting, representatives of Barclays and Morgan Stanley reviewed the proposals received on May 22
nd
and certain financial
aspects of the proposals. The Committee and its financial advisors noted that Sycamore had not done as much diligence as Party B and were concerned that Sycamore would not maintain its $11.50 offer
price through the signing of a definitive merger agreement and believed it would therefore be beneficial to continue to engage with both bidders. After discussion, the Committee determined that
Barclays and Morgan Stanley should inform Party B that its bid was lower than another bid and that it should work to increase its price. The Committee also determined that the Company should work with
Sycamore so that it could complete its diligence process as expeditiously as possible and that the financial advisors should convey to Sycamore that the Committee would be prepared to recommend a
transaction at the proposed price to the Board, subject to the completion of diligence, satisfactory negotiation of definitive transaction documents and receipt of a firm bid (including the necessary
equity and debt financing commitments) by mid-June.
Later
on May 23, 2017, the Board held a telephonic meeting, with senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Anderson present for
certain portions. Representatives of Barclays and Morgan Stanley reviewed the revised proposals of Sycamore and Party B and discussed with the Board certain financial aspects of the proposals. After
discussion, the Board concurred with the messages to both bidders recommended by the Transaction Committee.
Following
the Board meeting, representatives of Barclays and Morgan Stanley conveyed to Sycamore and Party B the messages approved by the Board.
Following
the Board meeting, members of the Transaction Committee discussed that Party C was no longer part of the sale process and that therefore the participation of
Mr. Lundgren would no longer create the risk of an appearance of a potential conflict of interest. The Committee determined
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that
it would benefit from Mr. Lundgren's experience and, accordingly, invited Mr. Lundgren to attend future Committee meetings as an observer.
On
May 30, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, representatives of Barclays and Morgan Stanley discussed their communications with Sycamore and Party B, the
fact that Party B appeared to remain ahead of Sycamore in its diligence and the expected time required by each bidder to be in a position to submit a final bid. The Committee instructed Barclays and
Morgan Stanley to confirm Sycamore's ability to obtain the necessary equity and debt financing commitments for an acquisition and to continue discussions with Party B but convey that its valuation of
the Company needed to be increased to be competitive.
Later
on May 30, 2017, Ms. Goodman, Ms. Komola and Mr. Hall met with the Chief Executive Officer and Chief Financial Officer of Party A to discuss further the
potential sale of the Company's U.S. retail business. At the meeting, Party A indicated it would present in early June a non-binding proposal to acquire the Company's U.S. retail business without the
Staples brand.
From
May 31 to June 6, 2017, management of the Company, with representatives of Barclays and Morgan Stanley, held further diligence discussions with both Sycamore and Party
B.
On
June 4, 2017, Party B submitted a revised proposal to acquire the Company for a price of $10.50 per share in cash and requested an exclusivity period of three weeks to complete
its diligence process and negotiate a definitive merger agreement with the Company.
On
June 5, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, representatives of Barclays and Morgan Stanley discussed their communications with the bidders since the
Committee's last meeting, including the revised proposal by Party B to acquire the Company at a price of $10.50 per share and its request for exclusivity, which request for exclusivity was rejected by
the Committee. Ms. Goodman also discussed the May 30
th
meeting with Party A.
Later
on June 5, 2017, Party A submitted a non-binding proposal to acquire the Company's U.S. retail business, excluding rights to the Staples brand and website URL, for cash
consideration of $625 million to $700 million. The non-binding proposal was subject to numerous conditions, including the completion of diligence.
From
June 7 to June 26, 2017, management of the Company, with representatives of Barclays and Morgan Stanley, continued to hold diligence sessions with Sycamore.
On
June 8, 2017, Party B informed Barclays and Morgan Stanley that it was no longer interested in pursuing a transaction with the Company, and, after Barclays and Morgan Stanley
inquired whether Party B would be interested in proceeding at its previous proposed price of $10.25 per share, Party B indicated that it would not be interested in proceeding at that price or even a
lower price.
On
June 10, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, representatives of Barclays and Morgan Stanley reported on Party B's decision to withdraw from the process.
Barclays and Morgan Stanley also updated the Committee regarding the continued diligence efforts of Sycamore. They also reported that representatives of Sycamore had confirmed that the financial
institutions providing the debt financing for Sycamore were committed to financing an acquisition of the Company as a whole. Finally, Barclays and Morgan Stanley reported that they were reviewing the
revised proposal received from Party A to acquire the Company's U.S. retail business.
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On
June 11, 2017, Sycamore submitted a revised proposal to acquire the Company at a price of $11.00 per share, together with updated unsigned financing commitment letters from
three financial institutions for funded indebtedness of up to $5.3 billion and an indication that Sycamore would be prepared to commit equity financing of up to $1.7 billion. The
proposal also included signed letters of intent for up to a total of $1.425 billion in equity commitments from five limited partners of Sycamore. Sycamore also submitted a full mark-up of the
merger agreement. Sycamore indicated it would be ready to sign a definitive merger agreement as expeditiously as possible, subject to confirmatory diligence, and also indicated that it would require
expense reimbursement agreement of up to $5 million in order to continue in the process.
On
June 12, 2017, the Transaction Committee held an in-person meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. Representatives of Barclays and Morgan Stanley discussed the most recent proposal from Party A and the revised proposal from
Sycamore to acquire the Company at a price of $11.00 per share in cash, subject to the completion of confirmatory diligence. Barclays and Morgan Stanley reviewed and discussed certain financial
aspects of Sycamore's proposal. The Committee and its advisors also discussed the expense reimbursement request by Sycamore in its revised proposal. WilmerHale provided a summary of the revisions to
the draft merger agreement proposed by Sycamore. In considering the proposal by Party A to acquire the Company's U.S. retail business, and the possibility of seeking to sell the Company's retail
business to another buyer, the Committee reviewed preliminary illustrative ranges of hypothetical values for three hypothetical scenarios for the sale of the Company's U.S. retail business or North
American retail business and the Company's continued operation of the remainder of its business as a stand-alone company, based on numerous assumptions provided by management. (See
"
The MergerCompany Financial Forecasts; Other Company InformationOther Company Information
"). The Committee also considered
the time, complexity and potential antitrust
issues and business disruption that would be involved in the sale of the Company's retail business, and the risks, uncertainties and incremental costs of continuing to operate the Company's remaining
business as a stand-alone company, including the risks relating to the secular decline in sales of office products and increasing competitive threats. After considering all of these factors, and the
proposals received to date to acquire the Company's retail business, the Committee determined to recommend to the Board that the continued pursuit of a sale of the Company as a whole would be the best
available alternative for stockholders of the Company.
On
June 12, 2017, the Board held an in-person meeting, with members of senior management, Barclays, Morgan Stanley, WilmerHale and Potter Anderson present for certain portions.
Representatives of Barclays and Morgan Stanley reviewed the activities with the various bidders since the May 23
rd
Board meeting and also reviewed the terms of the most
recent proposal from Sycamore to acquire the Company for $11.00 per share and the most recent proposal from Party A to acquire the U.S. retail business for $625 million to $700 million
in cash. Barclays and Morgan Stanley reviewed and discussed with the Board certain financial aspects of the proposals from Sycamore and Party A. The Committee then reviewed and discussed with the
Board its recommendation that the Company should continue to pursue a sale of the whole Company, and the Board concurred. Ms. Goodman then reviewed and discussed potential upside opportunities
from management's growth and profitability improvement initiatives shared with the financial bidders. The Board and management discussed the speculative nature of those upside opportunities and
determined that the Company's forecasts furnished to the bidders should not be revised to take into account those upside opportunities in view of the risks and uncertainties of those upsides and also
the risks and uncertainties of the forecasts themselves as a result of the challenging market trends and competitive conditions. A representative of WilmerHale reviewed certain issues in the mark-up
of the merger agreement provided by Sycamore. WilmerHale also discussed that while Sycamore intended to separately finance the Company's U.S. retail, Canadian retail, and North American contract
delivery businesses concurrently with or immediately after the closing of the proposed acquisition of the Company, Sycamore had confirmed that the separation of the
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businesses
would not be a condition to the closing of the proposed acquisition. The Board then discussed the request of Sycamore for expense reimbursement of up to $5 million if Sycamore
delivered a binding proposal (including financing commitments) at a price not less than $11.00 per share on or before June 27, 2017 or, on or before July 31, 2017, the Company entered
into a definitive agreement for the sale of the Company to a third party or the Company terminated its process to pursue strategic alternatives. After discussion, the Board determined that it would be
appropriate for the Company to enter into an expense reimbursement agreement with Sycamore substantially on such terms.
On
June 14, 2017, the Company and Sycamore entered into an expense reimbursement agreement for up to $5 million on substantially the terms proposed by Sycamore.
From
June 15 to June 28, 2017, representatives of WilmerHale and counsel to Sycamore, Kirkland & Ellis, LLP, which we refer to as K&E, negotiated the terms of
the definitive merger agreement, including the provisions relating to the ability of the Company to respond to superior proposals, the information required to be provided by the Company to Sycamore in
connection with its debt financing, the restrictions on the Company's activities between signing and closing, the Company Termination Fee and Buyer Termination Fee and the scope of the Company's
obligation to provide commercially reasonable cooperation to Sycamore's review and planning for the separation of the retail and contract delivery businesses.
On
June 19, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, representatives of Barclays and Morgan Stanley updated the Committee regarding Sycamore's outstanding
diligence items and the anticipated timing for finalizing the transaction documents. The Committee then discussed the non-binding proposal from Party A to acquire the Company's U.S. retail business,
excluding the Staples brand and website URL, for $625 to $700 million in cash. After discussion, the Committee reaffirmed the determination of the Board at its
June 12
th
meeting that the best available alternative for stockholders would be to continue to pursue a sale of the Company as a whole and therefor the Company should
inform Party A that the Committee was not willing to pursue a sale of the U.S. retail business at the proposed value. The Committee also considered certain employee-related matters, including the need
for a retention award program to retain key employees, other than senior management, who would be instrumental during the period prior to and immediately after the closing of a merger.
On
June 19, 2017, Barclays and Morgan Stanley informed the financial advisors to Party A that the Company was not interested in selling its U.S. retail business at the valuation
proposed by Party A.
During
the weeks of June 13 and June 19, 2017, management of the Company, with representatives of Barclays and Morgan Stanley, continued to provide information to Sycamore
in connection with its confirmatory diligence review of the Company.
On
June 21, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. At the meeting, the Committee and its financial and legal advisors reviewed and discussed Sycamore's plan to separately finance the retail and contract delivery
businesses concurrently with or immediately after the closing of the acquisition of the Company, and, after discussion, the Committee reconfirmed its position that any separation of the Company's
businesses could not be a condition to the closing of the acquisition.
On
June 22, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, representatives of Barclays, Morgan Stanley and WilmerHale updated the Committee on the status of discussions
with Sycamore and K&E, including with respect to the separation of the Company's retail and contract delivery
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businesses,
the status of Sycamore's financing commitments, and certain outstanding diligence issues that Sycamore had raised.
On
June 23, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, WilmerHale summarized the terms of the debt financing commitment letters provided by Sycamore and the status
of negotiations regarding the merger agreement and financing commitment letters. The Committee also discussed with management the potential business disruption and employee retention risks that could
arise as a result of Sycamore's plans to separately finance the Company's businesses upon or immediately after the closing and the need to formulate appropriate retention arrangements for key
employees other than senior management to address those risks.
Later
on June 23, 2017, Sycamore informed Barclays and Morgan Stanley that it was reducing its proposed acquisition price from $11.00 to $10.00 per share as a result of its
further review of the Company's business and its current assessment of the Company's business and future prospects. Also, K&E delivered to WilmerHale a revised draft of the merger agreement, which
included, among other things, terms that would add certain closing conditionality relating to Sycamore's plan to separately finance the Company's retail and contract delivery businesses.
In
the morning on June 24, 2017, after discussions among members of the Transaction Committee and its financial and legal advisors regarding the revised draft of the merger
agreement delivered by K&E, Barclays and Morgan Stanley, on behalf of the Transaction Committee, communicated to Sycamore that the Company was terminating any further discussions concerning a
potential transaction, unless and until a satisfactory resolution of the closing conditionality issues were reached.
Later
on June 24, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and
Potter Anderson present for certain portions. Mr. Lundgren also attended. At the meeting, representatives of Barclays and Morgan Stanley reported on the reduction in the proposed purchase price
to $10.00 per share. WilmerHale then discussed the status of negotiations regarding the terms of the definitive merger agreement, including the terms relating to closing conditionality. After
discussion, the Committee instructed Barclays and Morgan Stanley that, if the merger agreement issues relating to closing conditionality were satisfactorily resolved, they should seek from Sycamore a
price higher than $10.00 price per share.
Later
on June 24, 2017, after discussions among Sycamore, K&E, Ms. Komola, Barclays, Morgan Stanley and WilmerHale, the issues relating to closing conditionality were
resolved to the satisfaction of the Committee and its advisors by the elimination of the terms objected to in the June 23 draft provided by K&E.
Later
on June 24, 2017, representatives of Barclays and Morgan Stanley informed Sycamore that the Transaction Committee was not prepared to recommend to the Board a transaction at
a price of $10.00 per share.
On
June 25, 2017, the Board held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Anderson present
for certain portions. Representatives of Barclays and Morgan Stanley updated the Board on activities and discussions with Sycamore since the prior Board meeting on June 12 and reviewed the
principal terms of Sycamore's most recent proposal to acquire the Company for a price of $10.00 per share, as well as the debt and equity financing structure for the proposal. WilmerHale reviewed the
status of the negotiations regarding certain terms of the definitive merger agreement, including the closing conditions and Sycamore's proposal that the Company Termination Fee and Buyer Termination
Fee be 2% and 4%, respectively, of the Company's equity value, and that the Company reimburse up to $25 million of Sycamore's expenses if the Company's stockholders do not approve the Merger
under
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circumstances
where the Company Termination Fee is not payable. Potter Anderson reviewed for the Board the fiduciary duties of the directors in considering a potential sale of the Company or other
strategic alternatives.
Later
on June 25, 2017, Sycamore informed Barclays and Morgan Stanley that it would increase its proposed purchase price from $10.00 to $10.15 per share.
On
June 26, 2017, the Transaction Committee held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter
Anderson present for certain portions. Mr. Lundgren also attended. Representatives of Barclays and Morgan Stanley updated the Committee on Sycamore's increased offer. WilmerHale discussed the
status of the negotiations related to the merger agreement. The Committee conveyed to its financial and legal advisors that the Buyer Termination Fee would need to be meaningfully higher than 4%.
After discussion, the Committee instructed Barclays and Morgan Stanley to seek the best and final price from Sycamore as soon as possible and determined that it would consider a transaction with
Sycamore only after receiving such best and final price.
Later
on June 26, 2017, the Board held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Andersen
present for certain portions. Representatives of Barclays and Morgan Stanley updated the Board on the status of the discussions with Sycamore, and WilmerHale updated the board on the status of the
negotiations on the definitive merger agreement and financing commitments. The Board discussed the need to put in place appropriate retention arrangements to retain key employees other than senior
management between the signing of the merger agreement and at least the closing of the acquisition.
On
June 27, 2017, Sycamore conveyed to Barclays and Morgan Stanley its best and final price of $10.25 per share.
Later
on June 27, 2017, the Transaction Committee held a telephonic meeting, with senior management and representatives of Barclays, Morgan Stanley, WilmerHale, and Potter
Anderson present for certain portions. Mr. Lundgren also attended. Representatives of Barclays and Morgan Stanley discussed Sycamore's best and final price of $10.25 per share. Barclays and
Morgan Stanley then presented their financial analyses of the proposed transaction with Sycamore. The financial advisors also reviewed the general structure and amounts of Sycamore's equity and debt
financing, including the equity co-investments by certain limited partners of Sycamore. WilmerHale reviewed the principal terms of the merger agreement, including the Company Termination Fee of
$171 million (approximately 2.5% of equity value), the Buyer Termination Fee of $343 million (approximately 5% of equity value) and the reimbursement of up to $15 million of
Sycamore's expenses if the stockholders of the Company do not approve the merger under circumstances where the Company Termination Fee is not payable. WilmerHale also reviewed certain employee-related
matters that were addressed in the merger agreement, including the Company's plans to adopt an employee retention award program of up to $20 million for key employees other than senior
management; to maintain its current annual employee bonus plan through the end of fiscal year 2017 (with appropriate adjustments for the merger); to provide that the existing severance agreements with
officers and key employees cannot be terminated by the Company for two years following the merger; and to reimburse certain officers for potential excess parachute payment tax liabilities, if any,
arising from the merger. (See "
The MergerInterests of Certain Persons in the Merger.
") The Committee and its advisors discussed the timing
and next steps for submitting the merger agreement to the Board for consideration. Potter Anderson reviewed with the Committee the updated disclosures received from each of Barclays and Morgan Stanley
regarding certain relationships with Sycamore and the limited partners providing the equity co-investments. The Transaction Committee then unanimously adopted resolutions approving, and recommending
that the Board approve, the merger agreement, subject to the finalization of the terms of the merger agreement and delivery of a fairness opinion to the Board by each of Barclays and Morgan Stanley.
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Later
on June 27, 2017 the Board held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Anderson
present for certain
portions. The Transaction Committee reported that it had unanimously approved, and recommended that the Board approve, the merger agreement, subject to the finalization of the terms of the definitive
merger agreement and delivery of a fairness opinion by each of Barclays and Morgan Stanley. Barclays and Morgan Stanley then presented their financial analyses of the proposed transaction. (See
"
The MergerOpinions of the Company's Financial Advisors.
") The Board then reviewed preliminary illustrative ranges of hypothetical values
for three hypothetical scenarios for the sale of the Company's U.S. retail business or North American retail business and the Company's continued operation of the remainder of its business as a
stand-alone company, based on numerous assumptions provided by management. (See "
The MergerCompany Financial Forecasts; Other Company InformationOther
Company Information
"). WilmerHale reviewed the principal terms of the definitive merger agreement. WilmerHale also reviewed for the Board the employee-related issues discussed
at the meeting of the Transaction Committee held prior to the Board meeting. WilmerHale also reviewed a forum selection by-law amendment to be proposed for adoption by the Board upon the signing of
the definitive merger agreement. The Board then authorized its legal and financial advisors and management to continue to work toward finalizing the definitive merger agreement and other transaction
documents. The Board also authorized Ms. Goodman, with representatives of Barclays and Morgan Stanley, to meet in-person later that evening with the principals of Sycamore to discuss the plans
and goals of Sycamore for the Company's business, as well as an internal and external communications strategy, but not to discuss the roles or compensation of management following the merger.
Later
on June 27, 2017, Ms. Goodman, with representatives of Barclays and Morgan Stanley, met in person with the principals of Sycamore to discuss Sycamore's plans and
goals for the Company's business, as well as an internal and external communications strategy.
On
June 28, 2017, the Board held a telephonic meeting, with members of senior management and representatives of Barclays, Morgan Stanley, WilmerHale and Potter Anderson present. A
representative of WilmerHale reviewed the principal terms of the definitive merger agreement between Sycamore and the Company, previously distributed to the directors, and the debt and equity
commitment letters to be furnished by Sycamore. Representatives of Barclays and Morgan Stanley reviewed their financial analyses of the $10.25 in cash per share of Company Common Stock to be paid by
Sycamore pursuant to the Merger Agreement. Barclays then orally rendered to the Board its opinion, subsequently confirmed by delivery of a written opinion, to the effect that, as of the date of such
opinion and based on and subject to factors and assumptions set forth in such opinion, the $10.25 in cash per share to be offered to the holders of Company common stock (other than holders of excluded
shares) was fair, from a financial point of view, to such holders. Morgan Stanley then orally rendered to the Board its opinion, subsequently confirmed by delivery of a written opinion, to the effect
that, as of the date of such opinion and based on and subject to factors and assumptions set forth in such opinion, the $10.25 in cash per share to be received by the holders of Company common stock
(other than holders of excluded shares) was fair, from a financial point of view, to such holders (See "
The MergerOpinions of the Company's Financial
Advisors.
"). After discussion, the Board unanimously voted to approve the merger agreement and the transactions contemplated thereby, including the merger, to recommend the
merger agreement to the Company's stockholders and to adopt the forum selection by-law amendment.
Later
on June 28, 2017, the Company and Sycamore executed the merger agreement and issued a joint press release announcing the transaction. Concurrently, Sycamore and the
Co-Investors executed and
delivered the equity commitment letters and limited guaranties, and the commitment parties executed and delivered the debt commitment letters.
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Reasons for the Merger; Recommendation of the Board
At a meeting held on June 28, 2017, the Board, by a unanimous vote of all directors, (a) determined and declared that the merger
agreement, the merger and the other transactions contemplated by the merger agreement, on the terms and subject to the conditions set forth therein, are advisable and in the best interests of the
Company and its stockholders, (b) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (c) declared that the terms of
the merger are fair to the Company and the Company's stockholders, and (d) determined that it is advisable and in the best interests of the Company for the Board to submit the merger agreement
to the Company's stockholders for adoption and directed that the merger agreement be submitted to the Company's stockholders at a special meeting of the Company's stockholders for their adoption, and
recommended that the Company's stockholders adopt the merger agreement.
Before
making its recommendation, the Board consulted with its outside legal and financial advisors and with the Company's senior management team. In reaching its recommendation, the
Board considered the following material factors that it believes support its decision to enter into the merger agreement and consummate the merger (which factors are not necessarily presented in order
of relative importance):
-
-
Best Alternative for Maximizing Stockholder Value.
The Board believed that
receipt of the merger consideration of $10.25 per share in cash was more favorable to the Company stockholders than the likely value that would result from other potential transactions or remaining
independent. This decision was based on, among other things, the Board's assessment of:
-
-
the Company's historical operating and financial performance, including that the Company had experienced declines in sales in four
of the past five fiscal years and that the Company, during the last five years, had difficulty meeting its financial guidance due, in large part, to overall challenging market conditions and trends,
the secular decline in office products sales, the channel shift from retail to online sales and increased competition;
-
-
the Company's competitive position, including that it faced a growing and diverse set of competitors, including online retailers,
mass merchants, warehouse clubs, computer and electronics retail stores, specialty technology stores, print and marketing businesses, and a wide range of other retailers;
-
-
the Company's future prospects, including risks related to achieving the revenue growth and profitability reflected in the
Company's financial projections as a standalone company and the risks inherent in the Company's industry, including the competitive threat of new market entrants, especially in the contract delivery
business; the migration of consumers and businesses from printed to digital media and communications with the resultant reduction in sales of office supplies and the need to successfully expand other
products and services sold at acceptable margins; the ability to shrink the Company's excess retail presence while maintaining acceptable profitability levels; and the various additional risks and
uncertainties that are described in the Company's most recent annual report on Form 10-K filed with the SEC;
-
-
the possible alternatives to a sale of the entire Company, including continuing as a standalone company and spinning off or
selling certain of our business lines, which alternatives the Board evaluated with the assistance of its outside legal and financial advisors and determined did not present the best reasonably
available alternative for our stockholders in light of, among other factors, the potential risks, rewards and uncertainties associated with those alternatives;
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-
-
the Board's belief that its negotiations had resulted in the highest price per share for the Company common stock that Parent was
willing to pay; and
-
-
the Board's belief that the process conducted by the Company had resulted in the highest price reasonably available to the
stockholders of the Company.
-
-
Attractive Value.
The Board concluded that the consideration of $10.25 per
share represented an attractive valuation for the Company and an opportunity for the Company's stockholders to receive a significant premium over the market price of the Company common stock. The
Board reviewed the historical market prices, volatility and trading information with respect to the Company common stock, and the active sale process undertaken by the Company,
including:
-
-
the fact that the $10.25 per share price to be paid in cash in respect of each share of Company common stock represents an
approximately 18% premium to the closing price per share of the Company's common stock on April 3, 2017, the last full trading day before widespread media speculation about a potential
acquisition of the Company, and an approximately 20% premium to the volume weighted average price per share of the Company's common stock for the 10-day period ended April 3, 2017;
-
-
the fact that Barclays and Morgan Stanley, at the Board's instruction, contacted five prospective financial buyers, and were
contacted by two additional prospective financial buyers, regarding a potential acquisition, that of these prospective buyers, only four parties (including Sycamore) conducted preliminary due
diligence, and that no other party was willing to continue pursuing an acquisition of the Company after conducting preliminary due diligence;
-
-
the fact that the Company had preliminary discussions with Party A, a potential strategic buyer, regarding the sale of our U.S.
retail business, and that such discussions had led to a preliminary non-binding indication of interest for the acquisition of such business that was subject to numerous conditions and uncertainties,
including the completion of due diligence, which the Board evaluated with the assistance of outside legal and financial advisors and determined was less favorable to our stockholders than the merger
in light of, among other factors, (i) the greater certainty of consummation and value the merger would provide to our stockholders, particularly in light of the preliminary nature of the
discussions and the financial, operational and regulatory risks associated with a sale of our U.S. retail business to Party A, (ii) the competitive and other effects of a sale of our U.S.
retail business to Party A on our remaining business, (iii) the numerous complexities and challenges presented by a separation of our retail and contract delivery businesses, (iv) the
one-time and ongoing incremental costs that would have likely resulted from a separation of our retail and contract delivery businesses and the adverse impact thereof on the resulting value to our
stockholders, and (v) the risks and uncertainties of continuing to operate the Company's remaining business as a stand-alone company, including those arising from challenging market conditions
and trends, the secular decline in office products sales, the channel shift from retail to online sales and increased competition;
-
-
the fact that the Company had not received any other substantive alternative acquisition proposals, despite widespread speculation
in press and analyst reports since early April 2017, including
The Wall Street Journal
article published on April 4, 2017, that the Company was
considering a sale;
-
-
the fact that the Company actively solicited increases in the offer made by Parent and Parent indicated that the merger
consideration was its best and final offer;
-
-
the fact that there were restrictions on the ability of Sycamore and the Company's management to enter into any discussions or
arrangements regarding the terms of
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Company's
management employment following the closing, including equity incentives, without the Board's consent, that the Committee notified management of such restrictions in writing and that such
discussions have not taken place as of the date of this proxy statement; and
-
-
the risk that prolonging the sale process further could have resulted in the loss of an opportunity to consummate a transaction
with Parent and distracted senior management from implementing the Company's business plan.
-
-
Greater Certainty of Value.
The proposed consideration consists solely of
cash, which provides immediate liquidity and certainty of value to our stockholders. The receipt of cash consideration also eliminates for our stockholders the risk of the continued execution of our
business on a stand-alone basis.
-
-
Business Reputation of Sycamore.
The Board considered the business
reputation, management and financial resources of Sycamore, with respect to the transaction. The Board believed these factors supported the conclusion that a transaction with affiliates of Sycamore
could be completed relatively quickly and in an orderly manner.
-
-
Relationships with Financial Advisors.
The determination of the Board that
the relationships between each of Barclays and Morgan Stanley, on the one hand, and each of the Company and Sycamore, on the other hand, would not impair the ability of either Barclays or Morgan
Stanley to provide impartial advice to the Board and the fact that Barclays and Morgan Stanley each agreed at the outset of its engagement with the Company that it would not finance an acquisition of
the Company without the Company's consent.
-
-
Likelihood of Completion.
The likelihood that the merger will be
consummated, particularly in view of the terms of the merger agreement and the closing conditions. In that regard, the Board noted:
-
-
the fact that Parent and Merger Sub had obtained committed debt and equity financing for the transaction, the limited number and
nature of the conditions to the debt and equity financing, the reputation of the financing sources and the obligation of Parent to use its reasonable best efforts to obtain the debt financing, each of
which, in the reasonable judgment of the Board, increases the likelihood of such financings being completed;
-
-
that the merger is not subject to any financing-related condition;
-
-
the limited number of conditions to the merger and the fact that certain of the Company's obligations in the merger agreement,
including its obligations to cooperate with the carveout transactions and the repatriation of foreign cash, will not be taken into account for purposes of determining whether the closing condition
regarding the Company's compliance with its covenants has been satisfied;
-
-
the fact that the merger agreement provides that, in the event of a failure of the merger to be consummated under certain
circumstances, Parent will pay the Company a $343,000,000 reverse termination fee, without the Company having to establish any damages, and the guarantee of such payment obligation pursuant to the
limited guarantee;
-
-
the Company's ability, under certain circumstances pursuant to the merger agreement and the equity commitment letters, to seek
specific performance of Parent's obligation to cause the equity commitment to be funded; and
-
-
the relative likelihood of obtaining required regulatory approvals and Parent's obligation to effect remedies to obtain antitrust
approvals.
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-
-
Receipt of Opinions from Barclays and Morgan Stanley.
The financial
analyses presented to the Board by Barclays and Morgan Stanley, as well as:
-
-
the opinion of Barclays, dated June 28, 2017, to the effect that, as of that date and based upon and subject to the
qualifications, factors, limitations and assumptions set forth therein, from a financial point of view, the $10.25 per share in cash to be offered to the holders of shares of Company common stock
(other than holders of excluded shares) is fair to such holders, as more fully described below in "
The MergerOpinions of the Company's Financial
Advisors
" beginning on page [] and the full text of such opinion is attached to this proxy statement as Annex B.
-
-
the opinion of Morgan Stanley, dated June 28, 2017, to the effect that, as of that date and based upon and subject to the
qualifications, factors, limitations and assumptions set forth therein, the $10.25 per share in cash to be received by the holders of shares of Company common stock (other than holders of excluded
shares) pursuant to the merger agreement is fair, from a financial point of view, to such holders, as more fully described below in "
The
Merger
Opinions of the Company's Financial Advisors
" beginning on
page [] and the full text of such opinion is attached to this proxy statement as Annex C.
-
-
Terms of Merger Agreement.
The terms and conditions of the merger
agreement, including the Company's ability to consider and respond to, under certain circumstances specified in the merger agreement, an unsolicited written acquisition proposal (as more fully
described under the heading "
The Merger AgreementRestrictions on Solicitation of Other Offers
"), and the Board's right, after complying
with the terms of the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal (as more fully described under the heading
"
The Merger AgreementRestrictions on Changes of Recommendation to Company Stockholders
"), subject to certain match rights in favor of
Parent and upon payment of a termination fee to Parent of $171,000,000, which is approximately 2.5% of the equity value of the Company, as described under "
The Merger
AgreementTermination Fees
" beginning on page [].
-
-
Required Stockholder Approval.
The merger agreement is subject to adoption
by the Company's stockholders, who are free to reject the merger agreement.
-
-
Appraisal Rights.
The Board considered the fact that stockholders who
properly exercise and perfect their appraisal rights under Delaware law will be entitled to such appraisal rights in connection with the merger.
The
Board also weighed the factors described above against the following factors and risks that generally weighed against entering into the merger agreement (which factors and risks are
not necessarily presented in order of relative importance):
-
-
No Stockholder Participation in Future Growth or Earnings.
The Company will
no longer exist as an independent company, and accordingly, Company stockholders will no longer participate in any future growth the Company may have or any potential future increase in its value.
-
-
Effect of Failure to Complete Transactions.
While the Company expects that
the merger will be consummated, there can be no assurance that all conditions to the parties' obligations to complete the merger will be satisfied, and thus it is possible that the merger may not be
completed in a timely manner or at all. If the merger is not completed, (i) the Company will have incurred significant risk and transaction and opportunity costs, including the possibility of
disruption to our operations, diversion of management and employee attention, employee attrition and a potentially negative effect on our business and customer and supplier relationships,
(ii) the trading price of shares of Company common stock would likely be adversely affected and (iii) the market's perceptions of the Company's prospects could be adversely affected.
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-
-
Closing Conditions.
The fact that completion of the merger would require
antitrust clearance in the United States and the satisfaction of certain other closing conditions, including that no Company material adverse effect has occurred, which conditions are not entirely
within the Company's control and that there can be no assurances that any or all such conditions will be satisfied.
-
-
Risk Associated with Financing.
The risk that the merger might not be
consummated in a timely manner or at all, including the risk that the merger will not occur if the financing contemplated by the equity and debt commitments, described under the caption
"
The MergerFinancing of the Merger
", is not obtained, as Parent does not on its own possess sufficient funds to consummate the merger.
-
-
Interim Restrictions on Business.
The Company's management's focus and
resources may become diverted from other important business opportunities and operational matters while working to implement the merger, and the merger agreement imposes restrictions on the conduct of
the Company's business prior to the effective time of the merger, which could adversely affect the Company's business.
-
-
Risk of Litigation.
There is a risk of litigation arising in respect of the
merger agreement or the transactions contemplated by the merger agreement.
-
-
Taxable Consideration.
The merger will be a taxable transaction to the
Company's stockholders that are U.S. holders (as defined under the heading "
U.S. Federal Income Tax Consequences of the Merger
" below) for
U.S. federal income tax purposes and, therefore, such stockholders generally will be required to pay U.S. federal income tax on any gains they recognize as a result of the merger.
-
-
No Solicitation.
The terms of the merger agreement prohibit the Company and
its representatives from soliciting third party bids and Parent has the right to match an unsolicited third party bid if made, which terms could reduce the likelihood that other potential acquirers
would propose an alternative transaction that may be more advantageous to our stockholders.
-
-
Termination Fee and Expense Reimbursement.
The possibility that if the
merger is not consummated, subject to certain limited exceptions, we will be required to pay our own expenses associated with the merger agreement and the transactions contemplated thereby and, under
certain circumstances, to pay Parent a termination fee of $171,000,000 or expense reimbursement of up to $15,000,000 in connection with the termination of the merger agreement.
-
-
Parent and Merger Sub.
The fact that Parent and Merger Sub are newly formed
corporations with no assets other than the equity commitment letters and the debt commitment letter, and that our remedy in the event of breach of the merger agreement by Parent or Merger Sub may be
limited to receipt of the reverse termination fee from the funds, on a several basis, in an aggregate amount of $343,000,000, and that, under certain circumstances, we may not be entitled to a reverse
termination fee at all.
-
-
Suspension of Dividend.
The fact that the Company was restricted from
paying its $0.12 per share quarterly cash dividend following the dividend paid on July 13, 2017, until the closing of the merger.
In
considering the recommendation of the Board with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have
interests in the merger that are different from, or in addition to, yours. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger
agreement and the merger, and in their recommendations with respect to the merger agreement. See the section entitled "
The MergerInterests of Certain Persons in
the Merger
" beginning on page [].
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The
foregoing discussion of the information and factors considered by the Board in reaching its conclusions and recommendations is not intended to be exhaustive, but includes the
material factors considered by the directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Board did not
find it practicable to, and did not attempt, to quantify, rank or assign any relative or specific weights to the various factors considered in reaching its determination and making its recommendation.
In addition, individual directors may have given different weights to different factors. The Board considered all of the foregoing factors as a whole and based its recommendation on the totality of
the information presented.
The Board recommends that you vote "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of the nonbinding advisory proposal regarding
"golden parachute" compensation and "FOR" approval of the proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
Opinions of the Company's Financial Advisors
Opinion of Barclays Capital Inc.
The Company engaged Barclays to act as its financial advisor with respect to pursuing strategic alternatives for the Company, including a
possible merger, sale or other strategic business combination of the Company (including the merger) and other extraordinary transactions that could be entered into as an alternative to such events. On
June 28, 2017, Barclays rendered its oral opinion, which opinion was subsequently confirmed in a written opinion, dated June 28, 2017, to the Board, to the effect that, as of that date
and based upon and subject to the assumptions made,
procedures followed, matters considered and qualifications and limits upon the review undertaken by Barclays as stated in its written opinion, the merger consideration of $10.25 per share of the
Company common stock to be offered to the stockholders of the Company (other than holders of excluded shares) in the merger was fair, from a financial point of view, to such stockholders.
The full text of Barclays' written opinion, dated as of June 28, 2017, is attached as Annex B to this proxy statement. Barclays' written opinion
sets forth, among other things, the assumptions made, procedures followed, factors considered and qualifications and limitations upon the review undertaken by Barclays in rendering its opinion. The
Company encourages you to read the opinion carefully in its entirety. The following is a summary of Barclays' opinion. This summary is qualified in its entirety by reference to the full text of the
opinion.
Barclays'
opinion, the issuance of which was approved by Barclays' Valuation and Fairness Opinion Committee, is addressed to the Board, addresses only the fairness, from a financial
point of view, of the merger consideration of $10.25 per share of the Company common stock to be offered to the stockholders of the Company (other than holders of excluded shares), and does not
constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the merger or any other matter. The terms of the merger were determined through
arm's-length negotiations between the Company and Parent and were approved by the Board. Barclays did not recommend any specific amount or form of consideration to the Company or that any specific
amount or form of consideration constituted the only appropriate consideration for the merger. Barclays was not requested to opine as to, and its opinion does not in any manner address, the Company's
underlying business decision to proceed with or effect the merger or the likelihood of the consummation of the merger. Barclays' opinion did not address the relative merits of the merger as compared
to any other transaction or business strategy in which the Company might engage. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the
amount or the nature of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration of $10.25 per
56
Table of Contents
share
of the Company's common stock to be offered to the stockholders of the Company in the merger. No limitations were imposed by the Board upon Barclays with respect to the investigations made or
procedures followed by it in rendering its opinion.
In
arriving at its opinion, Barclays, among other things:
-
-
reviewed and analyzed a draft of the merger agreement, dated as of June 28, 2017, and the specific terms of the merger;
-
-
reviewed and analyzed publicly available information concerning the Company that Barclays believed to be relevant to its analysis, including
its Annual Report on Form 10-K for the fiscal year ended January 28, 2017 and Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017;
-
-
reviewed and analyzed financial and operating information with respect to the business, operations and prospects of the Company furnished to
Barclays by the Company, including financial forecasts (the "Forecasts") of the Company prepared by management of the Company;
-
-
reviewed and analyzed a trading history of the common stock of the Company from June 27, 2014 to June 27 2017 and a comparison of
that trading history with those of other companies that Barclays deemed relevant;
-
-
reviewed and analyzed a comparison of the historical financial results and present financial condition of the Company with those of other
companies that Barclays deemed relevant;
-
-
reviewed and analyzed a comparison of the financial terms of the merger with the financial terms of certain other transactions that Barclays
deemed relevant;
-
-
reviewed and analyzed the results of Barclays' efforts to solicit indications of interest from third parties with respect to a sale of the
Company;
-
-
reviewed and analyzed published estimates of independent research analysts with respect to the future financial performance and price targets
of the Company;
-
-
had discussions with the management of the Company concerning its business, operations, assets, liabilities, financial condition and prospects;
and
-
-
undertook such other studies, analyses and investigations as Barclays deemed appropriate.
In
arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of
such information (and did not assume responsibility or liability for any independent verification of such information). Barclays also relied upon the assurances of management of the Company that they
were not aware of any facts or circumstances that would make such information inaccurate or misleading in any material respect. With respect to the Forecasts of the Company, upon the advice of the
Company, Barclays assumed that such Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future
financial performance of the Company and that the Company will perform substantially in accordance with such Forecasts. In arriving at its opinion, Barclays assumed no responsibility for and expressed
no view as to any such forecasts or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities
of the Company and did not make or obtain any evaluations or appraisals of the assets or liabilities of the Company. Barclays' opinion was necessarily based upon market, economic and other conditions
as they existed on, and could be evaluated as of, the date of its opinion. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may have
occurred after June 28, 2017.
Barclays
assumed that the executed merger agreement would conform in all material respects to the last draft reviewed by Barclays. In addition, Barclays assumed the accuracy of the
representations and warranties contained in the merger agreement and all agreements related thereto. Barclays also
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assumed,
upon the advice of the Company, that all material governmental, regulatory and third party approvals, consents and releases for the merger would be obtained within the constraints
contemplated by the merger agreement and that the merger would be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term,
condition or agreement thereof. Barclays understood that Parent received draft equity commitment letters from funds managed by Sycamore and Neuberger Berman Private Equity and investment funds
affiliated with HarbourVest Partners (the funds managed by Neuberger Berman Private Equity and affiliated with HarbourVest Partners collectively referred to as, the "Co-Investors"), each dated
June 28, 2017, as applicable, and draft debt commitment letters from certain lenders dated June 28, 2017 (collectively the "financing letters"). Barclays expressed no opinion with
respect to the terms of the equity or debt commitment letters or the availability of the financing contemplated thereby. Barclays did not express any opinion as to any tax or other consequences that
might result from the merger, nor does its opinion address any legal, tax, regulatory or accounting matters, as to which Barclays understood that the Company had obtained such advice as it deemed
necessary from qualified professionals.
Opinion of Morgan Stanley & Co. LLC
The Company retained Morgan Stanley to provide it with financial advisory services in connection with a possible merger, sale or other strategic
business combination of the Company or a similar transaction. As part of such engagement, the Board requested that Morgan Stanley evaluate the fairness, from a financial point of view, to the holders
of the shares of the Company's common stock of the $10.25 per share merger consideration to be received pursuant to the merger agreement. Morgan Stanley rendered to the Board at its meeting on
June 28, 2017 Morgan Stanley's oral opinion, subsequently confirmed by delivery of a written opinion, dated June 28, 2017, that, as of such date, and based upon and subject to the
assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the $10.25 per
share merger consideration to be received by the holders of shares of the Company common stock (other than holders of excluded shares) pursuant to the merger agreement was fair, from a financial point
of view, to such holders. Morgan Stanley's opinion did not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not
such alternatives could be achieved or are available.
The full text of the written opinion of Morgan Stanley delivered to the Board, dated June 28, 2017, is attached as Annex C. The opinion sets forth,
among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion.
The Company's stockholders are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley's opinion is directed to the Board and addresses only the fairness, from a financial
point of view, to the Company's stockholders of the $10.25
per share merger consideration to be received by such holders pursuant to the merger agreement as of the date of the opinion. Morgan Stanley's opinion does not address any other aspect of the
transactions contemplated by the merger agreement and does not constitute a recommendation to the Company's stockholders as to how to vote at the special meeting held in connection with the merger.
The summary of Morgan Stanley's opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Morgan Stanley's opinion.
For
purposes of rendering its opinion, Morgan Stanley, among other things:
-
-
reviewed certain publicly available financial statements and other business and financial information of the Company;
-
-
reviewed certain internal financial statements and other financial and operating data concerning the Company;
-
-
reviewed the Forecasts prepared by the management of the Company;
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Table of Contents
-
-
discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;
-
-
reviewed the reported prices and trading activity for the shares of common stock of the Company;
-
-
compared the financial performance of the Company and the prices and trading activity of the shares of common stock of the Company with that of
certain other publicly traded companies comparable with the Company and their securities;
-
-
reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
-
-
participated in certain discussions and negotiations among representatives of the Company and Parent and their legal advisors;
-
-
reviewed a draft of the merger agreement dated as of June 28, 2017, the financing letters and certain related documents; and
-
-
performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.
In
arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or
supplied or otherwise made available to it by the Company, and formed a substantial basis for its opinion. With respect to the Forecasts, Morgan Stanley assumed that such Forecasts had been reasonably
prepared on bases reflecting the best currently available estimates and judgments of the management of the Company at the time prepared of the future financial performance of the Company. In addition,
Morgan Stanley assumed that the merger would be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including,
among other things, that Parent would obtain financing in accordance with the terms indicated in the financing letters and expressed no opinion with respect to the terms of the financing letters or
the availability of the financing contemplated thereby, and that the final merger agreement did not differ in any material respects from the last draft of the merger agreement which was reviewed by
Morgan Stanley. Morgan Stanley assumed that, in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the merger, no delays,
limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger. Morgan Stanley is not a legal, tax
or regulatory advisor. Morgan Stanley is a
financial advisor only and relied upon, without independent verification, the assessment of the Company and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters.
Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of the Company's officers, directors or employees, or any class of such persons,
relative to the merger consideration to be received by the Company's stockholders in the transaction. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of
the Company, nor was it furnished with any such valuations or appraisals. Morgan Stanley's opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the
information made available to it, as of June 28, 2017. Events occurring after such date may affect Morgan Stanley's opinion and the assumptions used in preparing it, and Morgan Stanley did not
assume any obligation to update, revise or reaffirm its opinion. Morgan Stanley's opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with
its customary practice. Morgan Stanley did not recommend any specific amount or form of consideration to the Company or that any specific amount or form of consideration constituted the only
appropriate consideration for the merger. No limitations were imposed by the Board upon Morgan Stanley with respect to the investigations made or procedures followed by it in rendering its opinion.
59
Table of Contents
Summary of Financial Analyses
The following is a summary of the material financial analyses prepared by Morgan Stanley and Barclays (referred to as the "financial advisors")
in connection with the rendering of the financial advisors' respective oral opinions, subsequently confirmed by delivery of respective written opinions, dated June 28, 2017, to the Board and
reviewed with the Board on June 28, 2017. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. The financial advisors
arrived at their respective opinions based on the results of all analyses undertaken and assessed as a whole, and they did not ascribe a specific range of values to the shares of the Company common
stock or draw, in isolation, conclusions from or with regard to, and did not attribute any particular weight to, any one factor or method of analysis, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by them and in the context of the circumstances of the particular
transaction. Accordingly, the summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinions of, the
financial advisors, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by either of the financial advisors. The
analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors,
could create a misleading or incomplete view of the process underlying the financial advisors' respective opinions. In addition, in
rendering their opinions, the financial advisors may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less
probable than other assumptions. As a result, the ranges of implied valuations resulting from any particular analysis described below should not be taken to be Morgan Stanley's or Barclays's view of
the actual value of the Company.
In
performing their financial analyses, summarized below, the financial advisors considered industry performance, general business, economic, market and financial conditions and other
matters existing as of the date of their respective opinions, many of which are beyond Morgan Stanley's, Barclays' and the Company's control. The assumptions and estimates contained in the financial
analyses and the ranges of implied valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less
favorable than those suggested by such analyses. In addition, financial analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial
uncertainty.
The
type and amount of consideration payable in the merger was determined by Parent and the Company, rather than by any financial advisor, and was approved by the Board. The decision by
the Company to enter into the merger agreement was solely that of the Board. As described above under "
The MergerReasons for the Merger; Recommendation of the
Board
", the financial advisors' analyses were only one of the many factors considered by the Board in its evaluation of the merger and should not be viewed as determinative of
the views of the Board or management with respect to the merger or the $10.25 per share merger consideration.
Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must
be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Please see Annex B and Annex C of this proxy
statement for the full text of the opinions of Barclays and Morgan Stanley, respectively.
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Table of Contents
Selected Comparable Trading Analysis
The financial advisors reviewed certain financial information, valuation multiples and market trading data relating to the Company and selected
publicly traded companies that each Company financial advisor believed, based on its experience with companies in the retail and distribution industries, to be similar to Company's current operations
for purposes of this analysis. Financial data of the selected companies were reflected in FactSet Research Systems, Inc. consensus estimates, public filings and other publicly available
information. Financial data of the Company was reflected in the Forecasts and share data was provided to the financial advisors by the Company management. "EV" refers to aggregate enterprise value,
calculated as equity value, plus book value of total debt, plus non-controlling interest (as appropriate for the company being analyzed), less cash, cash equivalents and marketable securities.
"EBITDA" refers to earnings before interest, taxes, depreciation and amortization as adjusted to exclude nonrecurring and other similar items and one-time charges. Certain of the foregoing terms are
used throughout this summary of financial analyses.
The
financial advisors reviewed data, including EV as a multiple of estimated 2017 EBITDA (referred to as EV/2017E EBITDA), of the Company and each of the following selected publicly
traded companies in the retail and distribution industries, the operations of which the financial advisors deemed similar for purposes of this analysis, based on their professional judgment and
experience, to the Company:
-
-
Retail Industry
-
-
Best Buy Co., Inc.
-
-
Dick's Sporting Goods, Inc.
-
-
Bed, Bath and Beyond Inc.
-
-
Office Depot, Inc.
-
-
GameStop Corp.
-
-
Barnes & Noble, Inc.
-
-
Distribution Industry
-
-
Pool Corp
-
-
Cintas Corporation
-
-
MSC Industrial Direct Co., Inc.
-
-
Genuine Parts Company
-
-
HD Supply Holdings, Inc.
-
-
W.W. Grainger, Inc.
-
-
Essendant Inc.
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With
respect to the selected comparable companies, the information the financial advisors presented to the Board included EV / 2017E EBITDA multiples:
Comparable Companies in the Retail Industry
|
|
|
|
|
Company
|
|
EV / 2017E
EBITDA
|
|
Best Buy Co., Inc.
|
|
|
5.9x
|
|
Dick's Sporting Goods, Inc.
|
|
|
5.0x
|
|
Bed, Bath and Beyond Inc.
|
|
|
4.6x
|
|
Office Depot, Inc.
|
|
|
4.1x
|
|
GameStop Corp.
|
|
|
3.7x
|
|
Barnes & Noble, Inc.
|
|
|
3.4x
|
|
Median
|
|
|
4.4x
|
|
Comparable Companies in the Distribution Industry
|
|
|
|
|
Company
|
|
EV / 2017E
EBITDA
|
|
Pool Corp
|
|
|
18.1x
|
|
Cintas Corporation
(1)
|
|
|
13.8x
|
|
MSC Industrial Direct Co, Inc.
|
|
|
11.7x
|
|
Genuine Parts Company
|
|
|
11.1x
|
|
HD Supply, Holdings Inc.
(2)
|
|
|
10.8x
|
|
W.W. Grainger Inc.
|
|
|
9.3x
|
|
Essendant Inc.
|
|
|
7.1x
|
|
Median
|
|
|
11.1x
|
|
-
(1)
-
Pro
forma for acquisition of G&K Services, Inc.
-
(2)
-
Pro
forma for announced divestiture of Waterworks Operating Company LLC.
Based
on this analysis and their professional judgment and experience, the financial advisors derived a reference range of EV / 2017E EBITDA multiples of 4.5x to 6.5x and applied
these multiples to estimated EBITDA for 2017 as reflected in the Forecasts.
Based
on the number of outstanding shares of the Company common stock on a fully-diluted basis as provided by the Company management and the Company's net debt, non-controlling interest
as of April 29, 2017 as disclosed in the Company's public filings, the analysis indicated the implied equity value per share range for the Company common stock, rounded to the nearest $0.05, of
$7.85 $11.15 as compared to the $10.25 per share merger consideration.
No
company utilized in the selected comparable trading analysis is identical to the Company. In evaluating selected companies, the financial advisors made judgments and assumptions with
regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the Company's and the financial advisors' control. These
include, among other things, selected company growth, profitability and customer concentration, the impact of competition on the Company's businesses and the industry generally, industry growth and
the absence of any adverse material change in the Company's financial condition and prospects or the industry, or in the financial markets in general. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using selected company data.
Precedent Transactions Analysis
The financial advisors performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available
financial terms of selected transactions that involve companies in the retail and distribution sectors. Selected comparable transactions were selected based
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on
the financial advisors' professional judgment and knowledge of the retail and distribution industries, the operations of which the financial advisors deemed similar for purposes of this analysis,
based on their professional judgment and experience.
For
each transaction listed below, the financial advisors divided EV by the target company's EBITDA for the 12-month period prior to the announcement of the transaction (referred to as
"LTM EBITDA").
Selected Precedent Transactions in the Retail Sectors
|
|
|
|
|
|
|
|
|
Date Announced
|
|
Acquiror
|
|
Target
|
|
EV / LTM EBITDA
|
|
February 3, 2016
|
|
Lowe's Companies, Inc.
|
|
Rona Inc.
|
|
|
12.7x
|
|
November 30, 2015
|
|
Mattress Firm Inc.
|
|
Sleepy's
|
|
|
10.9x
|
|
November 23, 2015
|
|
CVC Capital and CPPIB
|
|
Petco Animal Supplies, Inc.
|
|
|
~9.0x
|
|
August 24, 2015
|
|
Sycamore Partners
|
|
Belk, Inc.
|
|
|
6.2x
|
|
December 15, 2014
|
|
BC Partners
|
|
PetSmart Inc.
|
|
|
8.9x
|
|
July 28, 2014
|
|
Dollar Tree, Inc.
|
|
Family Dollar Stores, Inc.
|
|
|
11.6x
|
|
February 19, 2014
|
|
Signet Jewelers Ltd.
|
|
Zales
|
|
|
18.5x
|
|
November 26, 2013
|
|
Men's Wearhouse Inc.
|
|
Jos A. Bank Clothiers, Inc.
|
|
|
10.5x
|
|
September 9, 2013
|
|
Ares Management, CPPIB
|
|
Neiman Marcus
|
|
|
9.4x
|
|
October 16, 2013
|
|
Advance Auto Parts Inc.
|
|
General Parts Inc.
|
|
|
8.8x
|
|
September 3, 2013
|
|
Jarden Corporation
|
|
Yankee Candle
|
|
|
8.5x
|
|
July 29, 2013
|
|
Hudson Bay Company (HBC)
|
|
Saks Incorporated
|
|
|
10.8x
|
|
February 20, 2013
|
|
Office Depot, Inc.
|
|
OfficeMax
|
|
|
4.8x
|
|
May 9, 2012
|
|
Bed Bath & Beyond Inc.
|
|
Cost Plus World Market
|
|
|
12.6x
|
|
May 2, 2012
|
|
Ascena Retail Group
|
|
Charming Shoppes
|
|
|
9.8x
|
|
October 11, 2011
|
|
Ares Management
|
|
99 Cents Only Stores
|
|
|
9.0x
|
|
June 29, 2011
|
|
Leonard Green, CVC
|
|
BJ's Wholesale
|
|
|
6.8x
|
|
December 23, 2010
|
|
Leonard Green
|
|
Jo-Ann Stores
|
|
|
7.1x
|
|
November 23, 2010
|
|
Leonard Green, TPG
|
|
J. Crew Group
|
|
|
8.6x
|
|
Median
|
|
|
|
|
|
|
9.0x
|
|
Selected Precedent Transactions in the Distribution Sectors
|
|
|
|
|
|
|
|
|
Date Announced
|
|
Acquiror
|
|
Target
|
|
EV / LTM
EBITDA
|
|
June 6, 2017
|
|
CD&R
|
|
Waterworks Operating Agreement LLC
|
|
|
10.5x
|
|
July 30, 2015
|
|
W.W. Grainger Inc.
|
|
Cromwell
|
|
|
11.0x
|
(1)
|
March 27, 2015
|
|
Platinum Equity
|
|
PrimeSource
|
|
|
7.9x
|
|
August 11, 2014
|
|
Anixter
|
|
Tri-ED
|
|
|
11.7x
|
|
May 19, 2014
|
|
CCMP
|
|
Hillman Group
|
|
|
10.8x
|
|
August 15, 2011
|
|
W.W. Grainger Inc.
|
|
Fabory
|
|
|
N/A
|
|
April 22, 2010
|
|
Oak Hill
|
|
Hillman Group
|
|
|
9.6x
|
|
Median
|
|
|
|
|
|
|
10.7x
|
|
-
(1)
-
Assumed
10% EBITDA margin per announcement press release.
Based
on this analysis and their professional judgment, the financial advisors derived a reference range of EV/LTM EBITDA multiple of 5.0x to 7.0x and applied this range to the Company's
projected estimated LTM EBITDA for 2017 as reflected in the Forecasts.
Based
on the number of outstanding Company shares on a fully diluted basis provided by the Company management and the Company's net debt, and non-controlling interest as of
April 29, 2017 as disclosed in the Company's public filings, the analysis indicated the implied per share reference range for the Company common stock, rounded to the nearest $0.05, of
$8.65 $12.00.
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No
company or transaction utilized as a comparison in the selected precedent transactions analysis is identical to the Company, nor are the transactions identical to the merger. In
evaluating the transactions described above, the financial advisors made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of the Company, such as the impact of competition on the business of the Company or the industry generally, industry growth and the absence of any
adverse material change in the financial condition or property of the Company or the industry or in the financial markets in general. Accordingly, mathematical analysis, such as determining the
average or median, is not in itself a meaningful method of using comparable transaction data.
Discounted Cash Flow Analysis
Each of the financial advisors conducted a discounted cash flow analysis for the purpose of determining an implied equity value per share for
the Company common stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future cash flows generated by the asset and taking into consideration the time
value of money with respect to those future cash flows by calculating their present value. For purposes of the discounted cash flow analysis, the financial advisors used "unlevered free cash flows,"
which refers to a calculation of the future cash flows of an asset without including in such calculation any debt servicing costs. For purposes of the foregoing calculation, stock-based compensation
is treated as a cash expense. "Present value" refers to the current value of one or more future cash payments from an asset, which current value is referred to as that asset's cash flows, and is
obtained by discounting those cash flows back to the present using a discount rate that takes into account estimates of risk, the opportunity cost of capital and other appropriate factors. "Terminal
value" refers to the capitalized value of all cash flows from an asset for periods beyond the final forecast period.
Each
of the financial advisors performed a discounted cash flow analysis of the Company using information provided by the Company, including information contained in the Forecasts and
public filings, to calculate ranges of the implied value of the Company as of the end of fiscal year 2016. Unlevered free cash flows was defined as earnings before interest and taxes, less taxes, plus
depreciation and amortization, less capital expenditures, less increases in net working capital, less other cash flow items and acquisitions (in each case reflected in the Forecasts provided by the
Company management to the financial advisors).
Barclays
calculated a range of implied values per share of the Company common stock using the estimated future unlevered free cash flows reflected in the Forecasts for the fiscal years
2017 through 2021 and a terminal value for the Company as of the end of fiscal year 2021, derived by applying a range of EV / LTM multiples of 4.5x to 6.5x, selected based on Barclays' professional
judgment and experience, to the terminal year estimate of LTM EBITDA, as reflected in the Forecasts. To calculate an implied enterprise value for the Company, the unlevered free cash flows and the
terminal value were discounted to the end of fiscal year 2016 using a range of discount rates from 8.91% and 10.21%, which range of discount rates was calculated based on Barclays' professional
judgment and experience and an analysis of the weighted average cost of capital of the Company. Barclays then adjusted the total implied enterprise value ranges by the Company's total debt,
non-controlling interest and cash and cash equivalents based on the consolidated balance sheet of the Company as of April 29, 2017 and divided the resulting implied total equity value ranges by
the Company's fully diluted shares outstanding (calculated using the treasury stock method), all as provided by the Company management. This analysis indicated an implied per share reference range for
the Company common stock of $9.38 $12.40.
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Morgan Stanley calculated a range of implied values per share of the Company common stock using the estimated future unlevered free cash flows reflected in the
Forecasts for the fiscal years 2017 through 2021 and a terminal value for the Company as of the end of fiscal year 2021, derived by applying a range of EV / LTM multiples of 4.5x to 6.5x, selected
based on Morgan Stanley's professional judgment, to the terminal year estimate of LTM EBITDA, as reflected in the Forecasts. To calculate an implied enterprise value for the Company, the unlevered
free cash flows and the terminal value were discounted to end of fiscal year 2016 using a range of discount rates from 8.1% to 9.8%, which range of discount rates was calculated based on Morgan
Stanley's professional judgment and experience and an analysis of the weighted average cost of capital of the Company. Morgan Stanley then adjusted the total implied enterprise value ranges by the
Company's total debt, non-controlling interest and cash and cash equivalents based on the consolidated balance sheet of the Company as of April 29, 2017 and divided the resulting implied total
equity value ranges by the fully diluted shares of the Company common stock outstanding (calculated using the treasury stock method), all as provided by the Company management. This analysis indicated
an implied per share reference range for the Company common stock of $9.52 $12.79.
The
financial advisors also calculated a range of implied values per share of the Company common stock using the data and methodologies described above, except that that the unlevered
free cash flows and terminal values were discounted to the end of fiscal year 2016 using a range of discount rates from
8.5% to 10.5%, which represented an amalgamation of the weighted average cost of capital methodologies of the financial advisors. This analysis, which indicated an implied per share reference range
for the Company common stock of $9.30 $12.60 was provided to the Board for informational/reference purposes only and did not provide the basis for the rendering of the
financial advisors' opinions.
Illustrative Leveraged Buyout Analysis
The financial advisors performed a hypothetical leveraged buyout analysis to determine the prices at which a financial sponsor might effect a
leveraged buyout of the Company. In preparing this analysis, the financial advisors utilized the projections set forth in the Forecasts. The financial advisors assumed (1) a transaction date of
January 28, 2017 based on the consolidated balance sheet of the Company as of April 29, 2017, (2) a subsequent exit transaction by the financial sponsor at the end of fiscal year
2021, (3) a multiple of 4.00x of total debt to the Company's estimated 2017 adjusted EBITDA, as set forth in the Forecast and as adjusted with the consent of the Company to exclude the cost of
stock-based compensation, (4) a range from 4.5x to 6.5x of EV to 2021 EBITDA exit multiples and (5) target ranges of annualized internal rates of return for the financial sponsor of
20.0% to 25.0%. The financial advisors selected the leverage multiple, financing terms, exit multiples and target internal rates of return based upon the application of their professional judgment and
experience. This analysis indicated an implied per share reference range for the Company common stock, rounded to the nearest $0.05, of $8.20 $10.35.
Other Analyses
The analyses and data described below were presented to the Board for informational/reference purposes only and did not provide the basis for,
and were not otherwise material to, the rendering of the financial advisors' opinions.
The financial advisors reviewed the historical trading range of shares of the Company common stock for the 52-week period ended June 27,
2017. The financial advisors noted that,
during such period, the maximum closing price for the shares of the Company common stock was $10.01 and the minimum closing price for the shares of Company common stock was $7.28.
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The
financial advisors also reviewed the historical affected trading range of shares of the Company common stock for the period between April 4, 2017, which was the last trading
day prior to public speculation of a potential sale of the Company, and June 27, 2017. The financial advisors noted that, during such period, the maximum closing price for shares of the Company
common stock was $9.88 and the minimum closing price for shares of the Company common stock shares was $8.66.
The
historical trading ranges were presented for reference purposes only, and were not relied upon for valuation purposes.
The financial advisors reviewed publicly available equity research analysts per share price targets for shares of the Company common stock. The
research analysts' one year per share price targets for the Company common stock ranged from approximately $8.00 to $12.00. The financial advisors also calculated the implied present value of the low
and high one year per share price targets by applying a discount rate of 11.00%, representing an estimated cost of equity of the Company, to the $8.00 to $10.00 range of one year per share price
targets (which excluded the analyst price targets derived using a sum of the parts methodology, the average of which, after applying a discount rate of 11.00%, would have yielded an illustrative
implied equity value per share of the Company common stock of $10.35), which yielded a range of illustrative implied equity values per share of the Company common stock of
$7.20 $9.00 per share of the Company common stock. Morgan Stanley also calculated the implied present value of the low and high one year per share price targets by applying
a discount rate of 10.1%, representing a midpoint estimated cost of equity of the Company, to the $8.00 $10.00 range of one year per share price targets (which excluded the
analyst price targets derived using a sum of the parts methodology, the average of which, after applying a discount rate of 10.1%, would have yielded an illustrative implied equity value per share of
the Company common stock of $10.45), which yielded a range of illustrative implied equity values per share of the Company common stock of $7.27 $9.08.
The
analysts' price targets were presented for reference purposes only, and were not relied upon for valuation purposes.
General
Barclays is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The Board selected Barclays because of its qualifications, reputation and
experience in the valuation of businesses and securities in connection with mergers and acquisitions generally.
The
Board retained Morgan Stanley based upon Morgan Stanley's qualifications, experience and expertise. Morgan Stanley is an internationally recognized investment banking and advisory
firm. Morgan Stanley, as part of its investment banking and financial advisory business, is continuously engaged in the valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate, estate and other purposes.
Barclays
is acting as financial advisor to the Company in connection with the merger. As compensation for its services in connection with the merger, the Company agreed to pay Barclays a
fee estimated to be approximately $26.5 million in the aggregate, $2.5 million of which was payable upon delivery of Barclays' opinion while the remainder is contingent upon consummation
of the merger (calculated as a percentage of the aggregate consideration of a consummated transaction). In addition, the Company has agreed to reimburse Barclays' reasonable expenses and indemnify
Barclays for certain liabilities that may arise out of its engagement and the rendering of Barclays' opinion. Barclays has
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performed
various investment banking and financial services for the Company or its respective affiliates in the past, and expects to perform such services in the future, and has received, and expects
to receive customary fees for such services. Specifically, in the past two years, Barclays has performed the following investment banking and financial services: (i) acted as financial advisor
to the Company in connection with the terminated acquisition of Office Depot; (ii) acted as Lead Arranger and Joint Lead Bookrunner in connection with the financing for the terminated
acquisition of Office Depot; (iii) acted as Joint Lead Arranger and Joint Bookrunner on the Company's Senior Secured Credit Facilities raised in April 2015; (iv) acted as Joint Lead
Arranger on the Company's revolver refinancing in October 2016; and (v) acted as financial advisor to the Company in connection with the sale of its European assets in December 2016. In the
past two years, Barclays has received compensation for financial
advisory and/or underwriting services provided by its Investment Banking Division to the Company and/or to its affiliates of approximately $12.9 million.
In
addition, Barclays and its affiliates in the past have provided, currently are providing, or in the future may provide, investment banking services to Sycamore, an affiliate of
Parent, and certain of its affiliates and portfolio companies and have received or in the future may receive customary fees for rendering such services. However, Barclays has not in the past two years
performed any investment banking services for which it has received any fees from Sycamore.
In
addition, Barclays and its affiliates in the past have provided, currently are providing or in the future may provide, investment banking services to Neuberger Berman, a Co-Investor,
and certain of its affiliates and have received or in the future may receive customary fees for rendering such services. Specifically, in the past two years, Barclays has performed the following
investment banking and financial services for certain affiliates of Neuberger Berman: (i) having acted as underwriter for various debt offerings, (ii) having performed various activities
relating to hedging and credit origination and risk management services; and (iii) acting as a lender under a warehouse credit facility. In the past two years, Barclays has received
compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Neuberger Berman and/or to certain of its affiliates of approximately
$2.6 million. Barclays has not in the past two years performed any investment banking services for HarbourVest Partners for which Barclays has received any fees. In the future Barclays and its
affiliates may provide investment banking services for HarbourVest Partners and its affiliates or portfolio companies and may receive customary fees for rendering such services.
Barclays
Capital, its subsidiaries and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and
non-financial services. In the ordinary course of Barclays' business, Barclays and its affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any
derivatives thereof) and financial instruments (including loans and other obligations) of the Company, Sycamore and the Co-Investors and certain of Sycamore's and the Co-Investors' respective
portfolio companies and/or affiliates for Barclays' own account and for the accounts of Barclays' customers and, accordingly, may at any time hold long or short positions and investments in such
securities and financial instruments.
As
compensation for its services relating to its engagement, the Company has agreed to pay Morgan Stanley a fee of approximately $26.5 million in the aggregate,
$2.5 million of which was payable upon the rendering of its opinion and approximately $24 million of which is contingent upon the consummation of the merger (calculated as a percentage
of the aggregate consideration of a consummated transaction). The Company has also agreed to reimburse Morgan Stanley for its reasonable expenses incurred in performing its services. In addition, the
Company has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its
affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Morgan Stanley's engagement. In the two years prior
to the date of Morgan Stanley's opinion, in addition to the current engagement, Morgan Stanley and its affiliates have provided financial advisory
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and
financing services to the Company and have received aggregate fees of between $3 million and $4 million in connection with such services. In the two years prior to the date of Morgan
Stanley's opinion, Morgan Stanley and its affiliates have provided financial advisory and financing services to HarbourVest Partners and its respective affiliates and have received aggregate fees of
between $1 million and $2 million in connection with such services. In the two years prior to the date of Morgan Stanley's opinion, Morgan Stanley and its affiliates have provided
financial advisory and financing services to Neuberger Berman and its respective affiliates and have received aggregate fees of less than $1 million in connection with such services. In the two
years prior to the date of Morgan Stanley's opinion, Morgan Stanley and its affiliates have not received any fees for any financial advisory or financing services provided to Sycamore. Morgan Stanley
may also seek to provide financial advisory and/or financing services to Parent, the Company, Sycamore, the Co-Investors, and/or their respective affiliates on unrelated matters in the future and
expects to receive fees for the rendering of these services.
Morgan
Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in
securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial
advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and
may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of Parent and its affiliates, Sycamore, the
Co-Investors and their respective affiliates, the Company or any other company, or any currency or commodity, that may be involved in this transaction, or any related derivative instrument. In
addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with the Company in connection with this transaction, may have committed and may commit in the future to
invest in private equity funds managed by affiliates of Parent or any of the Co-Investors.
THE MERGER AGREEMENT (PROPOSAL ONE)
The following is a summary of the material terms and conditions of the merger agreement. The description in this section
and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as
Annex A
and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you.
We encourage you to read the merger agreement carefully and in its entirety because it is the legal document that governs the merger.
Explanatory Note Regarding the Merger Agreement
The merger agreement is included to provide you with information regarding its terms. Factual disclosures about the Company contained in this
proxy statement or in the Company's public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations,
warranties and covenants made in the merger agreement by the Company, Parent and Merger Sub were qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in
connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it
is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the
right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to
the merger agreement, rather than establishing as facts the matters described therein. The representations and warranties may also be subject to a contractual standard of materiality different from
those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in a disclosure schedule that the Company delivered to
Parent in connection with the merger agreement, which we refer to as the Company Disclosure Schedule and which disclosures are not reflected in the merger agreement. Moreover, information concerning
the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement, and such
subsequent developments or new information may not be included in this proxy statement.
The Merger
Upon the terms and subject to the conditions of the merger agreement, Merger Sub, a wholly-owned subsidiary of Parent, will merge with and into
the Company, with the Company continuing as the surviving corporation of the merger. As a result of the merger, the separate corporate existence of Merger Sub will cease, and the Company will become a
wholly-owned subsidiary of Parent. We sometimes refer to the Company after the consummation of the merger as the surviving corporation. The certificate of incorporation of the Company will be amended
and restated in its entirety by virtue of the merger, to read as set forth on an exhibit to the merger agreement. The by-laws of the Company will also be amended and restated in their entirety so
that, immediately following the effective time of the merger, they are identical to the by-laws of Merger Sub as in effect immediately prior to the effective time of the merger, except that all
references to the name of Merger Sub will be changed to refer to the Company. The directors of Merger Sub immediately prior to the effective time of the merger will be the initial directors of the
surviving corporation. The officers of the
Company immediately prior to the effective time of the merger will be the initial officers of the surviving corporation.
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Closing and Effective Time of the Merger
The closing of the merger will occur as soon as practicable (but in any event no later than the third business day) following the satisfaction
or waiver of all of the closing conditions set forth in the merger agreement or at such other date as the parties may agree in writing; provided that, if the marketing period (described below) has not
ended at such time, then, subject to the continued satisfaction or waiver of such closing conditions at such time, the closing shall occur instead on the earliest of (i) any business day during
the marketing period as may be specified by Parent on no less than three business days' prior written notice to the Company, (ii) the third business day following the final day of the marketing
period or (iii) such other date, time or place as agreed to in writing by Parent and the Company. The merger will become effective upon the filing of a certificate of merger with the Delaware
Secretary of State or at such subsequent time or date as Parent and the Company may agree and specify in the certificate of merger. We intend to complete the merger as promptly as practicable, subject
to receipt of the Company stockholder approval and satisfaction of the other closing conditions. Although we currently expect to complete the merger no later than December 2017, we cannot specify when
or assure you that all conditions to the merger will be satisfied or waived.
Marketing Period
The "marketing period" refers to the first period of 18 consecutive business days throughout which
both:
-
-
Parent will have certain financial information and other customary business and financial data that is requested by Parent to market, syndicate
and consummate the debt financing, which information we refer to as required financial information, and such required financial information will be compliant (as described below); and
-
-
the closing conditions of Parent, Merger Sub and the Company will have been satisfied or waived (other than those conditions that by their
nature can only be satisfied at the closing) and nothing shall have occurred and no condition shall exist that would cause any of the other closing conditions applicable to Parent and Merger Sub to
fail to be satisfied, assuming that the date of the closing were to be scheduled for any time during such 18 consecutive business day period.
With
respect to the required financial information, the term "compliant" means such required financial information that:
-
-
taken as a whole, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such
required financial information not misleading;
-
-
is compliant in all material respects with all applicable requirements of Regulations S-K and S-X under the Securities Act applicable to
offerings of debt securities on a registration statement on Form S-1 (other than such provisions for which compliance is not customary in a Rule 144A offering of high yield debt
securities);
-
-
the Company's auditors have not objected to the use of their audit opinions related to any audited financial statements included in such
required financial information and any interim quarterly financial statements included in such required financial information have been reviewed by the Company's independent auditors; and
-
-
the Company's auditors are prepared to issue an agreed upon form of comfort letter with respect to the required financial information when
customarily required to be delivered during the marketing period.
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The
marketing period will not be deemed to commence if, prior to the completion of the marketing period:
-
-
our auditors have withdrawn their audit opinion contained in the required financial information;
-
-
the Company issues a public statement indicating its intent to restate any historical financial statements of the Company or that any such
restatement is under consideration or may be a possibility, in which case the marketing period will not be deemed to commence unless and until such restatement has been completed and the relevant
financial statements have been amended or the Company has announced that it has concluded that no restatement shall be required in accordance with GAAP;
-
-
the Company has been delinquent in filing any Annual Report on Form 10-K or Quarterly Report on Form 10-Q, in which case the
marketing period will not be deemed to commence unless and until all such delinquencies have been cured; or
-
-
the required financial information ceases to be compliant (as described above) or would be required to be updated in order to be compliant on
any day during such 18 consecutive business day period, in which case the marketing period will not be deemed to commence until the receipt by Parent of such compliant updated required financial
information.
The
marketing period will end on any earlier date on which all of the debt financing or any alternative financing pursuant to the terms of the merger agreement is obtained.
If
we reasonably believe we have delivered the applicable required financial information, we may deliver to Parent a written notice to that effect (stating when we believe we completed
such delivery), in which case the marketing period will be deemed to have commenced on the date specified in that notice unless Parent reasonably believes we have not completed delivery of the
required financial information and, within two business days after the delivery of such notice by us, delivers written notice to us to that effect (stating with reasonable specificity which required
financial information Parent reasonably believes we have not delivered).
Merger Consideration
At the effective time of the merger, each issued and outstanding share of Company common stock, other than the dissenting shares and the
cancelled shares, will be canceled and automatically converted into the right to receive $10.25 in cash, without interest and subject to deduction for any required withholding tax, which we refer to
as the merger consideration or the per share merger consideration.
The
merger consideration will be adjusted to reflect fully the effect of any reclassification, stock split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Company common stock), reorganization, recapitalization or other like change with respect to Company common stock occurring (or for which a record date is established)
after the date of the merger agreement and prior to the effective time.
Any
shares of Company common stock that are held in the treasury of the Company and any shares of Company common stock owned any subsidiary of the Company, Parent, Merger Sub or any
other affiliate of Parent will be canceled and no consideration will be paid for such shares.
Any
dissenting shares will be entitled to the rights granted by Section 262 of the DGCL. These rights are discussed more fully under the section of this proxy statement entitled
"
Appraisal Rights
" beginning on page [].
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Payment Procedures
At or prior to the effective time of the merger, Parent will enter into an agreement (in form and substance reasonably acceptable to the
Company) with a paying agent for the merger, which we refer to as the paying agent, for the paying agent to act in such capacity for the merger and cause to be deposited with the paying agent, for the
benefit of the holders of shares of Company common stock outstanding immediately prior to the effective time of the merger, cash in an amount sufficient to pay the aggregate merger consideration,
which we refer to as the aggregate merger consideration, pursuant to the merger agreement, which we refer to as the payment fund. The payment fund may not be used for any purpose other than to fund
payments to stockholders pursuant to the merger agreement. The payment fund will be invested by the paying agent as directed by Parent, except that these investments must be in obligations of or
guaranteed by the United States, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $10 billion (based on the most recent financial statements of such bank
which are then publicly available). No gain or loss on the payment fund will affect the amounts payable under the merger agreement and Parent must take all actions necessary to ensure that the payment
fund includes at all times cash sufficient to satisfy Parent's obligation to pay the aggregate merger consideration under the merger agreement. Any interest and other income resulting from these
investments (net of any losses) will be paid to Parent upon termination of the payment fund in accordance with the merger agreement. In the event the payment fund is diminished below the level
required for the paying agent to make prompt cash payments as required under the merger agreement, Parent must, or must cause the surviving corporation to, immediately deposit additional cash into the
payment fund equal to the deficiency in the amount required to make such payments.
Within
five business days after the effective time, Parent will cause the paying agent to mail to each holder of record of a certificate representing shares of Company common stock,
which we refer to as a certificate, a letter of transmittal and instructions for use in effecting the surrender of the certificates in exchange for the merger consideration payable with respect
thereto. Upon surrender of a certificate to the paying agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such certificate will be promptly paid in exchange
therefor a cash amount in immediately available funds equal to the number of shares of Company common stock formerly represented by such certificate multiplied by the merger consideration, and the
certificate so surrendered shall forthwith be cancelled.
Any
holder of uncertificated shares that immediately prior to the effective time represented shares of Company common stock, which we refer to as uncertificated shares, will not be
required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the merger consideration that such holder is entitled to receive pursuant to the merger agreement.
In lieu thereof, each holder of record of one or more uncertificated shares will, upon receipt by the paying agent of an "agent's message" in customary form with respect to any uncertificated share
(or such other evidence, if any, of
transfer as the paying agent may reasonably request), be promptly paid the merger consideration in respect of such uncertificated share, and such uncertificated share shall forthwith be cancelled.
No
interest will be paid or accrued on the cash payable upon the surrender of certificates or uncertificated chares. In the event of a transfer of ownership of a certificate or
uncertificated shares which is not registered in the transfer records of the Company, the merger consideration with respect thereto may be paid to a person other than the person in whose name the
certificate or uncertificated shares is registered, if, in the case of a certificate, such certificate is presented to the paying agent, and in each case the transferor provides to paying agent
(i) all documents required to evidence and effect such transfer and (ii) evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by the merger
agreement, each certificate and all uncertificated shares (other than certificates or uncertificated shares representing dissenting shares) will be deemed at any
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time
after the effective time to represent only the right to receive upon such surrender the merger consideration as contemplated by the merger agreement.
All
merger consideration paid upon the surrender of certificates and cancellation of uncertificated shares in accordance with the terms of the merger agreement will be deemed to have
been paid in satisfaction of all rights pertaining to the shares of Company common stock formerly represented by such certificates and uncertificated shares, and from and after the effective time
there will be no further registration of transfers on the stock transfer books of the surviving corporation of the shares of Company common stock which were outstanding immediately prior to the
effective time. If, after the effective time, certificates or uncertificated shares are presented to the surviving corporation or the paying agent for any reason, they will be cancelled and exchanged
as provided in the merger agreement.
Any
portion of the payment fund that remains undistributed to the holders of certificates and uncertificated shares for one year after the effective time (including all interest and
other income received by the paying agent in respect of all funds made available to it) will be delivered to Parent, upon demand, and any holder of a certificate or uncertificated shares who has not
previously complied with the merger agreement will be entitled to receive only from Parent or the surviving corporation (subject to abandoned property, escheat and other similar laws) payment of its
claim for merger consideration, without interest.
To
the extent permitted by applicable law, none of Parent, Merger Sub, the Company, the surviving corporation or the paying agent will be liable to any holder of shares of Company common
stock for any amount required to be delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any certificates or uncertificated shares shall not have
been
surrendered prior to the date on which the related merger consideration would escheat to or become the property of any governmental entity, any such merger consideration will, to the extent permitted
by applicable law, immediately prior to such time become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.
If
any certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed, and, if
reasonably required by Parent, the posting by such person of a bond in such reasonable and customary amount as Parent may direct as indemnity against any claim that may be made against it with respect
to such certificate, the paying agent will pay, in exchange for such lost, stolen or destroyed certificate, the merger consideration to be paid in respect of the shares of Company common stock
formerly represented thereby pursuant to the merger agreement.
You should not send your certificates (if any) to the paying agent until you have received transmittal materials from the paying agent. Do not return your
certificates (if any) with the enclosed proxy.
Appraisal Rights
Shares of Company common stock issued and outstanding immediately prior to the effective time of the merger that are held by a holder who has
made a proper demand for appraisal of such shares of Company common stock in accordance with Section 262 of the DGCL, continuously holds such shares of record from the date of the making of the
demand through the effective time of the merger and has not thereafter failed to perfect, withdraw or otherwise lose his, her or its rights to appraisal, which we refer to as dissenting shares, will
not be converted into or represent the right to receive the merger consideration in accordance with the merger agreement. Holders of dissenting shares will be entitled to have their shares appraised
by the Delaware Court of Chancery and to receive in lieu of the merger consideration payment in cash of the amount determined by the Delaware Court of Chancery to be the "fair value" of the shares of
Company common stock as of the effective time of the merger. These
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rights
are discussed more fully under the section of this proxy statement entitled "
Appraisal Rights
" beginning on page
[].
If
any dissenting shares lose their status as such (through failure to perfect or otherwise), then, as of the later of the effective time or the date of loss of such status, such shares
will be deemed to have been converted as of the effective time into the right to receive the merger consideration in accordance with the merger agreement, without interest and subject to deduction for
any required withholding tax, and will not thereafter be deemed to be dissenting shares.
The
Company must give Parent: (i) prompt notice of any written demand for appraisal received by the Company prior to the effective time pursuant to the DGCL, any withdrawal of any
such demand and any other demand, notice, withdrawal or instrument delivered to the Company prior to the effective time pursuant to the DGCL that relates to such demand; and (ii) the right to
participate in, direct and control all negotiations and proceedings with respect to any such demand, notice, withdrawal or instrument. The Company may not settle or pay or make any payment or
settlement offer prior to the effective time with respect to any such demand, notice or instrument or agree to do any of the foregoing unless Parent has given its written consent to such settlement,
payment or payment or settlement offer.
Treatment of Company Stock Awards and Employee Stock Purchase Plan
Except as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the effective time of the merger,
each then-outstanding and unexercised option to purchase shares of Company common stock with an exercise price per share equal to or greater than the per share merger consideration will be canceled,
without any consideration being payable in respect thereof, and will have no further force or effect. Because the current exercise price per share of each outstanding Company stock option is equal to
or greater than the merger consideration, all Company stock options will be canceled, without payment of any consideration therefor, and will have no further force or effect.
Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that
will become vested, by its terms, as a result of the closing of the merger will automatically be canceled and converted into the right to receive from the surviving corporation an amount of cash equal
to the product of (i) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (ii) the per share merger consideration, without
any interest thereon and subject to all applicable withholding, with such amount payable promptly after the closing of the merger.
Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that
will not be vested, by its terms, on or before the closing of the merger will automatically be canceled and converted into the contingent right to receive from the surviving corporation an amount of
cash equal to the product of
(i) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (ii) the per share merger consideration, without any interest
thereon and subject to all applicable withholding, with such amount payable promptly following the earlier of (A) the date on which the original vesting conditions applicable to the underlying
Company restricted stock unit, including and taking into account any accelerated vesting provisions set forth therein, are satisfied and (B) the date that is 180 days following the
closing date, provided that the 180 day period referenced in clause (B) is extended the earlier of the (x) the last day of the tenth month following closing and
(y) October 31, 2018 for certain Company restricted stock units granted in July 2017.
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Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the effective time of the merger, each Company performance share award that
is then outstanding and unvested and that is held by a former employee of the Company (as determined immediately prior to the effective time of the merger) will automatically be canceled and converted
into the right to receive from the surviving corporation an amount of cash equal to the product of (i) the target number of shares of Company common stock subject to such Company performance
share award, as pro-rated in accordance with the terms of the applicable Company performance share award agreement, multiplied by (ii) the per share merger consideration, without any interest
thereon and subject to all applicable withholding, with such amount payable promptly after the closing of the merger.
Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the effective time of the merger, each Company performance share award that
is then outstanding and unvested and that is held by a person who is an employee of the Company immediately prior to the effective time of the merger will automatically be canceled and converted into
the contingent right to receive an amount of cash equal to the product of (i) the target number of shares of Company common stock subject to such Company performance share award multiplied by
(ii) the per share merger consideration, without any interest thereon and subject to all applicable withholding, with such amount payable promptly following the earlier of (A) the date
on which the original vesting conditions applicable to the underlying Company performance share award, including and taking into aacount any accelerated vesting provisions set forth therein, are
satisfied and (B) the date that is 180 days following the closing date, subject to the holder's continued service to the Company through the applicable date; provided that the merger
consideration payable in respect of the Company performance share awards will be paid no later than March 15 of the calendar year following the calendar year in which the closing occurs.
The
Board has suspended the Company's employee stock purchase plan indefinitely effective as of July 1, 2017. The Board will terminate the employee stock purchase plan as of
immediately prior to the effective time of the merger. During the period from the date of the merger agreement until the termination of the Company's employee stock purchase plan in accordance with
the merger agreement, we will not permit any offering periods to occur.
Representations and Warranties
In the merger agreement, the Company made representations and warranties to Parent and Merger Sub, including those relating
to:
-
-
the Company's corporate organization, standing and power;
-
-
the Company's capitalization;
-
-
the Company's subsidiaries;
-
-
the Company's authorization to execute, deliver and perform the merger agreement (including approval of the Board and direction to submit the
merger agreement to a stockholder vote and recommendation of stockholder approval) and the enforceability of the merger agreement;
-
-
the absence of conflicts with, or violations of, the Company's organizational documents, applicable laws, contracts or permits, in each case as
a result of the Company's execution of the merger agreement or consummation of the merger, and the absence of certain governmental filings and consents in connection with the merger;
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-
-
documents filed by the Company with the SEC, the accuracy and completeness of the financial statements and other information contained therein;
this proxy statement; the Company's compliance with the Sarbanes-Oxley Act of 2002, as amended, and the Company's disclosure controls and procedures;
-
-
the absence of certain undisclosed liabilities;
-
-
the absence of a Company Material Adverse Effect (as defined below in the section entitled "
Definition of
Company Material Adverse Effect
") since April 29, 2017; and the absence of certain other changes or events involving the Company from April 29, 2017 until the
date of the merger agreement;
-
-
the Company's filing of tax returns, payment of taxes and other tax matters;
-
-
the Company's leased and owned real property;
-
-
the Company's intellectual property;
-
-
the Company's material contracts;
-
-
the absence of pending or threatened litigation, investigations, judgments or orders involving the Company;
-
-
environmental matters with respect to the Company's operations;
-
-
the Company's employee benefit plans, matters relating to the Employee Retirement Income Security Act of 1974, as amended, and other matters
concerning employee benefits and employment agreements;
-
-
the Company's compliance with laws, including the U.S. Foreign Corrupt Practices Act of 1977 and export control laws;
-
-
the Company's possession of and compliance with permits, licenses and franchises to conduct its business;
-
-
the Company's employees and other labor matters;
-
-
the receipt by the Board of opinions from Barclays and Morgan Stanley of the fairness, from a financial point of view, of the merger
consideration to holders of the Company common stock;
-
-
the absence of undisclosed obligations to brokers and investment bankers;
-
-
the inapplicability to the merger of the restrictions set forth in Section 203 of the DGCL;
-
-
the Company's insurance policies; and
-
-
certain of the Company's suppliers.
In
the merger agreement, Parent and Merger Sub made representations and warranties to the Company, including those relating to:
-
-
Parent's and Merger Sub's corporate organization, standing and power;
-
-
Parent's and Merger Sub's authorization, execution, delivery, performance and the enforceability of the merger agreement;
-
-
the absence of conflicts with, or violations of, Parent's and Merger Sub's organizational documents, applicable laws, contracts or permits, in
each case as a result of their execution of the merger agreement or consummation of the merger; the absence of certain governmental filings and consents in connection with the merger;
-
-
the absence of any vote required by holders of Parent's securities in connection with the merger;
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-
-
the information provided by Parent and Merger Sub in writing for inclusion in this proxy statement;
-
-
the operations of Merger Sub;
-
-
the execution, delivery and enforceability of the debt and equity commitment letters, and the absence of any breach or default under the debt
and equity commitment letters;
-
-
the enforceability of, and absence of default under, the limited guarantee executed and delivered by the guarantors;
-
-
the solvency of the surviving corporation as of the effective time and immediately after consummation of the transactions contemplated by the
merger agreement;
-
-
the inapplicability to the merger of the restrictions set forth in Section 203 of the DGCL;
-
-
the absence of pending or threatened litigation, investigations, judgments or orders involving Parent or Merger Sub;
-
-
the disclosure to the Company of all agreements and understandings between Parent, Merger Sub or the guarantors and any member of the Board or
of management of the Company;
-
-
the absence of any agreements or understandings pursuant to which any stockholder of the Company would be entitled to receive consideration of
a different amount or nature other than the merger consideration or be obligated to vote the merger agreement or approve the merger agreement against a superior proposal;
-
-
the absence of obligations to brokers and investment bankers for which the Company or any of its subsidiaries would have any obligations or
liabilities prior to the effective time;
-
-
the due diligence investigation of Parent and Merger Sub;
-
-
acknowledgment by Parent and Merger Sub of the absence of representations and warranties by the Company not set forth in the merger agreement;
and
-
-
Parent's and Merger Sub's non-reliance on Company estimates, projections, forecasts, forward-looking statements and business plans.
Definition of Company Material Adverse Effect
Several of the representations and warranties made by the Company in the merger agreement and certain conditions to the performance by Parent
and Merger Sub of their obligations under the merger agreement are qualified by reference to whether the item in question would have a "Company Material Adverse Effect." The merger agreement provides
that a "Company Material Adverse Effect" means any effect, change, event, occurrence or development that is materially adverse to the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole. However, no effect, change, event, occurrence or development (by itself or when aggregated or taken together with any and all other effects, changes,
events, occurrences or
developments) to the extent resulting from, arising out of, attributable to, or related to any of the following will be deemed to be or constitute a "Company Material Adverse
Effect:"
-
-
general economic conditions (or changes in such conditions) or conditions in the global economy generally;
-
-
conditions (or changes in such conditions) in the securities markets, credit markets, currency markets or other financial markets;
-
-
conditions (or changes in such conditions) in the industries in which the Company and its subsidiaries conduct business;
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-
-
political conditions (or changes in such conditions) or acts of war, sabotage or terrorism;
-
-
earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force
majeure events;
-
-
the announcement of the merger agreement or the pendency or consummation of the transactions contemplated by the merger agreement, including
(i) the identity of Parent and (ii) the loss or departure of officers or other employees of the Company or any of its subsidiaries directly resulting from, arising out of, attributable
to, or related to the transactions contemplated by the merger agreement;
-
-
the taking of any action expressly required by the merger agreement or the failure to take any action expressly prohibited by the merger
agreement;
-
-
changes in law or other legal or regulatory conditions (or the interpretation thereof) or changes in GAAP or other accounting standards (or the
interpretation thereof);
-
-
changes in the Company's stock price or the trading volume of the Company's stock, or any failure by the Company to meet any public estimates
or expectations of the Company's revenue, earnings or other financial performance or results of operations for any period, or any failure by the Company or any of its subsidiaries to meet any internal
budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations (but not, in each case, the underlying cause of such changes or failures, unless such
changes or failures would otherwise be excepted from this definition); and
-
-
any litigation related to the merger agreement, the merger or other transactions contemplated by the merger agreement brought by any of the
current or former stockholders of the Company (on their own behalf or on behalf of the Company) against the Company, Merger Sub, Parent or any of their directors or officers;
except
to the extent such effects, changes, events, occurrences or developments to the extent resulting from, arising out of, attributable to or related to the matters described in the first, second,
third, fourth, fifth and eighth bullets above disproportionately adversely affect the Company and its subsidiaries, taken as a whole, as compared to other companies that conduct business in the
countries and regions in the world and in the industries in which the Company and its subsidiaries conduct business in any material respect (in which case, such adverse effects (if any) will be taken
into account when determining whether a "Company Material Adverse Effect" has occurred or may, would or could occur solely to the extent they are disproportionate).
Definition of Parent Material Adverse Effect
Certain of the representations and warranties made by Parent and Merger Sub in the merger agreement and certain conditions to the performance of
the Company's obligations under the merger agreement are qualified by reference to whether the item in question would have a "Parent Material Adverse Effect." The merger agreement provides that a
"Parent Material Adverse Effect" means any change, event or development that would reasonably be expected to prevent, or materially impair or delay, the ability of Parent or Merger Sub to consummate
the merger or any of the other transactions contemplated by the merger agreement or otherwise perform any of its obligations under the merger agreement.
Covenants Relating to the Conduct of the Company's Business
Except as otherwise expressly contemplated or required by the merger agreement, as required by applicable law or by certain material contracts
in effect on the date of the merger agreement and made available to Parent, as set forth in the Company Disclosure Schedule, or with Parent's prior written
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consent,
during the period beginning on the date of the merger agreement and ending at the earlier to occur of the effective time of the merger or the termination of the merger agreement, the Company
and its subsidiaries will use commercially reasonable efforts to act and carry on its business in the ordinary course of business, to preserve intact its business organization and to preserve
satisfactory business relationships with its significant suppliers and material customers, licensors, licensees, lessors, governmental entities, creditors and others having material business dealings
with the Company. Furthermore, except as otherwise expressly contemplated or required by the merger agreement, as required by applicable law, as set forth in the Company Disclosure Schedule, or with
Parent's prior written consent, until the earlier to occur of the effective time of the merger and the termination of the merger agreement, the Company will not, and will not permit any of its
subsidiaries to, do any of the following:
-
-
declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock (other than dividends and
distributions by a direct or indirect wholly-owned subsidiary of the Company to its parent);
-
-
split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or any of its other securities;
-
-
purchase, redeem or otherwise acquire any shares of its capital stock or any other of its securities or any rights, warrants or options to
acquire any such shares or other securities, except for certain exceptions;
-
-
issue, deliver, sell, grant, pledge or otherwise dispose of or subject to any lien any shares of its capital stock, any other voting securities
or any securities convertible into or exchangeable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible or exchangeable securities, except for certain
exceptions;
-
-
amend the Company's or any of its subsidiaries' certificate of incorporation, by-laws or other comparable charter or organizational documents,
except for certain exceptions;
-
-
acquire in any manner any business or any corporation, partnership, joint venture, limited liability company, association or other business
organization or division thereof;
-
-
acquire any assets, rights or properties, except purchases of inventory and raw materials in the ordinary course of business;
-
-
sell, lease, license, pledge, mortgage or otherwise dispose of or subject to any lien (other than liens arising in connection with immaterial
security deposit or cash collateral arrangements) any properties, rights or assets of the Company or any of its subsidiaries other than sales of inventory and disposition of obsolete equipment in the
ordinary course of business;
-
-
adopt any stockholder rights plan;
-
-
adopt a plan of complete or partial liquidation, dissolution, recapitalization, restructuring or other reorganization;
-
-
subject to certain exceptions, merge or consolidate with any person;
-
-
incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, except for certain exceptions;
-
-
issue, sell or amend any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of
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-
-
settle any action, suit, proceeding, claim, arbitration or investigation, except for certain exceptions;
-
-
enter into any new line of business;
-
-
change or revoke any material tax election or make any material tax election inconsistent with past practice;
-
-
file any material amended tax return with respect to any tax;
-
-
surrender any right to a material refund of taxes;
-
-
change any material method of accounting for tax purposes, except as required by law or GAAP;
-
-
settle or compromise any material tax claim or assessment;
-
-
engage in any transaction or enter into any contract that would require disclosure under Item 404 of Regulation S-K promulgated
under the Exchange Act;
-
-
other than in the ordinary course of business, materially reduce the amount of insurance coverage under existing insurance policies or fail to
renew or replace any material existing insurance policies; or
-
-
authorize any of, or commit or agree, in writing or otherwise, to take any of, the foregoing actions.
Covenants Relating to the Conduct of Parent's and Merger Sub's Business
Except as otherwise expressly contemplated or permitted by the merger agreement or as required by applicable law, during the period beginning on
the date of the merger agreement and ending at the earlier to occur of the effective time of the merger or the termination of the merger agreement:
-
-
neither Parent nor Merger Sub will, without the prior consent of the Company, take or cause to be taken any action that would be reasonably
expected to materially delay, impair or prevent the consummation of the transactions contemplated by the merger agreement, or enter into any agreement to take any such action, and
-
-
Merger Sub will not engage in any activity of any nature except for activities related to or in furtherance of the merger and the other
transactions contemplated by the merger agreement.
Restrictions on Solicitation of Other Offers
Under the merger agreement, until the earlier of the effective time of the merger and the termination of the merger agreement, the Company and
its subsidiaries will not, and the Company will cause its and its subsidiaries' officers and directors not to, and will use reasonable efforts to cause its and its subsidiaries' other representatives
not to, directly or indirectly:
-
-
solicit, initiate, knowingly facilitate or knowingly encourage (including by way of providing non-public information) any inquiries or the
making of any proposal or offer that constitutes, or that would reasonably be expected to lead to, any acquisition proposal;
-
-
amend or grant a waiver or release, or publicly authorize or agree to enter into an amendment, waiver or release, under (i) any
standstill or similar agreement with respect to any Company common stock (other than for Parent or its affiliates) or (ii) any applicable anti-takeover law or anti-takeover provision in the
certificate of incorporation or by-laws (other than for Parent or its affiliates), except, in each case, under the circumstances permitted under the merger agreement; or
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-
-
enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish or provide access to any non-public
information to any person who has made or would reasonably be expected to make, any acquisition proposal or otherwise for the purpose of encouraging or facilitating, any acquisition proposal.
However,
subject to compliance with the merger agreement, at any time prior to receipt of the Company stockholder approval the Company may, if the Board determines that failure to take
such action would be inconsistent with its fiduciary duties:
-
-
furnish non-public information with respect to the Company and its subsidiaries to any person who has made an acquisition proposal that did not
result from a material breach of the merger agreement that the Board determines in good faith (after consultation with outside counsel and its financial advisor) is, or could reasonably be expected to
lead to, a superior proposal, which we refer to as a qualified person, pursuant to a confidentiality agreement not materially less restrictive in any substantive manner, including with respect to
standstill provisions, than the confidentiality agreement between the Company and Sycamore (and which confidentiality agreement may not include an obligation of the Company to reimburse such person's
expenses);
-
-
engage in discussions or negotiations (including solicitation of revised acquisition proposals) with any qualified person regarding any
acquisition proposal; or
-
-
amend, or grant a waiver or release under, any standstill or similar agreement with respect to any Company common stock with any qualified
person solely to allow for an acquisition proposal to be made in a confidential manner to the Company or the Board.
An
"acquisition proposal" means any written:
-
-
proposal or offer for a merger, consolidation, dissolution, recapitalization, share exchange, tender offer or other business combination
involving the Company and its subsidiaries (other than (i) mergers, consolidations, recapitalizations, share exchanges or other business combinations involving solely the Company and/or one or
more subsidiaries of the Company and (ii) mergers, consolidations, recapitalizations, share exchanges, tender offers or other business combinations that if consummated would result in the
holders of the outstanding shares of Company common stock immediately prior to such transaction owning more than 80% of the equity securities of the Company, or any successor or acquiring entity,
immediately thereafter);
-
-
proposal for the direct or indirect disposition, sale or issuance by the Company of 20% or more of any class of its equity securities; or
-
-
proposal or offer to acquire, combine, license, reorganize or subject to a joint venture, in any manner, directly or indirectly, 20% or more of
the equity securities or consolidated total assets of the Company and its subsidiaries;
in
each case other than the transactions contemplated by the merger agreement or any offer or proposal by Parent or any subsidiary of Parent.
A
"superior proposal" means any bona fide acquisition proposal made by a third party after the date of the merger agreement to acquire, directly or indirectly, more than 50% of the
equity securities or consolidated total assets of the Company and its subsidiaries, (i) on terms which the Board determines in its good faith judgment to be more favorable to the holders of
Company common stock than the transactions contemplated by the merger agreement (after consultation with its financial and legal advisors), taking into account all the terms and conditions of such
proposal (including financial, regulatory, legal and other aspects of such proposal) and the merger agreement (including any written, binding offer by Parent to amend the terms of the merger
agreement) that the Board determines to be relevant and (ii) which the Board determines to be reasonably capable of being completed on the terms proposed, taking into account all financial,
regulatory, legal and other aspects of such proposal that the
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Board
determines to be relevant. In no event will an acquisition proposal be considered a "superior proposal" if it was solicited, initiated, facilitated, encouraged or negotiated in material breach
of the merger agreement by the Company.
The
Company must, within one business day, advise Parent orally and in writing of the Company's or any of its subsidiaries' or any of their respective representatives' receipt of any
acquisition proposal or request for material non-public information or access to the Company or its representatives by any third party that the Company reasonably believes is related to an acquisition
proposal or potential acquisition proposal, including the material terms and conditions of any such request for information or access or acquisition proposal and the identity of the person making any
such acquisition proposal. Thereafter, the Company must keep Parent informed on a reasonably prompt basis of any material developments with respect to any such request for information or access or
acquisition proposal, including with respect to the terms and status thereof and whether any such acquisition proposal has been withdrawn or rejected and must provide Parent written notice of any such
withdrawal or rejection and copies of any written request for information or access or acquisition proposal within 48 hours. Neither the Company nor any of its subsidiaries will enter into any
confidentiality agreement subsequent to the date of the merger agreement which prohibits the Company from providing to Parent the information or access required to be provided to Parent pursuant to
this provision of the merger agreement.
Under
the merger agreement, the Company agreed to, and agreed to cause its subsidiaries to, and agreed to direct their respective representatives to, except with respect to Parent and
Merger Sub:
-
-
cease immediately all solicitations, discussions and negotiations that commenced prior to the date of the merger agreement regarding any
proposal that constitutes, or could reasonably be expected to lead to, an acquisition proposal;
-
-
request the prompt return or destruction of all confidential or non-public information or access previously furnished to any person within the
last twelve months of the date of the merger agreement for the purpose of evaluating a possible acquisition proposal; and
-
-
terminate access to any physical or electronic data rooms relating to a possible acquisition proposal.
Restrictions on Changes of Recommendation to Company Stockholders
Under the merger agreement, the Board must submit the merger agreement to the Company's stockholders for adoption and must recommend that the
Company's stockholders vote in favor of adopting the merger agreement. Prior to the earlier of the effective time of the merger and the termination of the merger
agreement:
-
-
the Board may not (we refer to each of the actions listed in the following five sub-bullets as a Company board recommendation
change):
-
-
withhold, withdraw or modify, or publicly propose to withhold, withdraw or modify, in each case in a manner adverse to Parent, its
recommendation to the Company's stockholders that the Company's stockholders adopt the merger agreement at the special meeting, which we refer to as the recommendation;
-
-
fail to include the recommendation in this proxy statement;
-
-
fail to publicly reaffirm the recommendation within five business days of a request therefor in writing by Parent following the
public disclosure of an acquisition proposal with any person other than Parent and Merger Sub;
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-
-
fail to recommend against any acquisition proposal that is a tender offer or exchange offer within ten business days after the
commencement thereof; or
-
-
publicly announce an intention or resolution to effect any of the foregoing;
-
-
the Company and its subsidiaries may not enter into, or publicly authorize or agree to enter into, any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement relating to any acquisition proposal (other than a confidentiality agreement entered into in the
circumstances described above in the section entitled "
Restrictions on Solicitations of Other Offers
");
-
-
the Board may not adopt, approve, endorse or recommend, or publicly propose to adopt, approve, endorse or recommend, any acquisition proposal.
However,
prior to receipt of the Company stockholder approval, the Board may, (i) in response to a superior proposal that did not result from a material breach of the merger
agreement, either effect a board recommendation change or cause the Company to terminate the merger agreement, provided
that concurrently with or prior to such termination, the Company pays to Parent the company termination fee as required by the merger agreement and, immediately after the termination of the merger
agreement, the Company enters into a definitive agreement providing for such superior proposal, or (ii) in response to an intervening event, effect a board recommendation change if, and only
if, (in the case of either (i) or (ii)):
-
-
the Board has determined in good faith (after consultation with outside counsel) that the failure to effect a board recommendation change would
be reasonably likely to be inconsistent with its fiduciary duties under applicable law;
-
-
the Company has notified Parent in writing that it intends to effect a board recommendation change or termination of the merger agreement,
describing in reasonable detail the reasons for such intended board recommendation change or termination, which we refer to as a recommendation change notice;
-
-
if requested by Parent, the Company will have made itself and its subsidiaries and its and their respective representatives available and the
Company will have and will have caused its subsidiaries and its and their respective representatives to discuss and negotiate with Parent's representatives any proposed modifications to the terms and
conditions of the merger agreement (in a manner that would obviate the need to effect such board recommendation change) during the four business day period following delivery by the Company to Parent
of such recommendation change notice (it being understood that if there are any material amendments, revisions or changes to the terms of any such superior proposal (including any revision to the
amount, form or mix of consideration the Company's stockholders would receive as a result of the superior proposal, whether or not material), the Company will notify Parent of each such amendment,
revision or change and the applicable four business day period described above will be extended for at least two business days from the date of such notice), which we refer to as a notice period; and
-
-
at the end of such notice period, the Board has determined in good faith (after consultation with outside legal counsel), after considering any
modified terms and conditions proposed by or on behalf of Parent, that the failure to effect a board recommendation change would be reasonably likely to be inconsistent with its fiduciary duties under
applicable law and, with respect to a board recommendation change in response to a superior proposal, the Board has determined in good faith (after consultation with its financial advisor and outside
legal counsel) that such initial or revised (as applicable) superior proposal continues to constitute a superior proposal.
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Nothing
contained in the merger agreement prohibits the Company or the Board from:
-
-
taking and disclosing to its stockholders a position with respect to a tender offer contemplated by Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act, or from issuing a "stop, look and listen" statement pending disclosure of its position thereunder (none of which, in and of itself, will be deemed to constitute a
board recommendation change); or
-
-
making any disclosure to the Company's stockholders if, in the good faith judgment of the Board, after consultation with outside counsel,
failure to so disclose would be reasonably likely to be inconsistent with its fiduciary duties under applicable law.
However,
in no event may the Board make a board recommendation change except to the extent expressly permitted by, and in accordance with, the provisions of the merger agreement
described above.
Additional Agreements of the Parties to the Merger Agreement
Listing of Company Common Stock
Until the effective time, the Company must use its commercially reasonable efforts to continue the listing of Company common stock on the Nasdaq
Stock Market.
Access to Information
Until the earlier to occur of the effective time of the merger and the termination of the merger agreement, the Company and its subsidiaries
will afford to Parent and Parent's representatives reasonable access, upon reasonable notice, during normal business hours and in a manner that does not unreasonably disrupt or interfere with business
operations, to all of its properties, books, contracts and records as Parent may reasonably request, and, during such period, the Company and its subsidiaries will promptly make available to Parent
(i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal or state securities laws and
(ii) all other information concerning its business, properties and assets as Parent may reasonably request, except for certain exceptions. Prior to the closing of the merger, neither Parent nor
Merger Sub will (and each will cause its affiliates and representatives not to) contact or communicate with any of the employees, customers, licensors or suppliers of the Company or any of its
subsidiaries, without the prior written consent of the Company.
Legal Conditions to the Merger
Parent and the Company must each use its reasonable best efforts to:
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take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties to the merger
agreement in doing, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by the merger agreement as promptly as practicable;
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as promptly as practicable, obtain any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained by
such party (or any of its subsidiaries) from any governmental entity or third party in connection with the authorization, execution and delivery of the merger agreement and the consummation of the
transactions contemplated thereby, except that in no event will Parent or the Company or any of their respective subsidiaries be required to pay any monies (except for filings or similar fees) or
(except, in the case of Parent or its subsidiaries, as described below) agree to any material undertaking in connection with any of the foregoing;
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as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to the merger
agreement and the merger required under (i) the Exchange Act, and any other applicable federal or state securities laws, (ii) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and any related governmental request thereunder and (iii) any other applicable law;
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contest and resist any action, including any administrative or judicial action, and seek to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary or permanent), which we refer to as a restrictive order, which has the effect of making the merger illegal or otherwise
prohibiting consummation of the merger or the other transactions contemplated by the merger agreement; and
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execute or deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of,
the merger agreement.
Parent
must propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by consent decree, hold separate order or otherwise, the sale,
divestiture or disposition of such assets or businesses of Parent or, effective as of the effective time of the merger, the surviving corporation, or their respective subsidiaries, or otherwise offer
to take or offer to commit to take any action which it is capable of taking and if the offer is accepted, take or commit to take such action that limits its freedom of action with respect to, or its
ability to retain, any of the businesses, services or assets of Parent, the surviving corporation or their respective subsidiaries, in order to avoid the entry of, or to effect the dissolution of, any
restrictive order, which would have the effect of preventing or delaying the closing beyond the outside date, provided that Parent will not be obligated to take any such action unless the taking of
such action is expressly conditioned upon the consummation of the merger.
Public Disclosure
Except as may be required by law or stock market regulations, Parent and the Company must mutually agree upon the form and substance
of:
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any widespread internal written communications that may be made by the Company to its officers, employees, independent contractors,
consultants, directors, suppliers, customers, contract counterparties and/or other business relations of the Company or its subsidiaries with respect to the merger, the merger agreement and the
transactions contemplated thereby; and/or
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any other press release or other public statement with respect to the merger, the merger agreement and the transactions contemplated thereby.
In
addition, the Company must use its commercially reasonable efforts to consult with Parent prior to making any widespread internal oral communications to its employees.
Indemnification
For six years following the effective time of the merger, Parent and the Company have agreed that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the effective time of the merger and rights to advancement of expenses relating thereto now existing in favor of any person who is now,
or has been at any time prior to the date of the merger agreement, or who becomes prior to the effective time of the merger, an officer, director or manager of the Company or any of its subsidiaries,
who we refer to as an indemnified party, whether provided in the organizational documents of the Company or any of its subsidiaries or in any indemnification agreement between any indemnified party
and the Company or any of its subsidiaries, will survive the merger and continue in full force and effect, and may not be amended, repealed or otherwise modified in any manner that would adversely
affect any right thereunder of any indemnified party.
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For
six years following the effective time of the merger, Parent and the surviving corporation have agreed to maintain provisions no less favorable with respect to indemnification,
advancement of expenses and exculpation of present and former directors and officers of the Company and its subsidiaries in respect of acts or omissions occurring or alleged to have occurred at or
prior to the effective time of the merger as contained in the certificate of incorporation and by-laws of the Company in effect on the date of the merger agreement.
Parent
has also agreed to either:
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maintain in effect for six years from the effective time of the merger the Company's existing directors' and officers' liability insurance
policy with respect to matters existing or occurring at or prior to the effective time of the merger (including the transactions contemplated by the merger agreement), so long as the annual premiums
would not exceed more than 300% of the current annual premium paid for the Company's directors' and officers' liability insurance policy, which we refer to as the Maximum Premium; or
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(ii) purchase a "tail" policy for an annual cost not to exceed the Maximum Premium and maintain such "tail" policy in full force and effect for
six years from the effective time of the merger.
Notwithstanding
the foregoing, the Company may, prior to the effective time of the merger, elect to purchase its own "tail" policy using a nationally recognized broker selected by Parent
in consultation with the Company, as long as such "tail" policy does not cost more than the Maximum Premium.
In
the event Parent or the surviving corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and will not be the
continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each
such case, proper provision will be made so that the successors and assigns of Parent or the surviving corporation, as the case may be, will assume and succeed to the obligations described above.
If
any indemnified party makes any claim for indemnification or advancement of expenses under these provisions of the merger agreement that is denied by Parent and/or the Company or the
surviving corporation, and a court of competent jurisdiction determines that the indemnified party is entitled to such indemnification or advancement of expenses, then Parent, the Company or the
surviving corporation will pay the indemnified party's costs and expenses, including reasonable legal fees and expenses, incurred by the indemnified party in connection with pursuing his or her claims
to the fullest extent permitted by law.
Notification of Certain Matters
Prior to the effective time, Parent must give prompt notice to the Company, and the Company must give prompt notice to Parent,
of:
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the occurrence, or failure to occur, of any event, which occurrence or failure to occur is reasonably likely to cause any representation or
warranty of such party contained in the merger agreement to be untrue or inaccurate in any manner that would result in the failure of a closing condition;
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any material breach by such person of any covenant or agreement set forth in the merger agreement;
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any written notice or other written communication from any governmental entity or counterparty to certain material contracts alleging that the
consent of such governmental entity or such counterparty, as applicable, is required in connection with the transactions contemplated by the merger agreement; or
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any actions, suits claims or proceedings commenced or, to its knowledge, threatened in writing against such person or any of its subsidiaries
that relate to the consummation of the transactions contemplated by the merger agreement.
Employee Benefits Matters
For a period of one year following the effective time (or, if shorter, the period of employment of the relevant Company employee), Parent must
provide, or must cause to be provided, (i) to each Company employee a total compensation package no less favorable in the aggregate than the total compensation package (including base salary or
wage rates, commissions and target annual cash bonus opportunities but excluding the value of annual equity awards and cash payments in lieu of equity awards) provided to such Company employee
immediately before the effective time and (ii) to all Company employees in the aggregate other employee benefits (other than the Company employee stock purchase plan, long-term incentive or
defined benefit pension or equity awards or cash payments in lieu thereof) that are substantially comparable, in the aggregate, to the other benefits provided to such Company employees immediately
before the effective time.
For
purposes of vesting and eligibility to participate (but not for accrual or level of benefits) under the employee benefit plans of Parent and its subsidiaries providing benefits to
any Company employees after the effective time, each Company employee must, subject to applicable law and applicable tax qualification requirements, be credited with his or her years of service with
the Company and its subsidiaries and their respective predecessors before the effective time, to the same extent as such Company employee was entitled, before the effective time, to credit for such
service under any similar Company employee plan in which such Company employee participated or was eligible to participate immediately prior to the effective time, except that the foregoing will not
apply to the extent that its application would result in a duplication of benefits.
If
any Company employee (who is not otherwise a party to an employment agreement, offer letter or similar agreement or arrangement or any amendment or supplement of any of the foregoing,
in each case that provides for a different treatment with respect to severance) whose employment is terminated on or prior to the first anniversary of the effective time under circumstances under
which such Company employee would have received severance benefits under the Company severance policy, Parent will cause the surviving corporation to provide that such Company employee will be
entitled to severance benefits from the surviving corporation that are no less favorable than the severance benefits that would have been granted under the Company severance policy as in existence on
the date of the merger agreement and will notify such Company employee of such benefits in a manner consistent with the Company's past practices prior to the date of the merger agreement.
From
and after the effective time, Parent must cause the surviving corporation and its subsidiaries to assume, in accordance with their terms, all obligations of the Company under
contracts, agreements, arrangements, policies, plans and commitments of the Company and the subsidiaries of the Company as in effect immediately prior to the date hereof and in the form provided to
Parent prior to the date hereof that are applicable to any current or former employees or directors of the Company or any subsidiary of the Company, including any employment, severance, and
termination plans and agreements.
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All provisions contained in the merger agreement with respect to employee benefit plans or employee compensation are included for the sole benefit of the
respective parties and shall not create any right (including any third party beneficiary rights) in any other person, including any employee or former employee of the Company or any of its
subsidiaries or any participant or beneficiary in any Company employee plan. Nothing in the merger agreement (i) will require Parent, the surviving corporation or any of their subsidiaries to
continue to employ any particular Company employee following the effective time or to provide any right to a particular term or condition of employment, (ii) will, for a period of one year
following the effective time, permit the reduction of the existing severance or acceleration benefits in effect on the date of the merger agreement for any Company employee, or (iii) except as
provided in the foregoing clause (ii), will be construed to prohibit Parent, the surviving corporation or any of their subsidiaries from amending or terminating any employee benefit plan in
accordance with its terms or to amend or create any employee benefit plan or any similar plan or agreement from Parent or its affiliates.
Notwithstanding
the foregoing (other than potentially with respect to severance), employees located outside the United States or covered by collective bargaining agreements will be
treated instead in accordance with applicable contracts (after taking into account the assumptions of contracts described above) and applicable law.
State Takeover Laws
The Company and the Board must not take any action that would cause any anti-takeover or other similar law to become applicable to restrict or
prohibit the merger or any other transactions contemplated by the merger agreement. If any "fair price," "business combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to any of the transactions contemplated by the merger agreement, the parties to the merger agreement must use their respective reasonable best efforts to
(i) take such actions as are reasonably necessary so that the transactions contemplated under the merger agreement may be consummated as promptly as practicable on the terms contemplated under
the merger agreement and (ii) otherwise take all such actions as are reasonably necessary to eliminate or, if unable to be eliminated, minimize the effects of any such statute or regulation on
such transactions.
Rule 16b-3
Prior to the effective time of the merger, the Company must take all reasonable steps as may be required to cause any dispositions of Company
equity securities (including derivative securities) pursuant to the transactions contemplated by the merger agreement by each individual who is a director or officer of the Company and who would
otherwise be subject to Rule 16b-3 under the Exchange Act to be exempt under under such rule to the extent permitted by applicable law.
Financing
Each of Parent and Merger Sub must use, and must cause their respective affiliates to use, reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the financing pursuant to the debt commitment letter, which we refer to as the
debt financing, and the financing pursuant to the equity commitment letters, which we refer to as the equity financing, on the terms and subject only to the conditions set forth in the debt commitment
letter and the equity commitment letters. We refer to the debt financing together with the equity financing as the financing. We refer to the debt commitment letter together with the equity commitment
letters as the financing letters. The reasonable best efforts
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of
Parent and Merger Sub mentioned in the first sentence of this paragraph include reasonable best efforts to:
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maintain in effect and comply with the financing letters;
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negotiate and enter into definitive agreements with respect to the debt financing on the terms and subject only to the conditions set forth in
the debt commitment letter;
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satisfy (and cause its affiliates to satisfy) on a timely (taking into account the marketing period) basis all conditions applicable to Parent
and its affiliates in the financing letters and the definitive agreements related thereto (or, if necessary or deemed advisable by Parent, seek the waiver of conditions applicable to Parent and Merger
Sub contained in such financing letter or such definitive agreements related thereto);
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consummate the financing at or prior to the closing date;
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enforce its rights under the financing letters and the definitive agreements relating to the financing; and
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comply with its covenants and other obligations under the financing letters and the definitive agreements relating to the financing.
Parent
must not, and must not permit any of its affiliates to, take any action not otherwise required under the merger agreement that is a breach of, or would result in termination of,
any of the financing letters. Parent, Merger Sub and the guarantors must not, without the prior written consent of the Company, agree to or permit any termination of or amendment, supplement or
modification to be made to, or grant any waiver of any provision under, the financing letters or the definitive agreements relating to the financing if such termination, amendment, supplement,
modification or waiver would be reasonably likely to (we refer to amendments described in the three following bullets as prohibited amendments):
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(i) reduce (or could have the effect of reducing) the aggregate amount of any portion of the debt financing unless an alternative source of the
equity financing or other financing is increased by a corresponding amount or (ii) reduce the amount of equity financing unless the debt financing or alternative financing is increased by a
corresponding amount, so long as in the case of clauses (i) and (ii), the terms of such financing would not constitute a prohibited amendment under the two bullets immediately below;
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adversely impact the ability of Parent or Merger Sub, as applicable, to enforce its rights against other parties to the financing letters or
the definitive agreements with respect to the financing; or
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impose new or additional conditions precedent to the availability of the financing or otherwise expand, amend or modify any of the conditions
precedent to the financing, or otherwise expand, amend or modify any other provision of the financing letters in a manner that could reasonably be expected to materially delay or prevent or make less
likely to occur the funding of the financing (or satisfaction of the conditions to the financing) on the closing date.
Parent
must keep the Company informed on a current basis and in reasonable detail, upon reasonable request by the Company, of the status of its efforts to arrange the debt financing and
provide to the Company drafts (reasonably in advance of execution) and thereafter complete, correct and executed copies of the material definitive documents for the debt financing. Parent and Merger
Sub must give the Company prompt notice:
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of any actual breach, default (or any event that, with or without notice, lapse of time or both, would reasonably be expected to give rise to
any default or breach), termination, cancellation or
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As
soon as reasonably practicable, but in any event within two business days of the date the Company delivers to Parent or Merger Sub a written request, Parent and Merger Sub must
provide any information reasonably requested by the Company relating to any circumstance referred to in the three bullets immediately above. If any portion of the debt financing becomes unavailable on
the terms and conditions (including any applicable market flex provisions) contemplated by the debt commitment letter and alternative financing (so long as the terms thereof are of the type that would
not constitute a
prohibited amendment, as described above) or an increase in the equity financing is not then made available in an amount equal to such portion, and such portion is required to fund the aggregate
merger consideration and all fees, expenses and other amounts contemplated to be paid by Parent pursuant to the merger agreement, Parent must promptly notify the Company in writing and Parent and
Merger Sub must use their reasonable best efforts to arrange and obtain in replacement thereof, and negotiate and enter into definitive agreements with respect to, alternative financing from
alternative sources in an amount sufficient to consummate the transactions contemplated by the merger agreement with terms and conditions (including market flex provisions) not materially less
favorable, taken as a whole, to Parent and Merger Sub (or their respective affiliates) than the terms and conditions set forth in the debt commitment letter, as promptly as practicable following the
occurrence of such event but no later than the final day of the marketing period. In no event will the reasonable best efforts of Parent be deemed or construed to require Parent to (i) pay fees
materially in excess of those contained in the debt commitment letter (including the market flex provisions) or agree to market flex terms materially less favorable to Parent than the corresponding
market flex terms contained in or contemplated by the debt commitment letter or (ii) enter into any alternative financing the terms of which are materially less favorable to Parent than those
contained in the debt commitment letter on the date of the merger agreement (taken as a whole).
In
the event that (i) any portion of the debt financing anticipated under the debt commitment letter to be structured as a high yield bond financing is unavailable, regardless of
the reason therefor, and such amount is not funded through a securities demand under the debt commitment letter, (ii) all closing conditions applicable to Parent and Merger Sub have been
satisfied or waived (other than any such conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions at the closing, and those
conditions the failure of which to be satisfied is attributable to a breach by Parent or Merger Sub of their representations, warranties, covenants or agreements contained in the merger agreement) and
(iii) a bridge facility contemplated by the debt commitment letter (or an alternative bridge facility or other financing obtained in accordance with the merger agreement) is available on the
terms described in the debt commitment letter, then Parent and Merger Sub must cause the applicable financing sources to fund such bridge financing in accordance
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with
the terms of the debt commitment letter and the proceeds shall be used in lieu of the affected portion of the high yield bond financing.
Prior
to the closing date, the Company must use its reasonable best efforts to provide, and to cause its subsidiaries to provide, to Parent and Merger Sub, in each case at Parent's sole
cost and expense, such reasonable cooperation as is customary and reasonably requested by Parent in connection with the arrangement, syndication and consummation of the debt financing, including using
its reasonable best efforts to:
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furnish Parent and Merger Sub and their debt financing sources, as promptly as reasonably practicable, all required financial information (as
described above in the section entitled "
Marketing Period
");
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have the Company designate members of its senior management to execute customary authorization letters with respect to Company information
included in a customary confidential information memorandum for a syndicated bank financing and cause management of the Company to participate in a reasonable number of meetings, presentations, road
shows, sessions (upon reasonable request) with rating agencies, due diligence sessions, drafting sessions and sessions between senior management and the sources of the debt financing;
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provide reasonable and customary assistance with the preparation of materials for rating agency presentations, road shows, bank information
memoranda, private placement memoranda and other customary marketing materials and provide reasonable cooperation with the due diligence efforts of the debt financing sources to the extent reasonable
and customary;
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request the Company's independent auditors to cooperate with Parent to obtain an agreed upon form of comfort letter;
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to the extent timely requested by Parent and required under the debt commitment letter, (i) obtain documents reasonably requested by
Parent or its debt financing sources relating to the repayment of the existing indebtedness of the Company and its subsidiaries and the release of related liens and related guarantees and
(ii) provide all documentation and other information required by U.S. bank regulatory authorities under applicable "know-your-customer" and anti-money laundering rules and regulations relating
to the Company or any of its subsidiaries, in each case as reasonably requested by Parent at least ten business days prior to the closing date;
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assist in the preparation, execution and delivery of definitive financing documents, including guarantee and collateral documents and customary
closing certificates (including a solvency certificate from the chief financial officer or other officer of equivalent duties) as may be required by the debt financing and other customary documents as
may be reasonably requested by Parent and cooperate to facilitate the pledging of, granting of security interests in and obtaining perfection of any liens on, collateral in connection with the debt
financing, but in no event shall any of the foregoing be effective until as of or after the closing;
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cooperate with Parent and take all corporate actions or other similar actions reasonably necessary to permit the consummation of the financing,
including customary resolutions, consents or approvals;
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assist Parent in obtaining legal opinions from local outside counsel as reasonably requested by Parent for financings similar to the financing;
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(i) subject to confidentiality restrictions, permit the prospective lenders involved in the financing to evaluate the Company and its
subsidiaries' current assets, cash management and accounting systems, policies and procedures relating thereto for the purpose of establishing collateral arrangements, (ii) cooperate with
Parent to establish bank and other accounts and blocked
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agreements and lock box arrangements in connection with the foregoing and (iii) permit representatives of the prospective lenders to conduct commercial field examinations, inventory and
intellectual property appraisals, environmental assessments and an appraisal of the owned real property, and make audits and appraisals delivered for the purposes of any credit facility available to
Parent for purposes of its financing;
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provide monthly financial statements (excluding footnotes) of the Company and its subsidiaries or business units to the extent the Company
customarily prepares (and has prepared) such financial statements; and
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use commercially reasonable efforts to assist Parent in benefiting from the existing lending relationships of the Company and its subsidiaries.
The
requested cooperation described above must not, in the Company's reasonable judgment, unreasonably interfere with the ongoing business or operations of the Company and any of its
subsidiaries. In no event will the Company or any of its subsidiaries be required to bear any cost or expense, pay any commitment or other fee, enter into any definitive agreement, incur any other
liability or obligation, make any other payment or agree to provide any indemnity in connection with the financing or any of the foregoing prior to the effective time. In addition, none of the
requested cooperation described above will require any action that would conflict with or violate the Company's or any of its subsidiaries' organizational documents or any laws or result in, prior to
the effective time, the contravention of, or that would reasonably be expected to result in, prior to the effective time, a violation or breach of, or default under, any contract to which the Company
or any of its subsidiaries is a party. In addition, if, in connection with a marketing effort contemplated by the debt commitment letter, Parent reasonably requests the Company to file a
Current Report on Form 8-K pursuant to the Exchange Act that contains material non-public information with respect to the Company, which Parent reasonably desires to include in a customary
offering memorandum for the debt financing, then the Company must discuss in good faith whether or not the Company will file a Current Report on Form 8-K or similar document containing
such material non-public information.
None
of the Company or its subsidiaries or their respective officers, directors (with respect to any subsidiary of the Company) or employees will be required to execute or enter into or
perform any agreement with respect to the financing contemplated by the financing letters that is not contingent upon the closing or that would be effective prior to the closing and no directors of
the Company that will not be continuing directors, acting in such capacity, will be required to execute or enter into or perform any agreement, or to pass any resolutions or consents, with respect to
the financing, except for any customary authorization letters. Parent must promptly, upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and fees and expenses of the Company's accounting firms engaged to assist in connection with the financing) incurred by the Company or any of its subsidiaries or any of
their respective representatives in connection with the financing, and must indemnify and hold harmless the Company, its subsidiaries and their respective representatives from and against any and all
losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with the arrangement of the financing and any information used in connection therewith.
Parent
must, and must cause its affiliates to, refrain from taking, directly or indirectly, any action that could reasonably be expected to result in the failure of any of the conditions
contained in the financing letters or in any definitive agreement relating to the financing. Parent and Merger Sub have acknowledged and agreed under the merger agreement that, notwithstanding the
Company's obligations
under the merger agreement, none of the obtaining of the financing or any permitted alternative financing, the completion of any issuance of securities contemplated by the financing, or the Company or
any of its subsidiaries having or maintaining any available cash balances is a condition to the closing, and have reaffirmed their obligation to consummate the transactions contemplated by the merger
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agreement
irrespective and independently of the availability of the financing or any permitted alternative financing, the completion of any such issuance, or the Company or any of its subsidiaries
having or maintaining any available cash balances.
Security Holder Litigation
In the event that any litigation related to the merger agreement, the merger or the other transactions contemplated thereby is brought by any
stockholder of the Company or any holder of the Company's other securities against the Company and/or its directors or officers, the Company must promptly notify Parent of such litigation and must
keep Parent reasonably informed with respect to the status thereof. The Company will have the right to control the defense and settlement of any litigation related to the merger agreement, the merger
or the other transactions contemplated by the merger agreement brought by any stockholder of the Company or any holder of the Company's other securities against the Company and/or its directors or
officers. However, the Company will give Parent the opportunity to participate, at Parent's expense, in the defense of any such litigation and the Company must consider in good faith Parent's advice
with respect to such litigation. The Company may not settle any such litigation without the prior written consent of Parent.
Proxy Statement; Company Stockholders' Meeting
As promptly as reasonably practicable following the Company's receipt of notice from the SEC that the SEC has completed its review of this proxy
statement (or, if the SEC does not inform the Company that it intends to review this proxy statement on or before the 10th calendar day following the filing of this proxy statement, as promptly
as reasonably practicable following such 10th calendar day), the Company is obligated to call, give notice of, convene and hold a special meeting
of its stockholders, which we refer to as the special meeting, to consider adoption of the merger agreement and the advisory vote required by Rule 14a-21(c) under the Exchange Act.
However,
the Board is permitted to adjourn, delay or postpone the special meeting in accordance with applicable law (but not beyond the outside date, which is described below)
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to the extent necessary to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the
Board has determined in good faith after consultation with outside counsel is reasonably likely to be necessary or appropriate under applicable law and for such supplemental or amended disclosure to
be disseminated and reviewed by the Company's stockholders prior to the special meeting;
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-
if there are insufficient shares of Company common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct
the business of the special meeting; or
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on one occasion to allow reasonable additional time to solicit additional proxies to the extent the Board or any committee thereof reasonably
believes necessary in order to obtain the Company stockholder approval.
Except
to the extent that the Board will have effected a board recommendation change in accordance with the merger agreement, the Board must (i) recommend to its stockholders that
they adopt the merger agreement and (ii) include such recommendation in this proxy statement.
Carveout Transaction Matters
If requested by Parent, at Parent's sole expense, the Company must:
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provide commercially reasonable cooperation to Parent and Merger Sub's review of and planning for an internal reorganization of the Company and
its subsidiaries into separate internal
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organizations
for the United States retail, Canadian retail, and North American delivery businesses, which we refer to as the carveout transactions; and
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refrain from taking actions to effect any internal reorganization to implement the carveout transactions without the prior written consent of
Parent.
However,
the Company is not required to take any corporate action, to execute any document or other instrument, or to incur any liability that is not conditioned upon or that would be
effective prior to the effective time of the merger. The completion of the carveout transactions is not a condition to closing and the Company's compliance or failure to comply with its obligations to
cooperate with the carveout transactions will not be taken into account for purposes of determining whether the closing condition regarding the Company's compliance with its covenants has been
satisfied.
Repatriation
The merger agreement provides that we and our wholly-owned subsidiaries will cooperate with Parent to effect the transfer of unrestricted cash
balances held in commercial bank accounts in foreign jurisdictions to accounts located in the United States, in each case effective as of the effective time. Parent has agreed to indemnify and hold
harmless the Company, its subsidiaries and its and their representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments, taxes and
penalties suffered or incurred by them in connection
with any such repatriation. The repatriation of foreign cash is not a condition to closing and the Company's compliance or failure to comply with its obligations to cooperate with the repatriation of
foreign cash will not be taken into account for purposes of determining whether the closing condition regarding the Company's compliance with its covenants has been satisfied.
Treatment of Certain Notes
The Company has previously issued 2.750% Senior Notes Due 2018, which we refer to as the 2018 Notes, and 4.375% Senior Notes Due 2023, which we
refer to as the 2023 Notes. We refer to the 2018 Notes and the 2023 Notes together as the Notes.
The
Company has agreed, at the request and expense of Parent, to promptly commence an offer to purchase for any and all of the outstanding aggregate principal amount of the Notes on
price terms that are acceptable to Parent and such other customary terms and conditions as are reasonably acceptable to the Company and Parent to be consummated substantially simultaneously with the
closing of the merger using funds provided by Parent, which we refer to as a Debt Tender Offer. Any Debt Tender Offer will be conditioned on the closing of the merger.
If
reasonably requested by Parent in writing, the Company will, in accordance with the applicable redemption provisions of the applicable series of Notes and the indenture governing such
Notes, (i) substantially simultaneous with the effective time issue a notice of optional redemption for all of the outstanding aggregate principal amount of such series of Notes, pursuant to
the redemption provisions of the applicable indenture and (ii) use reasonable best efforts to take any other actions reasonably requested by Parent to facilitate the satisfaction and discharge
of such series of Notes pursuant to the satisfaction and discharge provisions of the applicable indenture and the other provisions of such indenture applicable thereto, in each case so long as Parent
has or has caused to be set aside sufficient and immediately available funds to deliver to the Company to effect such redemption and satisfaction and discharge.
Parent
will (or the Company will, if directed by Parent), at a time selected by Parent at or after the closing of the merger, commence a change of control offer to purchase all of the
2023 Notes (in accordance with the requirements of the indenture governing such Notes) at the price required pursuant to the indenture governing such Notes using funds provided by Parent. In
accordance with the
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terms
of the change of control offer for the 2023 Notes, the surviving corporation will accept for purchase and purchase each of the 2023 Notes properly tendered and not properly withdrawn in such
change of control offer using funds provided by Parent.
The
Company and its subsidiaries will comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable law to the extent such laws are applicable in
connection with the any change of control offer or any Debt Tender Offer and such compliance will not be deemed a breach of the merger agreement.
Parent
will promptly, upon the Company's request, reimburse the Company for certain reasonable and documented out-of-pocket costs, fees and expenses incurred by or on behalf of the
Company at the request of Parent in connection with its compliance with the obligations under the Notes, including reasonable and documented out-of-pocket costs, fees and expenses incurred by or on
behalf of the Company in connection with any Debt Tender Offer, redemption, satisfaction, discharge or change of control offer made in respect of any series of Notes (including any out-of-pocket
costs, fees and expenses incurred in connection with the preparation or distribution of any offer documents or other documents related thereto). Subject to certain exceptions, Parent will also
indemnify and hold harmless the Company and its representatives for certain liabilities incurred by any of them in connection with any such action.
Conditions to the Merger
The obligation of each of the Company, Parent and Merger Sub to consummate the merger is subject to the satisfaction or waiver of the following
conditions:
-
-
the obtaining of the Company stockholder approval;
-
-
the waiting period (and any extension thereof) applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, having expired or early termination thereof having been granted; and
-
-
no governmental entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered any order, executive order, stay,
decree, judgment or injunction (temporary, preliminary or permanent) or statute, rule or regulation which is in effect and which has the effect of making the merger illegal or otherwise prohibiting,
restraining, preventing or enjoining consummation of the merger.
The
obligation of the Company to consummate the merger is subject to the satisfaction or waiver of the following additional conditions:
-
-
the representations and warranties of Parent and Merger Sub that (i) are not made as of a specific date being true and correct as of the
effective time, as though made as of the effective time, and (ii) are made as of a specific date being true and correct as of such date, in each case, except where the failure of such
representations or warranties to be true and correct (without giving effect to any limitation as to materiality or Parent Material Adverse Effect set forth in such representations and warranties) is
not reasonably likely to have a Parent Material Adverse Effect;
-
-
each of Parent and Merger Sub having performed in all material respects all covenants and obligations required to be performed by it under the
merger agreement at or prior to the effective time; and
-
-
receipt of a certificate, dated as of the closing date, signed by an executive officer of Parent certifying as to the matters set forth in the
immediately preceding two bullets.
The
obligation of Parent and Merger Sub to consummate the merger is subject to the satisfaction or waiver of the following additional
conditions:
-
-
the Company's representation regarding the absence of a Company Material Adverse Effect being true and correct in all respects as of the date
of the merger agreement and as of the effective time, as though made as of the effective time;
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-
-
certain representations and warranties of the Company regarding the Company's capitalization being true and correct in all respects as of the
date of the merger agreement and the effective time, as though made as of the effective time (other than any such representation or warranty that is made as of a specific date, which need only be true
and correct in all respects as of such date), except where the failure of such representations and warranties to be so true and correct would, individually or in the aggregate, be reasonably expected
to result in more than $5,000,000 of aggregate merger consideration or amounts payable to holders of equity awards pursuant to the merger agreement;
-
-
certain representations and warranties of the Company regarding organization, capitalization, authority, Section 203 of the DGCL and
brokers being true and correct in all material respects (other than any such representation or warranty that is qualified by materiality or Company Material Adverse Effect, which must be true and
correct in all respects) as of the effective time, as though made on and as of the date hereof and the effective time (other than any such representation or warranty that is made as of a specific
date, which need only be true and correct in all material respects as of such date);
-
-
all other representations and warranties of the Company contained in the merger agreement being true and correct as of the effective time, as
though made as of the effective time (other than any such representation or warranty that is made as of a specific date, which need only be true and correct as of such date), except where the failure
of such representations or warranties to be true and correct (without giving effect to any limitation as to materiality or Company Material Adverse Effect set forth in such representations and
warranties) is not reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect;
-
-
the Company shall have performed in all material respects all covenants and obligations required to be performed by it under the merger
agreement prior to the effective time; and
-
-
receipt of a certificate, dated as of the closing date, signed by an executive officer of the Company certifying as to the matters set forth in
the immediately preceding five bullets.
Termination
The merger agreement may be terminated and the merger may be abandoned:
-
-
by mutual written consent of Parent and the Company at any time prior to the effective time;
-
-
by either Parent or the Company, if the effective time of the merger has not occurred on or before December 22, 2017, which we refer to
as the outside date, except that a party to the merger agreement will not be permitted to terminate the merger agreement under this provision if the failure of such party to fulfill, in any material
respect, any obligation under the merger agreement has been a principal cause of or resulted in the failure of the effective time to occur on or before the outside date, provided that no party will be
permitted to terminate the merger agreement during the three business day notice period referenced in the final bullet in this section entitled
"
Termination;
"
-
-
by either Parent or the Company at any time prior to the effective time if a governmental entity of competent jurisdiction has issued a
nonappealable final order, decree, judgment, injunction or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining, preventing or
otherwise prohibiting the consummation of the merger, except that a party to the merger agreement will not be permitted to terminate the merger agreement under this provision if the failure of such
party to use the standard of efforts required pursuant to the merger agreement to prevent and oppose such order, decree, ruling or the taking of such other action has been a principal cause of or
resulted in the issuance of any such order, decree, ruling or the taking of such other action;
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-
-
by Parent or the Company if the Company stockholder approval is not obtained at the special meeting or at any adjournment or postponement
thereof at which a vote on the adoption of the merger agreement was taken;
-
-
by Parent, prior to the effective time, if the Board has effected a Company board recommendation change;
-
-
by the Company, at any time prior to receipt of the Company stockholder approval, in order to enter into a definitive agreement providing for a
superior proposal after complying with the terms and conditions of the provisions described above in the sections entitled "
Restrictions on Solicitation of Other
Offers
" and "
Restrictions on Changes of Recommendation to Company Stockholders
" in all material respects; provided
that any purported termination of the merger agreement under this provision will be null and void if the Company does not, prior to or concurrently with the termination of the merger agreement, pay
Parent the Company termination fee;
-
-
by Parent, prior to the effective time, if there has been a breach of, inaccuracy in or failure to perform any representation, warranty,
covenant or agreement of the Company set forth in the merger agreement, which breach, inaccuracy or failure to perform (i) would cause certain closing conditions applicable to Parent and Merger
Sub set forth in the merger agreement not to be satisfied, and (ii) is not capable of being cured by the outside date or, if capable of being cured by the outside date, will not have been cured
within 20 business days following receipt by the Company of written notice of such breach, inaccuracy or failure to perform from Parent, provided that neither Parent nor Merger Sub is then in material
breach of any representation, warranty or covenant under the merger agreement that would cause certain other closing conditions set forth in the merger agreement not to be satisfied;
-
-
by the Company, prior to the effective time, if there has been a breach of, inaccuracy in or failure to perform any representation, warranty,
covenant or agreement of Parent or Merger Sub set forth in the merger agreement, which breach, inaccuracy or failure to perform (i) would cause certain closing conditions applicable to the
Company set forth in the merger agreement not to be satisfied, and (ii) is not capable of being cured by the outside date or, if capable of being cured by the outside date, will not have been
cured within 20 business days following receipt by Parent of written notice of such breach, inaccuracy or failure to perform from the Company, provided that the Company is not then in material breach
of any representation, warranty or covenant under the merger agreement that would cause certain other closing conditions set forth in the merger agreement not to be satisfied; or
-
-
by the Company if:
-
-
the marketing period has ended and the closing conditions applicable to Parent (other than those conditions that by their nature
are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) have been and continue to be satisfied;
-
-
the Company has confirmed by written notice to Parent after the end of the marketing period that all closing conditions applicable
to the Company have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) or
that it irrevocably waives in writing any unsatisfied conditions that may be waived under applicable law; and
-
-
the merger will not have been consummated within three business days after the date on which Parent is required to consummate the
merger pursuant to the merger agreement, and at all times during such three business day period, the Company stood ready, willing and able to consummate the merger.
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In
the event of valid termination of the merger agreement as provided above, written notice thereof will be given to the other party or parties to the merger agreement, specifying the
provision pursuant to which such termination is made and the merger agreement will immediately become void and there shall be no liability or obligation on the part of Parent, the Company, Merger Sub
or their respective representatives, stockholders or affiliates; except that, subject to certain limitations,
-
-
any such termination will not relieve any party from liability for any willful breach prior to such valid termination; and
-
-
certain provisions, including those related to confidentiality, fees and expenses, defined terms and miscellaneous matters and the
confidentiality agreement between Parent and the Company and the limited guarantee, will remain in full force and effect and survive any valid termination of the merger agreement in accordance with
their respective terms and conditions.
A
"willful breach" means a material breach of any covenant or agreement set forth in the merger agreement that is a consequence of an act, or failure to act, undertaken by the breaching
party with the actual knowledge that the taking of such act, or failure to act, would result, or would reasonably be expected to result, in such breach.
Termination Fees
Subject to certain limitations, the Company will pay Parent a termination fee equal to $171,000,000, which we refer to as the Company
termination fee, in the event that the merger agreement is terminated:
-
-
by Parent if the Board has effected a Company board recommendation change;
-
-
by the Company in order to enter into a definitive agreement providing for a superior proposal; or
-
-
(i) by Parent if there has been a breach of, inaccuracy in or failure to perform any representation, warranty, covenant or agreement of the
Company set forth in the merger agreement, which breach, inaccuracy or failure to perform would cause certain closing conditions applicable to Parent and Merger Sub set forth in the merger agreement
not to be satisfied, and is not capable of being cured by the outside date or, if capable of being cured by the outside date, will not have been cured within 20 business days following receipt by the
Company of written notice of such breach, inaccuracy or failure to perform from Parent, (ii) by either Parent or the Company, prior to receipt of the Company stockholder approval, if the
effective time of the merger has not occurred on or before the outside date or (iii) by Parent or the Company if the Company stockholder approval is not obtained, if (in each of the preceding
clauses (i), (ii) and (iii)):
-
-
before the date of such termination, an acquisition proposal has been publicly announced, made or disclosed and not irrevocably
withdrawn without encouragement by or consultation with (excluding arms-length negotiations regarding the terms of the acquisition proposal) the Company or its representatives;
-
-
at the time of the stockholder vote, the debt and equity commitment letters are in full force and effect or have been replaced by
alternative financing commitments in corresponding amounts sufficient to consummate the merger; and
-
-
within 12 months after the date of termination, the Company enters into a definitive agreement with respect to any
acquisition proposal (which is subsequently consummated) or has consummated any acquisition proposal (provided that, for these purposes, the references to "20%" and "80%" in the definition of
"acquisition proposal" are deemed to be references to "50%").
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If
either the Company or Parent terminates the merger agreement because the Company stockholder approval is not obtained and at the time of the stockholder vote, the debt and equity
commitment letters are in full force and effect or have been replaced with letters providing for alternative financing commitments in a corresponding amount sufficient to consummate the merger, the
Company will pay to Parent within two business days following the delivery by Parent of an invoice therefor any and all out-of-pocket fees and expenses actually incurred by Parent or on its behalf in
connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of the merger agreement and the transactions contemplated by the merger agreement,
which we refer to as the Parent expenses, up to a maximum amount of $15,000,000. To the extent a Company termination fee becomes payable, any payment previously made pursuant to the preceding sentence
will be credited against the obligation of the Company to pay the Company termination fee.
Subject
to certain limitations, Parent will pay the Company a termination fee equal to $343,000,000 in the event that the merger agreement is
terminated:
-
-
by the Company, prior to the effective time, if there has been a breach of, inaccuracy in or failure to perform any representation, warranty,
covenant or agreement of Parent or Merger Sub set forth in the merger agreement, which breach, inaccuracy or failure to perform (i) would cause certain closing conditions applicable to the
Company set forth in the merger agreement not to be satisfied, and (ii) is not capable of being cured by the outside date or, if capable of being cured by the outside date, will not have been
cured within 20 business days following receipt by Parent of written notice of such breach, inaccuracy or failure to perform from the Company; or
-
-
by the Company if:
-
-
the marketing period has ended and the closing conditions applicable to Parent (other than those conditions that by their nature
are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) have been and continue to be satisfied;
-
-
the Company has confirmed by written notice to Parent after the end of the marketing period that all closing conditions applicable
to the Company have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) or
that it irrevocably waives in writing any unsatisfied conditions that may be waived under applicable law; and
-
-
the merger has not been consummated within three business days after the date on which Parent is required to consummate the merger
pursuant to the merger agreement, and at all times during such three business day period, the Company stood ready, willing and able to consummate the merger.
In
no event will the Company or Parent be required to pay a termination fee on more than one occasion.
If
the Company or Parent fails to timely pay any amount described above and, in order to obtain the payment, the other party commences a suit, action or proceeding which results in a
final and non-appealable judgment against the other party for the applicable payment set forth above, such paying party will pay the other party its reasonable and documented out-of-pocket costs and
expenses (including reasonable and documented out-of-pocket attorneys' fees) in connection with such suit, action or proceeding, together with interest on such amount at the prime rate as published in
The Wall
Street Journal
in effect on the date such payment was required to be made through the date such payment was actually received.
Payment
of the Parent termination fee to the Company, together with any indemnification for or reimbursement of any applicable expenses pursuant to certain provisions of the merger
agreement, will
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be
the sole and exclusive remedy for any and all losses or damages suffered or incurred by the Company or any other person arising out of or in connection with the merger agreement, the financing
letters or the limited guarantee, any of the transactions contemplated thereby (or the abandonment or termination thereof), any breach (including any willful breach) or failure to perform under the
merger agreement, the failure of the merger or the other transactions to be consummated, or any matter forming the basis for such termination, and, upon payment of such amount, neither the Company,
nor any other person will be entitled to bring or maintain any claim, action or proceeding against Parent, Merger Sub, any guarantor, the financing sources or any of their respective representatives
or any of their respective affiliates or any of their or their affiliates' respective direct or indirect, former, current or future general or limited partners, stockholders, equityholders,
securityholders, financing sources, managers, members, directors, officers, employees, controlling persons, agents or assignees, which we refer to collectively as the Parent related parties, for any
loss or damage arising out of or in connection with any breach (including any willful breach) or failure to perform under the merger agreement, the financing letters or the limited guarantee, any of
the transactions (or the abandonment or termination thereof), the failure of the merger or the other transactions to be consummated or any matters forming the basis for such termination.
Payment
of the Company termination fee to Parent shall, together with any reimbursement of applicable expenses, be the sole and exclusive remedy for any and all losses or damages
suffered or incurred by Parent, Merger Sub, the Parent related parties or any other person arising out of or in connection with the merger agreement, the transactions (and the abandonment or
termination thereof), any breach (including any willful breach) or failure to perform under the merger agreement, the failure of the merger or the other transactions to be consummated, or any matter
forming the basis for such termination, and, upon payment of such amount, none of Parent, Merger Sub, any of their respective affiliates or any other person will be entitled to bring or maintain any
claim, action or proceeding against the Company and its subsidiaries and any of their respective direct or indirect, former, current or future officers, directors, partners, stockholders, managers,
members, financing sources, representatives, employees, controlling persons, agents, affiliates or any other person claiming by, through or for the benefit of the Company, which we refer to
collectively as the Company related parties, arising out of or in connection with the merger agreement (including any willful breach), any of the transactions, the failure of the merger or the other
transactions to be consummated or any matters forming the basis for such termination.
Amendment; Extension; Waiver; Procedures
Amendment
The merger agreement may be amended, modified or supplemented by the parties to the merger agreement by action taken or authorized by their
respective boards of directors at any time prior to the effective time of the merger, whether before or after receipt of the Company stockholder approval, except that after receipt of the Company
stockholder approval, no amendment may be made that pursuant to applicable law requires further approval or adoption by the stockholders of the Company without such further approval or adoption. The
merger agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment,
modification or supplement to the merger agreement (as applicable), signed on behalf of each of the parties to the merger agreement.
Extension; Waiver
At any time prior to the effective time of the merger, the parties to the merger agreement, by action taken or authorized by their respective
boards of directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties to the merger agreement,
(ii) waive any inaccuracies in the representations and warranties contained in
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the
merger agreement or in any document delivered pursuant the merger agreement and (iii) waive compliance with any of the agreements or conditions contained in the merger agreement. Any
agreement on the part of a party to the merger agreement to any such extension or waiver will be valid only if set forth in a written instrument signed on behalf of such party. Such extension or
waiver will not apply to any time for performance, inaccuracy in any representation or warranty, or noncompliance with any agreement or condition, as the case may be, other than that which is
specified in the extension or waiver. The failure of any party to the merger agreement to assert any of its rights under the merger agreement or otherwise will not constitute a waiver of such rights.
Procedure for Termination, Amendment, Extension or Waiver
A termination, amendment, modification, supplement, extension or waiver of the merger agreement will, in order to be effective, require action
by the respective board of directors of the applicable parties.
Remedies
Under the merger agreement, the parties thereto have acknowledged and agreed that the parties will be entitled to an injunction or injunctions,
specific performance or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement. The right of the Company to
obtain an injunction, specific performance or other equitable remedies in connection with enforcing Parent's obligation to cause the equity financing to be funded in accordance with the terms and
conditions of the applicable equity commitment letter and to effect the closing is subject in all events to the requirements that:
-
-
the marketing period has ended and the satisfaction, or express written waiver by Parent of all conditions precedent to the obligations of
Parent to consummate the transactions contemplated by the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to such conditions being
satisfied at the closing) at the time when the closing would have been required to occur pursuant to the merger agreement, but for the failure of the equity financing to be funded;
-
-
the debt financing has been funded or will be funded in accordance with the terms thereof at the closing if the equity financing is or were to
be funded at the closing; and
-
-
the Company has irrevocably confirmed in writing to Parent that if specific performance is granted and the equity financing and debt financing
were funded, then it would take such actions required of it by the merger agreement to cause the closing to occur and it stands ready, willing and able to consummate the merger.
In
connection with any loss suffered by the Company or any Company related party arising out of or in connection with the merger agreement, the financing letters or the limited
guarantees and the transactions contemplated by the merger agreement, including as a result of the failure of the transactions contemplated thereby to be consummated or for a breach (including willful
breach) or failure to perform thereunder or otherwise (other than in the circumstances in which the Company is entitled to receive the Parent termination fee), the maximum aggregate monetary liability
of Parent and the Parent related parties is limited to the amount of the Parent termination fee, and in no event may the Company seek or be entitled to recover from Parent or any Parent related party
any monetary damages in excess of such amount, except with respect to indemnification for or reimbursement of any applicable expenses pursuant to certain provisions of the merger agreement.
In
connection with any loss suffered by Parent, Merger Sub, any guarantor, the financing sources or any of their respective representatives or any of their respective affiliates as a
result of the failure of the transactions contemplated by the merger agreement to be consummated or for a breach or failure
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to
perform thereunder or otherwise, other than in the circumstances in which Parent is entitled to receive the Company termination fee, the maximum aggregate monetary liability of the Company and
the Company related parties is limited to the amount of the Company termination fee, and in no event may Parent seek or be entitled to recover from the Company or any Company related party any
monetary damages in excess of such amount.
Governing Law; Submission to Jurisdiction
The merger agreement is governed by the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision
or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware. Except as specifically set
forth in the debt commitment letters, all claims or causes of action (whether at law, in equity, in contract, in tort or otherwise) against any of the debt financing sources in any way relating to the
debt commitment letters or the performance thereof or the financings contemplated thereby, shall be exclusively governed by and construed in accordance with, the internal laws of the State of New
York. Each of the parties to the merger agreement consented to submit itself to the exclusive personal jurisdiction of the Delaware Court of Chancery or, if that court does not have jurisdiction, a
federal court sitting in the State of Delaware in any action or proceeding arising out of or relating to the merger agreement or any of the transactions contemplated by the merger agreement.
Required Vote; Recommendation of the Board
The vote on this proposal to adopt the merger agreement is a vote separate and apart from the vote on the nonbinding advisory proposal regarding
"golden parachute" compensation and the proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes
at the time of the special meeting to approve the proposal to adopt the merger agreement. Accordingly, you may vote "
FOR
" either or both of the
nonbinding advisory proposal regarding "golden parachute" compensation and the proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement and vote "
AGAINST
" or
"
ABSTAIN
" for this proposal to adopt the merger agreement.
The
approval of this proposal requires the affirmative vote of a majority of the outstanding shares of Company common stock entitled to vote thereon as of the record date.
The Board recommends that you vote "FOR" approval of the proposal to adopt of the merger agreement.
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AMENDMENT TO COMPANY BY-LAWS
On June 28, 2017, the Board adopted an amendment, which we refer to as the by-law amendment, to our by-laws. The by-law amendment, which
was effective upon adoption by the Board, designates the Delaware Court of Chancery as the sole and exclusive forum for any stockholder to bring (i) any derivative action or proceeding brought
on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee, agent or stockholder of the Company to
the Company or the Company's stockholders, including, without limitation, a claim alleging the aiding and abetting of such a breach of fiduciary duty, (iii) any action asserting a claim arising
pursuant to any provision of the DGCL, our certificate of incorporation or our by-laws (as each may be amended from time to time) or as to which the DGCL confers jurisdiction on the Delaware Court of
Chancery, or (iv) any action asserting a claim governed by the internal affairs doctrine.
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NONBINDING ADVISORY PROPOSAL REGARDING "GOLDEN PARACHUTE" COMPENSATION (PROPOSAL TWO)
In accordance with Section 14A of the Exchange Act and Rule 14a-21(c) under the Exchange Act, we are providing stockholders with
the opportunity to cast a nonbinding advisory vote with respect to certain payments that may be made to our named executive officers in connection with the merger, or "golden parachute" compensation,
as reported on the Golden Parachute Compensation table on page [].
Accordingly
we are seeking approval of the following resolution at the special meeting:
"RESOLVED,
that the compensation that may be paid or become payable to the Company's named executive officers in connection with the merger, as disclosed in the table in the section of the proxy
statement entitled
'The MergerInterests of Certain Persons in the MergerGolden Parachute Compensation'
including the
associated narrative discussion, is hereby approved."
The
vote on this proposal is a vote separate and apart from the vote on the proposal to adopt the merger agreement and the proposal to approve one or more adjournments of the special
meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
Accordingly, you may vote "
FOR
" either or both of the proposal to adopt the merger agreement and the proposal to approve one or more adjournments of the
special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement and
vote "
AGAINST
" or "
ABSTAIN
" for this nonbinding advisory proposal regarding "golden parachute"
compensation (and vice versa).
Because
your vote is advisory, it will not be binding upon the Company, the Board, the Board's compensation committee, Parent or any affiliate of Parent. Further, the underlying plans
and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the merger agreement is adopted by
the stockholders and the merger is completed, the "golden parachute" compensation will still be paid to our named executive officers to the extent payable in accordance with the terms of such
compensation.
The
approval of this proposal requires the affirmative vote of a majority of the votes cast by the holders of all of the shares present or represented at the special meeting and voting
on such proposal.
The Board recommends that you vote "FOR" approval of the nonbinding advisory proposal regarding "golden parachute" compensation.
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Future Stockholder Proposals
If the merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of
stockholders of the Company. However, if the merger is not consummated, we expect to hold our 2018 annual meeting of stockholders, which we refer to as the 2018 annual meeting, in June 2018, although
the Company reserves the right to delay its annual meeting as may be permitted under applicable law.
If
the merger is not consummated and we hold our 2018 annual meeting within 30 days before or after the date of our 2017 annual meeting of stockholders, under SEC rules, a
stockholder who intends to present a proposal, including nomination of a director, at our 2018 annual meeting and who wishes the proposal to be included in the proxy statement and proxy card for that
meeting, must submit the proposal in writing to: Corporate Secretary, Staples, Inc., Five Hundred Staples Drive, Framingham, Massachusetts 01702, before not later than December 27, 2017.
SEC rules set standards for the types of stockholder proposals and the information that must be provided by the stockholder making the request.
If
you wish to present a proposal or nominate a director candidate for election at the 2018 annual meeting, but do not wish to have the proposal considered for inclusion in our proxy
statement and proxy card, you must give us advance notice and provide the information required by our by-laws, including but not limited to, information regarding the identity of the stockholder or
beneficial owner, their holdings in the Company's securities, agreements or compensation relating to such nomination or matter, and any derivatives or other arrangements to mitigate risk or change
voting power. If a stockholder gives notice of such a proposal or nomination after the applicable deadline, the stockholder will not be permitted to present the proposal or nomination to the
stockholder for a vote at the meeting. For our 2018 annual meeting, our Corporate Secretary generally must receive such a notice at Five Hundred Staples Drive, Framingham, Massachusetts 01702 not
later than 90 days and no earlier than 120 days prior to the first anniversary of our 2017 annual meeting. However, if the date of our 2018 annual meeting is more than 30 days
before or more than 70 days after such anniversary date, notice by the stockholder must be received no earlier than 120 days prior to the 2018 annual meeting and not later than the later
of (i) the 90th day prior to the 2018 annual meeting and (ii) the tenth day following the day on which public announcement of the date of the 2018 annual meeting is made or notice
for the 2018 annual meeting was mailed, whichever occurs first.
Our
proxy access bylaw allows a stockholder, or a group of up to 25 stockholders, owning 3% or more of our outstanding common stock continuously for at least three years to nominate and
include in our proxy materials director nominees constituting up to two individuals or 20% of the Board (whichever is greater), provided that the stockholder(s) and the nominee(s) satisfy the
requirements specified in Article I, Section 7.4 of our by-laws. Notice of any such nomination must be received by the Corporate Secretary at Five Hundred Staples Drive, Framingham,
Massachusetts 01702, not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred
twentieth (120th) day, prior to the first anniversary of the preceding year's annual meeting. For the 2018 annual meeting, notice of proxy access nominations must be received no earlier than
February 12, 2018 and no later than March 14, 2018. However, if the date of our 2018 annual meeting is more than 30 days before or more than 70 days after such anniversary
date, notice by the stockholder must be received no earlier than 120 days prior to the 2017 annual meeting and not later than the later of (i) the 90th day prior to the 2017
annual meeting and (ii) the tenth day following the
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day
on which public announcement of the date of the 2018 annual meeting is made or notice for the 2018 annual meeting was mailed, whichever occurs first.
Stockholders Sharing the Same Address
Some banks, brokerage firms and other nominee record holders may be participating in the practice of "householding." This means that only one
copy of our proxy statement may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of our proxy statement to you if you write, call or email us at:
Staples, Inc.
Five Hundred Staples Drive
Framingham, Massachusetts 01702
Attention: Investor Relations
(508) 253-5000
investor@staples.com
If
you would like to receive separate copies of our proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you
should contact your bank, brokerage firm or other nominee record holder, or you may contact us at the above address, phone number or email address.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file
at the SEC public reference room located at 100 F Street, N.E., Room 1580, 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 at the SEC website at
www.sec.gov
. You also may obtain free copies of the documents we
file with the SEC, including this proxy statement, by going to the Investors section of our website,
www.staples.com
. Our website address is provided as
an inactive textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated herein by reference.
Statements
contained in this proxy statement, or in any document incorporated by reference in this proxy statement regarding the contents of any contract or other document, are not
necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to "incorporate by
reference" into this proxy statement documents we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by
reference is considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that information. We incorporate by reference the documents
listed below and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (in each case, other than those documents or the portions of those documents not
deemed to be filed) after the date of this proxy statement and before the date of the special meeting.
-
-
Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (filed with the SEC on March 9, 2017);
-
-
Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (filed with the SEC on May 16, 2017);
-
-
Current Reports on Form 8-K filed with the SEC on February 2, 2017, June 13, 2017, June 28, 2017 and
June 30, 2017; and
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-
-
Definitive Proxy Statement for our 2017 annual meeting of stockholders filed with the SEC on April 20, 2017.
Any
person, including any beneficial owner of shares of Company common stock, to whom this proxy statement is delivered may request copies of proxy statements and any of the documents
incorporated by reference in this document or other information concerning us by written or telephonic request directed to our Secretary at the Company's address, which is Staples, Inc., Five
Hundred Staples Drive, Framingham, Massachusetts 01702, telephone (508) 253-5000; or from our proxy solicitor, D.F. King (toll-free at (866) 796-7179); or from the SEC through the SEC
website at the address provided above. Documents incorporated by reference are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by
reference into those documents.
THIS
PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES OF COMPANY COMMON STOCK AT THE SPECIAL MEETING. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED [], 2017.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS SUBSEQUENT TO THAT
DATE DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
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Annex A
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
by and among
STAPLES, INC.,
ARCH MERGER SUB INC.
and
ARCH PARENT INC.
Dated as of June 28,
2017
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TABLE OF CONTENTS
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ii
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "
Agreement
"), is made and entered into as of this
28th day of June, 2017, by and among Arch Parent Inc., a Delaware corporation (the "
Parent
"), Arch Merger Sub Inc., a Delaware
corporation and a wholly owned subsidiary of the Parent (the "
Merger Sub
"), and Staples, Inc., a Delaware corporation (the
"
Company
").
RECITALS
WHEREAS, the parties intend that Merger Sub, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the
DGCL, merge with and into the Company, with the Company continuing as the surviving corporation of such merger (the "
Merger
");
WHEREAS,
the Company Board has as of the date hereof unanimously (a) determined and declared that it is in the best interests of the Company and the stockholders of the Company
that the Company enter into this Agreement and consummate the Merger and the other Transactions on the terms and subject to the conditions set forth herein, (b) adopted, approved and declared
the advisability of this Agreement, the Merger and the other Transactions, (c) declared that the terms of the Merger are fair to the Company and the Company's stockholders and
(d) directed that this Agreement be submitted to the Company's stockholders at the Company Stockholders Meeting for their adoption and recommended that the Company's stockholders adopt this
Agreement;
WHEREAS,
the respective board of directors of the Parent and the Merger Sub have adopted, approved and declared it advisable for the Parent and the Merger Sub to enter into this
Agreement and to consummate the Merger and the other Transactions, upon the terms and subject to the conditions set forth herein; and
WHEREAS,
concurrently with the execution of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, investment funds or accounts
managed or advised by each of Sycamore Partners II, L.P., and the other investment funds or managed accounts party to a Limited Guarantee dated as of the date hereof and delivered to the
Company concurrently with the execution of this Agreement (each, a "
Guarantor
" and together, the
"
Guarantors
") are entering into the Limited Guarantees with respect to certain obligations of Parent and Merger Sub under this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the Parent, the Merger Sub and the Company,
intending to be legally bound, hereby agree as follows:
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ARTICLE I
THE MERGER
1.1
The Merger.
Upon the terms and subject to the conditions set forth in this Agreement, and in accordance
with the DGCL, the Merger Sub shall merge with and into the Company at
the Effective Time.
1.2
Effective Time of the Merger.
Upon the terms and subject to the satisfaction or waiver of the
conditions set forth in this Agreement, as soon as practicable on the Closing Date, Parent, Merger
Sub and the Company shall cause a certificate of merger or other appropriate documents (in any such case, the "
Certificate of Merger
") to be duly
prepared, executed and acknowledged in accordance with the relevant provisions of the DGCL and filed with the Secretary of State. The Merger shall become effective upon the due filing of the
Certificate of Merger with the Secretary of State or at such subsequent time or date as the Parent and the Company shall agree and specify in the Certificate of Merger (the
"
Effective Time
").
1.3
Closing.
Subject to the satisfaction or waiver (to the extent permitted herein and by applicable
law) of the conditions set forth in
Article VII
, the Closing shall take place at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, MA 02109
as soon as practicable (but in any event no later than the third Business Day) following the day on which the last to be satisfied or waived of the conditions set forth in
Article VII
(other than
those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of
such conditions) shall be satisfied or waived in accordance with this Agreement, or at such other date, time or place as the parties hereto shall agree in writing;
provided
that, if the Marketing Period
has not ended at the time of the satisfaction or waiver of the conditions set forth in
Article VII
(other than those conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of
those conditions at such time), then, subject to the continued satisfaction or waiver of the conditions set forth in
Article VII
at such time,
the Closing shall occur instead on the earliest of (a) any Business Day during the Marketing Period as may be specified by Parent on no less than three Business Days' prior written notice to
the Company, (b) the third (3
rd
) Business Day following the final day of the Marketing Period or (c) such other date, time or place as agreed to in writing by Parent and
the Company.
1.4
Effects of the Merger.
At the Effective Time (a) the separate existence of the Merger Sub
shall cease, the Merger Sub shall be merged with and into the Company and the Company
shall continue as the Surviving Corporation in the Merger and (b) the certificate of incorporation of the Company as in effect immediately prior to the Effective Time shall be amended and
restated in its entirety to read as set forth on
Exhibit A
, and as so amended and restated shall be the certificate of incorporation of the
Surviving Corporation until thereafter further amended in accordance with the DGCL. In addition, subject to
Section 6.6(b)
hereof, the Parent
shall cause the bylaws of the Surviving Corporation to be amended and restated in their entirety so that, immediately following the Effective Time, they are identical to the bylaws of the Merger Sub
as in effect immediately prior to the Effective Time, except that all references to the name of the Merger Sub therein shall be changed to refer to the name of the Company, and, as so amended and
restated, such bylaws shall be the bylaws of the Surviving Corporation, until further amended in accordance with the DGCL. The Merger shall have the effects set forth in Section 259 of the DGCL
and in this Agreement.
1.5
Directors and Officers of the Surviving Corporation.
The directors of the Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case to hold office in accordance with the term of office set forth in certificate
of incorporation and bylaws of the Surviving Corporation and until their successors are duly elected and qualified.
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ARTICLE II
TREATMENT OF COMPANY SECURITIES
2.1
Conversion of Capital Stock.
As of the Effective Time, by virtue of the Merger and without any action on
the part of the Company, the Merger Sub, the Parent or the holder of any shares of the
capital stock of the Company or capital stock of the Merger Sub:
(a)
Capital Stock of the Merger Sub.
Each share of the common stock, par value $0.01 per share, of the Merger
Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share,
of the Surviving Corporation.
(b)
Cancellation of Treasury Stock and Parent-Owned Stock.
All shares of Company Common Stock that are held in
the treasury of the Company and any shares of Company Common Stock owned by any Subsidiary of the Company, the Parent, the Merger Sub or any other Affiliate of the Parent immediately prior to the
Effective Time shall be cancelled and shall cease to exist and no consideration shall be paid or delivered in exchange therefor.
(c)
Merger Consideration for Company Common Stock.
Except as otherwise agreed in writing between the holder and
Parent, subject to
Section 2.2
, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled in accordance with
Section 2.1(b)
and Dissenting Shares) shall be automatically converted into the right to receive
$10.25, without interest thereon (the "
Merger Consideration
"). As of the Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a Certificate or Uncertificated Share shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration pursuant to this
Section 2.1(c)
in accordance with the provisions of
Section 2.2
.
(d)
Adjustments to Merger Consideration.
The Merger Consideration shall be adjusted to reflect fully the effect
of any reclassification, stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization or
other like change with respect to Company Common Stock occurring (or for which a record date is established) after the date hereof and prior to the Effective Time.
2.2
Surrender of Certificates.
(a)
Paying Agent.
At or prior to the Effective Time, the Parent shall (i) enter into an agreement (in
form and substance reasonably acceptable to the Company) with the Paying Agent for the Paying Agent to act as paying agent for the Merger and (ii) deposit, or cause to be deposited (including
by directing that available cash of the Company and/or its Subsidiaries (including, if requested by Parent no later than three (3) Business Days prior to Closing, any cash proceeds received
upon liquidating any investments held in highly liquid short-term interest-bearing investments in the United States) be deposited with the Paying Agent at the Effective Time), with the Paying Agent,
for the benefit of the holders of shares of Company Common Stock outstanding immediately prior to the Effective Time, for payment through the Paying Agent in accordance with this
Section 2.2
, the
Payment Fund. The Payment Fund shall not be used for any other purpose. The Payment Fund shall be invested by the Paying Agent
as directed by the Parent;
provided
,
however
, that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital
exceeding $10 billion (based on the most recent financial statements of such bank which are then publicly available);
provided
,
however
, that no gain
or loss thereon shall affect the amounts payable
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hereunder
and the Parent shall take all actions necessary to ensure that the Payment Fund includes at all times cash sufficient to satisfy the Parent's obligation to pay the Merger Consideration under
this Agreement. Any interest and other income resulting from such investments (net of any losses) shall be paid to the Parent pursuant to
Section 2.2(e)
. In the event the Payment Fund is diminished
below the level required for the Paying Agent to make prompt cash payments as
required under
Section 2.2(b)
, including any such diminishment as a result of investment losses, the Parent shall, or shall cause the Surviving
Corporation to, immediately deposit additional cash into the Payment Fund in an amount equal to the deficiency in the amount required to make such payments.
(b)
Exchange Procedures.
(i) Promptly
(and in any event within five (5) Business Days) after the Effective Time, the Parent shall cause the Paying Agent to mail to each holder of record of a
Certificate (A) a letter of transmittal (which shall (1) be prepared prior to the Closing, (2) specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu thereof as provided in
Section 2.2(g)
) to the
Paying Agent, and (3) otherwise be in such form and have such provisions as may be reasonably acceptable to the Parent and the Company), and (B) instructions for use in effecting the
surrender of the Certificates (or affidavits of loss in lieu thereof as provided in
Section 2.2(g)
) in exchange for the Merger Consideration
payable with respect thereto. Upon surrender of a Certificate (or affidavit of loss in lieu thereof as provided in
Section 2.2(g)
) to the Paying
Agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such Certificate shall be promptly paid in exchange therefor a cash amount in immediately available funds
equal to (1) the number of shares of Company Common Stock formerly represented by such Certificate (or affidavit of loss in lieu thereof as provided in
Section 2.2(g)
) multiplied by
(2) the Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled.
(ii) Notwithstanding
anything to the contrary in this Agreement, any holder of Uncertificated Shares shall not be required to deliver a Certificate or an executed letter of
transmittal to the Paying Agent to receive the Merger Consideration that such holder is entitled to receive pursuant to this
Article II
. In lieu
thereof, each holder of record of one or more Uncertificated Shares shall, upon receipt by the Paying Agent of an "agent's message" in customary form with respect to any Uncertificated Share (or
such other evidence, if any, of transfer as the Paying Agent may reasonably request), be promptly paid the Merger Consideration in respect of such Uncertificated Share, and such Uncertificated Share
shall forthwith be cancelled.
(c)
Interest; Transfers; Rights Following the Effective Time.
No interest will be paid or accrued on the cash
payable upon the surrender of such Certificates or Uncertificated Shares. In the event of a transfer of ownership of a Certificate or Uncertificated Shares which is not registered in the transfer
records of the Company, the Merger Consideration may be paid to a Person other than the Person in whose name the Certificate or Uncertificated Shares is registered, if, in the case of a Certificate,
such Certificate is presented to the Paying Agent, and in each case the transferor provides to Paying Agent (i) all documents required to evidence and effect such transfer and
(ii) evidence that any applicable stock transfer Taxes have been paid. Until surrendered as contemplated by this
Section 2.2
, each
Certificate and all Uncertificated Shares (other than Certificates or Uncertificated Shares representing Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the Merger Consideration as contemplated by
Section 2.1(c)
.
(d)
No Further Ownership Rights in Company Common Stock.
All Merger Consideration paid upon the surrender of
Certificates and cancellation of Uncertificated Shares in accordance
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with
the terms hereof shall be deemed to have been paid in satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificates and Uncertificated
Shares, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation or the Paying Agent for any
reason, they shall be cancelled and exchanged as provided in this
Article II
, subject to
Section 2.2(e)
.
(e)
Termination of Payment Fund.
Any portion of the Payment Fund that remains undistributed to the holders of
Certificates and Uncertificated Shares for one year after the Effective Time (including all interest and other income received by the Paying Agent in respect of all funds made available to it) shall
be delivered to the Parent, upon demand, and any holder of a Certificate or Uncertificated Shares who has not previously complied with this
Section 2.2
shall be entitled to receive only from the
Parent or the Surviving Corporation (subject to abandoned property, escheat and other
similar laws) payment of its claim for Merger Consideration, without interest.
(f)
No Liability.
To the extent permitted by applicable law, none of the Parent, the Merger Sub, the Company,
the Surviving Corporation or the Paying Agent shall be liable to any holder of shares of Company Common Stock for any amount required to be delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates or Uncertificated Shares shall not have been surrendered prior to the date on which the related Merger Consideration would escheat to or
become the property of any Governmental Entity, any such Merger Consideration shall, to the extent permitted by applicable law, immediately prior to such time become the property of Parent, free and
clear of all claims or interest of any Person previously entitled thereto.
(g)
Lost Certificates.
If any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, and, if reasonably required by the Parent, the posting by such Person of a bond in such reasonable and
customary amount as the Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall pay, in exchange for such lost, stolen or
destroyed Certificate, the Merger Consideration to be paid in respect of the shares of Company Common Stock formerly represented thereby pursuant to this Agreement.
2.3
Company Stock Plans.
(a) Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the Effective Time, each then-outstanding and unexercised
Company Stock Option shall automatically be canceled and converted into the right to receive from the Surviving Corporation an amount of cash equal to the product of (i) the total number of
shares of Company Common Stock then underlying such Company Stock Option multiplied by (ii) the excess, if any, of the Merger Consideration over the exercise price per share of such Company
Stock Option, without any interest thereon and subject to all applicable withholding. Parent shall cause the Surviving Corporation to pay the aggregate amount payable by the Surviving Corporation to
the holders of such Company Stock Options pursuant to the preceding sentence, without any interest thereon and subject to all applicable withholding, upon the later of (A) five
(5) Business Days after the Closing Date and (B) the date of the Company's first regularly scheduled payroll after the Closing Date. In the event that the exercise price of any Company
Stock Option is equal to or greater than the Merger Consideration, such Company Stock Option shall be canceled, without any consideration being payable in respect thereof, and have no further force or
effect.
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(b) Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the Effective Time:
(i) each
Company RSU that will become vested, by its terms, as a result of the Closing of the Merger shall automatically be canceled and converted into the right to receive
from the Surviving Corporation an amount of cash equal to the product of (A) the total number of shares of Company Common Stock then underlying such Company RSU multiplied by (B) the
Merger Consideration. Parent shall cause the Surviving Corporation to pay the aggregate amount payable by the Surviving Corporation to the holders of such Company RSUs pursuant to the preceding
sentence, without any interest thereon and subject to all applicable withholding, upon the later of (I) five (5) Business Days after the Closing Date and (II) the date of the
Company's first regularly scheduled payroll after the Closing Date;
(ii) each
Company RSU that will not be vested, by its terms, on or before the Closing Date shall automatically be canceled and converted into the contingent right to receive
from the Surviving Corporation an amount of cash equal to the product of (A) the total number of shares of Company Common Stock then underlying such Company RSU multiplied by (B) the
Merger Consideration;
provided
that such cash payment shall not be paid at the Effective Time but shall instead be subject to the holder of such Company
RSU being in continuous service to the Surviving Corporation as an employee or consultant until the earlier of (I) any date on which the original vesting conditions applicable to the underlying
Company RSU, including, and taking into account, any accelerated vesting provisions set forth therein, are satisfied and (II) the date 180 days following the Closing Date (such earlier
date, the "
RSU Vesting Date
"). Parent shall cause the Surviving Corporation to pay the Merger Consideration applicable to such Company RSU to the holder
of such Company RSU, without any interest thereon and subject to all applicable withholding, upon the later of (x) five (5) Business Days after the RSU Vesting Date and (y) the
date of the Company's first regularly scheduled payroll after the RSU Vesting Date; and
(iii) each
Company July 2017 RSU that will not be vested, by its terms, on or before the Closing Date shall automatically be canceled and converted into the contingent right
to receive from the Surviving Corporation an amount of cash equal to the product of (A) the total number of shares of Company Common Stock then underlying such Company July 2017 RSU multiplied
by (B) the Merger Consideration;
provided
that such cash payment shall not be paid at the Effective Time but shall instead be subject to the
holder of such Company July 2017 RSU being in continuous service to the Surviving Corporation as an employee or consultant until the earlier of (I) any date on which the original vesting
conditions applicable to the underlying Company July 2017 RSU, including, and taking into account, any accelerated vesting provisions set forth therein, are satisfied and (II) the date that is
the last day of the 10
th
month following the Closing Date (such earlier date, the "
July 2017 RSU Vesting Date
"). Parent shall cause
the Surviving Corporation to pay the Merger Consideration applicable to such Company July 2017 RSU to the holder of such Company July 2017 RSU, without any interest thereon and subject to all
applicable withholding, upon the later of (x) five (5) Business Days after the July 2017 RSU Vesting Date and (y) the date of the Company's first regularly scheduled payroll after
the July 2017 RSU Vesting Date.
(c) Except
as otherwise agreed upon in writing between the holder and Parent, effective as of immediately prior to the Effective Time:
(i) each
Company Performance Share Award that is then outstanding and unvested and that is held by a former employee of the Company (as determined immediately prior to the
Effective Time) shall automatically be canceled and converted into the right to receive from the Surviving Corporation an amount of cash equal to the product of (A) the target number
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of
shares of Company Common Stock subject to such Company Performance Share Award, as pro-rated in accordance with the terms of the applicable Company Performance Share Award agreement, multiplied by
(B) the Merger Consideration. Parent shall cause the Surviving Corporation to pay the aggregate amount payable by the Surviving Corporation to the holders of such Company Performance Share
Awards pursuant to the preceding sentence, without any interest thereon and subject to all applicable withholding, upon the later of (x) five (5) Business Days after the Closing Date and
(y) the date of the Company's first regularly scheduled payroll after the Closing Date; and
(ii) each
Company Performance Share Award that is then outstanding and unvested and that is held by a person who is an employee of the Company immediately prior to the
Effective Time shall automatically be canceled and converted into the contingent right to receive from the Surviving Corporation an amount of cash equal to the product of (A) the target number
of shares of Company Common Stock subject to such Company Performance Share Award multiplied by (B) the Merger Consideration;
provided
that such
cash payment shall not be paid at the Effective Time but shall instead be subject to the holder of such Company Performance Share Award being in continuous service to the Surviving Corporation as an
employee or consultant until the earlier of (A) the date on which the original vesting conditions applicable to the underlying Company Performance Share Award, including, and taking into
account, any accelerated vesting provisions set forth therein, are satisfied and (B) the date 180 days following the Closing Date (such earlier date, the "Performance Share Vesting
Date"). Parent shall cause the Surviving Corporation to pay the Merger Consideration applicable to such Company Performance Share Award to the holder of such Company Performance Share Award, without
interest thereon and subject to all applicable withholding, upon the later of (x) five (5) Business Days after the Performance Share Vesting Date and (y) the date of the Company's
first regularly scheduled payroll after the Performance Share Vesting Date, provided that in no event shall the amount payable pursuant to this
Section 2.3(c)(ii)
be paid later than March 15
of the calendar year following the year in which the Closing occurs.
(d) The
Parent shall cause the Surviving Corporation to maintain at all times from and after the Effective Time sufficient liquid funds to satisfy its obligations pursuant
to
Section 2.3(a)
,
Section 2.3(b)
and
Section 2.3(c)
.
(e) As
soon as practicable following the execution of this Agreement, (i) the Company shall mail or provide via email to each Person who is a holder of Company Stock
Options, Company RSUs, Company July 2017 RSUs or Company Performance Share Awards a letter describing the treatment of and payment for such equity awards pursuant to this
Section 2.3
and providing
instructions for use in obtaining payment therefor, and (ii) the Company Board shall take all such actions as
are required to provide for the treatment of such equity awards pursuant to this
Section 2.3
and the termination of the Company Stock Plans
conditioned upon, and effective immediately after, the Effective Time.
(f) The
Parent and the Company may agree to treat equity compensation held by Company employees subject to non-U.S. law in a manner other than that contemplated above in
this
Section 2.3
to the extent necessary to take into account applicable non-U.S. law or Tax or employment considerations.
(g) The
only "Offering Period" in effect as of the date of this Agreement (as such term is defined in the Company ESPP) ends June 30, 2017 (which is the "Exercise
Date" (as such term is defined in the Company ESPP) for such Offering Period). Any options granted under the Company ESPP with respect to such Offering Period that are outstanding as of such
June 30, 2017 Exercise Date shall be exercised on such date in accordance with the existing terms of the
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Company
ESPP. As soon as practicable following the date of this Agreement, the Company Board shall take all such actions as are required to provide that, (i) no new Offering Periods will
commence, nor will the existing Offering Period be extended, following the date of this Agreement; (ii) no new individuals will be permitted to enroll in the Company ESPP following the date of
this Agreement; (iii) with respect to the Offering Period in effect as of the date of this Agreement, no existing participant will be permitted to increase his or her rate of deductions and
purchases following the date of this Agreement; and (iv) no shares of Company Common Stock will be issued under the Company ESPP except with respect to the June 30, 2017 Exercise Date,
as set forth above. In any event, the Company Board shall terminate the Company ESPP prior to the Effective Time.
2.4
Dissenting Shares.
(a) Notwithstanding
anything to the contrary contained in this Agreement, Dissenting Shares shall not be converted into or represent the right to receive the Merger
Consideration in accordance with
Section 2.1
, but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting
Shares.
(b) If
any Dissenting Shares shall lose their status as such (through failure to perfect or otherwise), then, as of the later of the Effective Time or the date of loss of
such status, such shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration in accordance with
Section 2.1
, without
interest, and shall not thereafter be deemed to be Dissenting Shares.
(c) The
Company shall give the Parent: (i) prompt notice of any written demand for appraisal received by the Company prior to the Effective Time pursuant to the DGCL,
any withdrawal of any such demand and any other demand, notice, withdrawal or instrument delivered to the Company prior to the Effective Time pursuant to the DGCL that relates to such demand; and
(ii) the right to participate in, direct and control all negotiations and proceedings with respect to any such demand, notice, withdrawal or instrument. The Company shall not settle or pay or
make any payment or settlement offer prior to the Effective Time with respect to any such demand, notice or instrument or agree to do any of the foregoing unless the Parent shall have given its
written consent to such settlement, payment or payment or settlement offer.
2.5
Withholding Rights.
Each of the Parent, the Merger Sub, the Company, the Surviving Corporation
and the Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock or any other recipient of payments hereunder any amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any other applicable state, local or foreign Tax law. To the extent that amounts are so withheld and timely remitted by the Parent, the Merger
Sub, the Company, the Surviving Corporation or the Paying Agent, as the case may be, to the applicable Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having
been paid to the holder or other recipient in respect of which such deduction and withholding was made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Merger Sub that the statements contained in this
Article III
are true and
correct, except (a) as disclosed in the Company SEC Reports filed with or furnished to the SEC since
January 1, 2015 and prior to the date of this
Agreement (excluding, in each case, disclosures set forth under the headings "Risk Factors" or "Forward-Looking Statements" of such filings and any similar disclosures that are cautionary, predictive
or forward-looking in nature) to the extent that it is reasonably apparent solely from a reading of the text of such
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reports
that such disclosure is applicable to any section or subsection of this
Article III
; provided that nothing in the Company SEC Reports
shall be deemed to modify or qualify the representations and warranties set forth in
Section 3.2
(Capitalization),
Section 3.4(a)
(Authority) and
the first sentence of
Section 3.7
(Absence of Company
Material Adverse Effect) or (b) as set forth herein or in the Company Disclosure Schedule, subject to
Section 10.13
.
3.1
Organization, Standing and Power.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company has all requisite
corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted and is duly qualified to do business and, where applicable as a
legal concept, is in good standing as a foreign corporation in each jurisdiction in which the character of the properties it owns, operates or leases or the nature of its activities makes such
qualification legally required, except for such failures to be so organized, qualified or in good standing, individually or in the aggregate, that have not had and would not be reasonably likely to
have a Company Material Adverse Effect. The Company has publicly filed correct and complete copies of the Company's certificate of incorporation and bylaws (and all amendments thereto) as in effect on
the date of this Agreement.
3.2
Capitalization.
(a) The
authorized capital stock of the Company as of the date of this Agreement consists of 2,100,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, par value $0.01 per share (the "
Company Preferred Stock
"). The Company Common Stock and the Company Preferred Stock are entitled to the rights
and privileges set forth in the Company's certificate of incorporation. As of the Capitalization Date, (i) 653,441,161 shares of Company Common Stock were issued and outstanding (not including
shares held in treasury, but including, for the avoidance of doubt, shares of Company Common Stock held by or on behalf of the Company 401(k) Plan), (ii) 301,241,189 shares of Company Common
Stock were held in treasury, (iii) an aggregate of 1,465,991 shares of Company Common Stock were subject to outstanding purchase rights pursuant to the Company ESPP (with such outstanding
purchase rights limited exclusively to the offering period ending June 30, 2017, and with the number of shares calculated in accordance with the assumptions set forth on Section 3.2(a)
of the Disclosure Schedule), and (iv) no shares of Company Preferred Stock were issued or outstanding.
Between the Capitalization Date and the execution of this Agreement, no shares of Company Common Stock have been issued except pursuant to the terms of Company Stock Options, Company RSUs or Company
Performance Share Awards outstanding as of the Capitalization Date to the extent required or permitted under the terms thereof as in effect on the Capitalization Date.
(b)
Section 3.2(b)
of the Company Disclosure Schedule sets forth a complete and accurate list, as of the
Capitalization Date, of all Company Stock Plans, indicating for each Company Stock Plan, as of such date, (i) the aggregate number of shares of Company Common Stock issued under such Company
Stock Plan, (ii) the aggregate number of shares of Company Common Stock subject to outstanding Company Stock Options under such Company Stock Plan and, for each Company Stock Option, the name
of the holder, the grant date, the expiration date, the vesting schedule, the exercise price per share, and the number of shares of Company Common Stock subject thereto, (iii) the aggregate
number of shares of Company Common Stock reserved for future issuance under such Company Stock Plan, (iv) the weighted average exercise price of the outstanding Company Stock Options under such
Company Stock Plan, (v) the aggregate number of shares of Company Common Stock that are subject to Company RSUs and, for each Company RSU, the name of the holder, the grant date, the vesting
schedule, and the number of shares of Company Common Stock subject thereto, and (vi) the aggregate number of shares of Company Common Stock that are subject to Company Performance Share Awards
(assuming applicable performance criteria were deemed satisfied at target performance) and, for each Company Performance Share
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Award,
the name of the holder, the grant date, the performance period, and the target number of shares of Company Common Stock subject thereto. The Company has made available to the Parent complete
and accurate copies of all (A) Company Stock Plans, (B) forms of stock option agreements evidencing Company Stock Options, (C) forms of agreements evidencing Company RSUs and
Company Performance Share Awards and (D) forms of agreements evidencing any other equity or equity-linked award or compensation arrangement.
(c) Except
as set forth in this
Section 3.2
and
Section 3.2(b)
of the Company Disclosure Schedule and for changes since the Capitalization Date resulting from the exercise or settlement of Company Stock Options, Company RSUs, Company July 2017 RSUs granted after
the date of this Agreement in accordance with the terms and limitations set forth in
Section 5.1(b)
of the Company Disclosure Schedule or Company
Performance Share Awards outstanding on such date to the extent required or permitted under the terms thereof as in effect on the Capitalization Date, (i) there are no equity securities of any
class of the Company, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance, outstanding or authorized and (ii) there are no options,
warrants, equity securities, calls, rights, subscriptions, arrangements, understandings or agreements to which the Company or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound obligating the Company or any of its Subsidiaries to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged, transferred, delivered or sold, additional
shares of capital stock or other equity interests of the Company or any security or rights convertible into or exchangeable or exercisable for any such shares or other equity interests, or obligating
the Company or any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security, call, right or agreement or make
payments based on the value of any shares of Company Common Stock or other equity securities or equity interests of the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has (A) any outstanding stock appreciation rights, phantom stock or similar rights or obligations or (B) outstanding bonds, debentures, notes or other similar obligations,
the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote or other equity securities of the Company) with the stockholders of
the Company on any matter. Neither the Company nor any of its Subsidiaries is a party to or is bound by any agreement with respect to the voting (including trusts or proxies) or sale or transfer of
any shares of capital stock or other equity interests of the Company. Except as described in
Section 3.2(c)
of the Company Disclosure Schedule,
and except to the extent arising pursuant to applicable state takeover or similar laws, there are no registration rights, and there is no rights agreement, "poison pill" anti-takeover plan or other
similar agreement to which the Company or any of its Subsidiaries is a party or by which it or they are bound with respect to any equity security of any class of the Company or any of its
Subsidiaries.
(d) All
outstanding shares of Company Common Stock are, and all shares of Company Common Stock subject to issuance as specified in
Section 3.2(b)
of the Company Disclosure Schedule, upon issuance on the
terms and conditions specified in the instruments pursuant to which they
are issuable, will be, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive
right, subscription right or any similar right under any provision of the DGCL, the Company's certificate of incorporation or bylaws or any agreement to which the Company is a party or is otherwise
bound.
(e) There
are no obligations, contingent or otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire, or to register any shares of
Company Common Stock or the capital stock of the Company or any of its non-wholly owned Subsidiaries.
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(f) As
of the Capitalization Date, except for indebtedness (other than indebtedness owed by the Company to any directly or indirectly wholly owned Subsidiary thereof or by
any directly or indirectly wholly owned Subsidiary of the Company to the Company or another directly or indirectly wholly owned Subsidiary of the Company) in an aggregate amount of less than
$20,000,000, there is no outstanding indebtedness for borrowed money of the Company and its Subsidiaries other than indebtedness reflected on the Company Balance Sheet.
3.3
Subsidiaries.
(a)
Section 3.3
of the Company Disclosure Schedule sets forth, as of the date of this Agreement, for each Subsidiary
of the Company: (i) its name; (ii) its jurisdiction of organization; and (iii) in the case of a Subsidiary of the Company that is not wholly owned, the number and type of its
outstanding equity securities and a list of the holders thereof. All of the issued and outstanding shares of capital stock of, or other equity securities in, each Subsidiary of the Company
(x) have been duly authorized and validly
issued and are fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar
right and (y) except as set forth in
Section 3.3
of the Company Disclosure Schedule, are owned, directly or indirectly, by the Company
free and clear of all Liens.
(b) Each
Subsidiary of the Company is an entity duly organized, validly existing and in good standing (to the extent such concepts are applicable) under the laws of the
jurisdiction of its incorporation, has all requisite corporate (or similar, in the case of a non-corporate entity) power and authority to own, lease and operate its properties and assets and to carry
on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation (to the extent such concepts are applicable) in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except for such failures to be so organized, qualified or in good
standing, individually or in the aggregate, that have not had and would not be reasonably likely to have a Company Material Adverse Effect. The Company has made available to Parent true, correct and
complete copies of the certificate of incorporation and bylaws (or comparable organizational documents) of each material Subsidiary of the Company (and all amendments thereto) as currently in effect.
(c) The
Company does not own or control, directly or indirectly, any material amount of capital stock of any Person that is not a Subsidiary of the Company.
3.4
Authority; No Conflict; Required Filings and Consents.
(a) The
Company has all requisite corporate power and authority to enter into this Agreement, perform its obligations hereunder and, assuming the accuracy of the
representations and warranties of the Parent and the Merger Sub in
Section 4.8
and receipt of the Company Stockholder Approval, consummate the
Merger and the other transactions contemplated hereby. The Company Board, at a meeting duly called and held, by the unanimous vote of all directors, duly adopted resolutions (i) determining and
declaring that it is in the best interests of the Company and the stockholders of the Company that the Company enter into this Agreement and consummate the Merger on the terms and subject to the
conditions set forth herein, (ii) adopting, approving and declaring the advisability of this Agreement, the Merger and the other Transactions, (iii) declaring that the terms of the
Merger are fair to the Company and the Company's stockholders and (iv) directing that this Agreement be submitted to the Company's stockholders at the Company Stockholders Meeting for their
adoption and recommending that the stockholders of the Company adopt this Agreement. Assuming the accuracy of the representations and warranties of the Parent and the Merger Sub in
Section 4.8
and
receipt of the Company Stockholder Approval, the execution and delivery of this Agreement and the consummation of the
Transactions by the Company have been duly authorized by all necessary corporate action on the part of the
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Company.
This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery of this Agreement by the Parent and the Merger Sub, constitutes
the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (the "
Bankruptcy and Equity
Exception
").
(b) The
execution and delivery of this Agreement by the Company do not, and (assuming the accuracy of the representations and warranties of the Parent and the Merger Sub in
Section 4.8
and receipt of the
Company Stockholder Approval) the consummation by the Company of the Transactions shall not, (i) conflict
with, or result in any violation or breach of, any provision of the certificate of incorporation, bylaws or similar organizational documents of the Company or any Subsidiary of the Company,
(ii) conflict with, or result in any violation or breach of, or constitute a default (with or without notice or lapse of time or both) (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, or result (or, with or without notice or lapse of time or both, would result) in the
creation or imposition of any Lien on any asset, property or right of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any Company Material Contract, or
(iii) subject to compliance with the requirements specified in clauses (i) through (v) of
Section 3.4(c)
, conflict with or
violate any permit, concession, franchise, license, judgment, injunction, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of its
or their respective properties, rights or assets, except in the case of clauses (ii) and (iii) of this
Section 3.4(b)
for any such
conflicts, violations, breaches, defaults, terminations, cancellations, accelerations, losses, penalties or Liens, and for any consents or waivers not obtained, that, individually or in the aggregate,
have not had and would not be reasonably likely to have a Company Material Adverse Effect.
(c) No
consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with, any Governmental Entity or any stock market or
stock exchange on which shares of Company Common Stock are listed for trading is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the Transactions, except for (i) the pre-merger notification requirements under the HSR Act and any requirements under other
applicable Antitrust Laws, (ii) the filing of the Certificate of Merger with the Secretary of State and appropriate corresponding documents with the appropriate authorities of other states in
which the Company is qualified as a foreign corporation to transact business, (iii) the filing of the Proxy Statement with the SEC in accordance with the Exchange Act, (iv) the filing of
such other reports, schedules or materials under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (v) such consents, approvals,
orders, authorizations, registrations, declarations, notices and filings as may be required under applicable state securities laws and the rules and regulations of the Nasdaq Stock Market, and
(vi) such other consents, approvals, licenses, permits, orders, authorizations, registrations,
declarations, notices and filings which, if not obtained or made, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect.
(d) There
are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.
3.5
SEC Filings; Financial Statements; Information Provided.
(a) The
Company has filed or furnished all registration statements, forms, reports and other documents required to be filed or furnished by the Company with the SEC since
January 1, 2015.
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All
such registration statements, forms, reports and other documents, as such documents have been amended or supplemented since the time of their filing (including exhibits and all other information
incorporated therein and those registration statements, forms, reports and other documents that the Company may file after the date hereof until the Closing) are referred to herein as the
"
Company SEC Reports
." As of their respective dates or, if amended prior to the date hereof, as of the date of the last such amendment, the Company SEC
Reports (i) were or will be filed on a timely basis, (ii) at the time filed or furnished, complied, or will comply when filed or furnished, as to form in all material respects with the
requirements of the Securities Act and the Exchange Act applicable to such Company SEC Reports and (iii) did not or will not at the time they were or are filed or furnished contain any untrue
statement of a material fact or omit to state a material fact required to be stated in such Company SEC Reports or necessary in order to make the statements in such Company SEC Reports, in the light
of the circumstances under which they were made, not misleading in any material respect. The Company has not, as of the date hereof, received any written comments from the SEC with respect to any of
the Company SEC Reports which remain unresolved.
(b) Each
of the consolidated financial statements (including, in each case, any related notes and schedules) contained or to be contained in the Company SEC Reports at the
time filed (i) complied or will comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto,
(ii) were or will be prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may
be indicated therein or in the notes to such financial statements or, in the case of unaudited interim financial statements, as permitted by the SEC on Form 10-Q under the Exchange Act), and
(iii) fairly presented or will fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates indicated and the consolidated
results of its operations and cash flows, as the case may be, for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end
adjustments that are not material in the aggregate.
(c) Subject
to the following sentence, (i) the Proxy Statement, on the date the Proxy Statement is first mailed to holders of shares of Company Common Stock, at the
time of any amendment or supplement thereto and at the time of the Company Stockholders Meeting, shall not contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they shall be made, not misleading and (ii) the Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act applicable to the Proxy Statement. Notwithstanding the foregoing, the Company makes no representation or warranty with
respect to statements included or incorporated by reference in the Proxy Statement based on any information supplied by or on behalf of the Parent or the Merger Sub expressly for inclusion or
incorporation by reference therein.
(d) The
Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act. Each required form, report and document containing
financial statements that has been filed with or submitted to the SEC was accompanied by any certifications required to be filed or submitted by the Company's principal executive officer and principal
financial officer pursuant to the Sarbanes-Oxley Act and, at the time of filing or submission of each such certification, any such certification complied in all material respects with the applicable
provisions of the Sarbanes-Oxley Act. Neither the Company nor any of its executive officers has received written notice from any Governmental Entity challenging or questioning the accuracy,
completeness, form or manner of filing of such certifications.
(e) The
Company has established and maintains disclosure controls, procedures and internal control over financial reporting (as defined in Rule 13a-15 under the
Exchange Act) required by
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Rule 13a-15
or 15d-15 under the Exchange Act. Such (i) disclosure controls and procedures are designed to provide reasonable assurance that all information concerning the Company that
could have a material effect on the financial statements is made known on a timely basis to the individuals responsible for the preparation of the Company's filings with the SEC and other public
disclosure
documents and (ii) internal controls are designed to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of Company financial
statements for external purposes in accordance with GAAP. The Company's principal executive officer and its principal financial officer have disclosed, based on the most recent evaluation of internal
control over financial reporting prior to the date of this Agreement, to the Company's auditors and the audit committee of the Company Board (and made available to Parent a summary of the significant
aspects of such disclosure, if any) (1) all known significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably
likely to adversely affect in any material respect the Company's ability to record, process, summarize and report financial information, and (2) any known fraud, whether or not material, that
involves management or other employees who have a significant role in the Company's internal control over financial reporting. The Company is in compliance in all material respects with the applicable
listing and other rules and regulations of the Nasdaq Stock Market.
3.6
No Undisclosed Liabilities.
Except as disclosed in the Company Balance Sheet and except for
liabilities incurred in the Ordinary Course of Business since the date of the Company Balance
Sheet (and, solely for the purposes of this
Section 3.6
, liability for breach of a Company Material Contract, tort, infringement,
misappropriation or dilution shall not be deemed Ordinary Course of Business), the Company and its Subsidiaries do not have any liabilities of any nature that, individually or in the aggregate, have
had or would be reasonably likely to have a Company Material Adverse Effect. The Company is not subject to any "Off-Balance Sheet Arrangement" (as defined in Item 303(a) of
Regulation S-K under the Securities Act) that have not been so described in the Company SEC Reports.
3.7
Absence of Certain Changes or Events.
Since the date of the Company Balance Sheet, there has not
been any effect, change, event, occurrence or development that, individually or in the aggregate,
constituted, or would be reasonably expected to constitute, a Company Material Adverse Effect. From the date of the Company Balance Sheet until the date of this Agreement, except as expressly
contemplated hereby, (a) the business of the Company and its Subsidiaries, taken as a whole, has been conducted in the Ordinary Course of Business and (b) none of the Company or any of
its Subsidiaries has taken any action that would have required the consent of the Parent under
Section 5.1
of this Agreement (other than
paragraphs (b), (g), (h), (j) and (k) of
Section 5.1
and paragraph (q) of
Section 5.1
as it relates to paragraphs (b),
(g), (h), (j) and (k) of
Section 5.1
) had such action or event occurred after the date of this Agreement.
3.8
Taxes.
(a) The
Company and each of its Subsidiaries has filed (or there has been filed on its behalf) all income Tax Returns and all other material Tax Returns that it was required
to file, and all such Tax Returns were correct and complete in all material respects. The Company and each of its Subsidiaries has paid (or caused to be paid) on a timely basis all material Taxes due
and owing by the Company and/or its Subsidiaries, other than Taxes that are being contested in good faith through appropriate proceedings
and for which the most recent financial statements contained in the Company SEC Reports reflect an adequate reserve in accordance with GAAP.
(b) No
examination or audit of any material Tax Return of the Company or any of its Subsidiaries by any Governmental Entity is currently in progress, is, to the Company's
Knowledge,
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pending
or has been proposed in writing. There are no Liens for Taxes on any of the assets or properties of the Company or any of its Subsidiaries.
(c) Neither
the Company nor any of its Subsidiaries has any material liability for any Taxes of any Person (other than the Company and its Subsidiaries) (i) under
Treasury Regulation Section 1.1502-6 (or any similar provision of Tax law in any jurisdiction) or as a transferee or successor under applicable law, or (ii) pursuant to any Tax sharing,
Tax allocation or Tax indemnification agreement or other similar agreement (other than pursuant to commercial agreements or arrangements entered into in the Ordinary Course of Business that are not
primarily related to Taxes).
(d) Neither
the Company nor any of its Subsidiaries has entered into any "listed transaction" within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(e) Neither
the Company nor any of its Subsidiaries has been a "controlled corporation" or a "distributing corporation" in any distribution occurring during the three-year
period ending on the date hereof that was purported or intended to be governed by Section 355 of the Code.
(f) Neither
the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3.9
Real Property.
(a)
Section 3.9(a)
of the Company Disclosure Schedule sets forth a list as of the date of this Agreement that is
complete and accurate in all material respects of all Leased Real Property. Except as set forth in
Section 3.9(a)
of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has subleased such Leased Real Property or any portion thereof in a manner that would interfere in any material respect with the Company's
current or anticipated use of such Leased Real Property in the Ordinary Course of Business.
(b)
Section 3.9(b)
of the Company Disclosure Schedule sets forth a list as of the date of this Agreement that is
complete and accurate in all material respects of all Owned Real Property. With respect to each Owned Real Property, except for matters that, individually or in the aggregate, are not reasonably
likely to be material to the Company and its Subsidiaries, taken as a whole, the Company or the identified Subsidiary has good and clear record and marketable title to such Owned Real Property,
insurable by a recognized national title insurance company at standard rates, free and clear of any Liens, except for recorded easements, covenants and other restrictions of record which do not
materially impair the current uses or occupancy of such Owned Real Property. As of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to any agreement obligating
the Company or any Subsidiary to purchase any material real property or material interest therein.
3.10
Intellectual Property.
(a) To
the Company's Knowledge, the Company and its Subsidiaries own, license, sublicense or otherwise possess legally enforceable rights to use all Intellectual Property
used by the Company and its Subsidiaries in the conduct of the business of the Company and its Subsidiaries, taken as a whole, as currently conducted, the absence of which, individually or in the
aggregate, is reasonably likely to have a Company Material Adverse Effect.
(b) Schedule
3.10(b)
of the Company Disclosure Schedule sets forth a complete list of all material Company Intellectual
Property that is subject to an application or registration with the United States Patent and Trademark Office, the United States Copyright Office or a foreign equivalent thereof. To the Company's
Knowledge, all issued patents and registrations for
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trademarks,
service marks and copyrights included in the Company Intellectual Property are subsisting and have not expired or been cancelled.
(c) The
conduct of the business of the Company and its Subsidiaries, taken as a whole, as currently conducted, does not infringe, violate, dilute or constitute a
misappropriation of any Intellectual Property of any third party in a manner that has or would reasonably be expected to result in a material liability to the Company and its Subsidiaries, taken as a
whole. Between January 1, 2015 and the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written claim or notice from any Person (i) alleging any
infringement, violation or misappropriation of any Intellectual Property of any third Person in a manner that has or would reasonably be expected to result in a material liability to the Company and
its Subsidiaries, taken as a whole or (ii) advising that such Person is challenging or threatening to challenge the ownership, use, validity or enforceability of any Company Intellectual
Property in a manner that has or would reasonably be expected to result in a material liability to the Company and its Subsidiaries, taken as a whole.
(d) To
the Company's Knowledge, the Company and its Subsidiaries have implemented commercially reasonable measures to maintain the confidentiality of the Company
Intellectual Property of a nature that the Company intends to keep confidential.
(e) To
the Company's Knowledge, no third party is infringing, violating, diluting or misappropriating any of the Company Intellectual Property in a manner that has or would
reasonably be expected to result in a material liability to the Company and its Subsidiaries, taken as a whole.
(f) Since
January 1, 2015, the Company and its Subsidiaries have complied with all laws, contractual obligations and externally published privacy policies of the
Company applicable to the Company or any of its Subsidiaries and related to the privacy of, and the collection, use, disclosure and protection of, personally identifiable information, except for any
failures to comply that, individually or in the aggregate, would not reasonably be expected to result in a material liability to the Company and its Subsidiaries, taken as a whole. From
January 1, 2015 through the date of this Agreement, the Company has not received any written notice asserting any violation by the Company or any of its Subsidiaries of any such law,
contractual obligation or externally published privacy policy, except for any such violations that, individually or in the aggregate, would not reasonably be expected to result in a material liability
to the Company and its Subsidiaries, taken as a whole.
(g) Except
for matters that would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (i) the computer systems, including
software and hardware, used by the Company and its Subsidiaries in the conduct of the business of the Company and its Subsidiaries, taken as a whole, as currently conducted, are sufficient for the
immediate needs of the business as it is currently conducted and (ii) the Company and its Subsidiaries maintain commercially reasonable security, disaster recovery and business continuity plans
and procedures.
3.11
Contracts.
(a) The
Company has made available to the Parent a true, complete and correct copy of, and
Section 3.11
of the Company
Disclosure Schedule sets forth, as of the date of this Agreement, a list of, each Company Material Contract to which the Company or any of its Subsidiaries is a party as of the date of this Agreement
or by which any of them or any of their respective properties or assets are bound.
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(a) Each
Company Material Contract is in full force and effect except to the extent it has previously expired in accordance with its terms or where the failure to be in full
force and effect, individually or in the aggregate, has not had and would not be reasonably likely to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries nor, to
the Company's Knowledge, any other party to any Company Material Contract is in violation of or in default under (nor does there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) or has failed to perform under any Company Material Contract, except for violations or defaults that, individually or in the
aggregate, have not had and would not be reasonably likely to have a Company Material Adverse Effect.
(b) Since
January 1, 2017, neither the Company nor any of its Subsidiaries has entered into any transaction that would be subject to disclosure pursuant to
Item 404 of Regulation S-K that has not been disclosed in the Company SEC Reports.
3.12
Litigation.
Since January 1, 2015 until the date of this Agreement, there
has been no action, suit, proceeding, claim, arbitration or investigation pending or, to the
Company's Knowledge, threatened against the Company or any of its Subsidiaries or any of their respective properties or assets, in each case that, individually or in the aggregate, has had or would be
reasonably likely to have a Company Material Adverse Effect. Since January 1, 2015 until the date of this Agreement, there have been no judgments, orders or decrees outstanding against the
Company or any of its Subsidiaries or any of their respective properties or assets that, individually or in the aggregate, have had or would be reasonably likely to have a Company Material Adverse
Effect.
3.13
Environmental Matters.
(a) To
the Company's Knowledge, except for matters that, individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect:
(i) neither the Company nor any of its Subsidiaries is or, since January 1, 2015, has been, in violation of any Environmental Law or has received written notice of such violation,
(ii) there has been no Release or disposal of, or exposure of any Person to, any Hazardous Substance at the Company's owned or leased real property that would reasonably be expected to result
in any liability under any Environmental Law and neither the Company nor any of its Subsidiaries has received written notice of any such liability; and (iii) the Company and its Subsidiaries
have all permits, licenses and other authorizations required under any Environmental Law and the Company and its Subsidiaries are and have been since January 1, 2015 in compliance with such
permits, licenses and other authorizations.
(b) The
only representations and warranties of the Company in this Agreement as to any environmental matters or any other obligation or liability with respect to Hazardous
Substances or materials of environmental concern are those contained in this
Section 3.13
and
Sections 3.4
,
3.5
,
3.6
,
3.7
and
3.12
. Without limiting the generality of the foregoing,
the representations and warranties
contained in
Sections 3.15
and
3.16
do not relate to environmental matters.
3.14
Employee Benefit Plans.
(a)
Section 3.14(a)
of the Company Disclosure Schedule sets forth a complete and accurate list, as of the date of this
Agreement, of all material Company Employee Plans.
(b) With
respect to each Company Employee Plan in effect on the date of this Agreement, the Company has made available to the Parent a complete and accurate copy of
(i) such Company
Employee Plan and all amendments thereto, (ii) the most recently filed annual report (Form 5500) and accompanying schedules, if any, (iii) the most recent determination letter
from the Internal Revenue Service, if applicable, and (iv) each trust agreement, group annuity contract and summary plan description, if any, relating to such Company Employee Plan.
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(c) Each
Company Employee Plan has been established, maintained, funded and administered in accordance with ERISA, the Code and all other applicable laws and the regulations
thereunder and in accordance with its terms, except for failures to so establish, maintain, fund, or administer such Company Employee Plan as are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect.
(d) With
respect to the Company Employee Plans, there are no benefit obligations for which contributions have not been made or properly accrued to the extent required by
GAAP, except for failures to make such contributions or accruals for contributions as are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect.
(e) All
the Company Employee Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the IRS to the effect
that such Company Employee Plans are qualified and the plans and trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, or are
based on prototype or volume submitter documents that, to the Company's Knowledge, have received opinion or advisory letters, and no such letter has been revoked and revocation has not been
threatened, and no act or omission has occurred, that would reasonably be expected to adversely affect its qualification.
(f) None
of the Company, any of its Subsidiaries or any of their ERISA Affiliates (i) maintains or has any actual or contingent liability with respect to a Company
Employee Plan that is subject to Section 412 of the Code or Title IV of ERISA or (ii) is obligated to contribute to or has any actual or contingent liability with respect to a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) other than any contingent liability that is not reasonably likely to be material to the Company and its Subsidiaries, taken as a
whole.
(g) Neither
the Company nor any of its Subsidiaries is a party to any (i) agreement or arrangement with any current or former stockholder, director, independent
contractor, employee or executive officer of the Company or any of its Subsidiaries (A) the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a
transaction involving the Company or any of its Subsidiaries of the nature of any of the Transactions, (B) providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of
such director, independent contractor, employee or executive officer; or (ii) agreement, plan or arrangement binding the Company or any of its Subsidiaries, including any stock option plan,
stock appreciation right plan, restricted stock plan, stock purchase plan or severance benefit plan, any of the compensation or benefits of which shall be triggered or increased, or the payment,
funding or the vesting of the compensation or benefits of which shall be accelerated, by the occurrence of any of the Transactions (either alone or together with any other event) or the value of any
of the compensation or benefits of which shall be calculated on the basis of any of the Transactions.
(h) Neither
the execution and delivery of this Agreement nor the consummation of the Transactions would (either alone or in conjunction with any other event) give rise to
the payment of any amount that would not be deductible pursuant to the terms of Sections 280G of the Code. Neither the Company nor any of its Subsidiaries has any obligation to gross-up,
reimburse or indemnify any individual with respect to any Taxes, including those imposed pursuant to Sections 409A or 4999 of the Code.
(i) None
of the Company Employee Plans promises or provides retiree medical or other retiree welfare benefits to any Person, except as required by Section 4980B of
the Code (or similar state law) and for which the covered individual pays the full cost of coverage or where the liabilities of the Company and its Subsidiaries are not reasonably expected to be
material.
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(j) Except
as has not had or would not, individually or in the aggregate, be reasonably likely to have a Company Material Adverse Effect, there are no pending or, to the
Company's Knowledge, threatened actions, claims, proceedings, or suits (other than routine claims for benefits in accordance with the terms of the applicable Company Employee Plan) or audits or
investigations by any Governmental Entity on behalf or, with respect to or against any of the Company Employee Plans, trusts related thereto, or fiduciaries acting with respect to any Company Employee
Plan.
3.15
Compliance With Laws.
(a) The
Company and each of its Subsidiaries is and, since January 1, 2015 has been, in compliance with, and is not in violation of, any applicable statute, law,
judgment, order, decree or regulation with respect to the conduct of its business, or the ownership or operation of its properties or assets, except for failures to comply or violations that,
individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect.
(b) Neither
the Company nor any of its Subsidiaries, nor, to the Company's Knowledge, any of their respective directors, officers, employees or agents has since
January 1, 2012 violated any provision of the U.S. Foreign Corrupt Practices Act of 1977 or any other anti-bribery or anti-corruption laws, except for violations that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse Effect.
(c) The
Company and its Subsidiaries are in compliance with all applicable export control laws, including those administered by the U.S. Department of Commerce and the U.S.
Department of State, and applicable asset control laws, including those administered by the U.S. Department of the Treasury, except for failures to comply that, individually or in the aggregate, are
not reasonably likely to have a Company Material Adverse Effect.
3.16
Permits; Regulatory Matters.
Since January 1, 2015, the Company and its Subsidiaries have
all authorizations, permits, licenses and franchises from Governmental Entities required to
conduct their businesses as now being conducted, except for such authorizations, permits, licenses and franchises the absence of which, individually or in the aggregate, have not had and would not be
reasonably likely to have a Company Material Adverse Effect (the "
Company Permits
"). The Company Permits are in full force and effect, except for any
failures to be in full force and effect that, individually or in the aggregate, have not had and would not be reasonably likely to have a Company Material Adverse Effect. Since January 1, 2015
(to the extent applicable), the Company and each of its Subsidiaries have been in compliance with the terms of the Company Permits, except for such failures to comply that, individually or in the
aggregate, have not had and would not be reasonably likely to have a Company Material Adverse Effect.
3.17
Labor Matters.
The Company and its Subsidiaries have complied with all applicable laws relating
to labor and employment, including those relating to wages, hours, collective
bargaining, unemployment compensation, plant closures and layoffs, worker's compensation, equal employment opportunity, age and disability discrimination, immigration control and employee and
independent contractor classification, except for such failures to comply that, individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is the subject of any proceeding asserting that the Company or any of its Subsidiaries has committed an unfair labor practice or seeking to compel it to bargain
with any labor union or labor organization that, individually or in the aggregate, is reasonably likely to have a Company Material Adverse Effect. There are no pending or, to the Company's Knowledge,
threatened labor strikes, disputes, walkouts, work stoppages, slow-downs or lockouts involving the Company or any of its Subsidiaries. Neither the Company nor its Subsidiaries are party to or bound by
any contract or relationship with any trade union, works council, or other labor organization with respect to employees. To the Company's Knowledge, in the past three (3) years, there has been
no union organizing activity
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among
employees of the Company or its Subsidiaries, Except as, individually or in the aggregate, would not have a Company Material Adverse Effect, the Company and its Subsidiaries: (i) have
paid all wages, salaries, wage premiums, commissions, bonuses, fees, and other compensation which have come due and payable to their current and former employees and independent contractors under
applicable law, contract or policy; and (ii) are not liable for any fines, taxes, interest, or other penalties for any failure to pay or delinquency in paying such compensation.
3.18
Opinion of Financial Advisor.
Barclays Capital Inc., a financial advisor of the Company,
has delivered to the Company Board an opinion to the effect that, as of the date of such
opinion, and based upon and subject to the qualifications, factors, limitations and assumptions set forth therein, the Merger Consideration to be offered to the holders of Company Common Stock (other
than any shares held by the Company as treasury stock, shares held by Parent or any subsidiary of either the Company or Parent and any Dissenting Shares) pursuant to the Merger as provided in this
Agreement is fair, from a financial point of view, to such holders. In addition, Morgan Stanley & Co. LLC (together with Barclays Capital Inc., the
"
Financial Advisors
"), a financial advisor to the Company, has delivered to the Company Board an opinion to the effect that, as of the date of such
opinion, and based upon and subject to the qualifications, factors, limitations and assumptions set forth therein, the Merger Consideration to be received by the holders of Company Common Stock (other
than any shares held by the Company as treasury stock, shares held by Parent or any subsidiary of either the Company or Parent and any Dissenting Shares) pursuant to the Merger as provided in this
Agreement is fair, from a financial point of view, to such holders. As promptly as practicable following the date hereof, a complete and executed copy of such opinions thereof will be delivered to
Parent for informational purposes only.
3.19
Section 203 of the DGCL.
Assuming the accuracy of the representations and warranties of the
Parent and the Merger Sub in
Section 4.8
, the Company Board has taken all actions necessary so that the restrictions contained in Section 203 of the DGCL applicable to
a "business combination" (as defined in Section 203 of the DGCL) shall not apply to the execution, delivery or performance of this Agreement or the consummation of the Merger or the other
Transactions.
3.20
Brokers.
No agent, broker, investment banker, financial advisor or other firm or Person is or
shall be entitled, as a result of any action or agreement of the Company or
any of its Affiliates, to any broker's, finder's, financial advisor's or other similar fee or commission in connection with any of the Transactions, except as disclosed in
Section 3.20
of the
Company Disclosure Schedule. Neither Financial Advisor is entitled to, nor has the Company or its Subsidiaries agreed to pay
to either Financial Advisor, compensation, fees and/or expenses in connection with the Transactions in excess of the amount set forth in
Section 3.20
of the Company Disclosure Schedule.
3.21
Insurance.
Except as has not had and would not be reasonably likely to, individually or in the
aggregate, have a Company Material Adverse Effect, (a) all insurance
policies of the Company and its Subsidiaries are in full force and effect, except for any expiration thereof in accordance with the terms thereof, (b) the Company and its Subsidiaries are not
in default under any such insurance policy and (c) no written notice of cancelation or termination has been received with respect to any such insurance policy, other than in connection with
ordinary renewals.
3.22
Suppliers.
Listed in
Section 3.22
of the
Company Disclosure Schedules are the names of the ten (10) most
significant suppliers (by dollar volume of purchases) of the Company (each, a "
Significant Supplier
") for the fiscal year ended January 28, 2017
and the approximate dollar amount purchased from each such supplier during such period. From January 1, 2016 through the date of this Agreement, to the Company's Knowledge, neither the Company
nor any of its Subsidiaries has received any written notice from a Significant Supplier that such Significant Supplier has ceased, or will cease, to supply or make available all or substantially all
of the products, equipment, goods or services currently supplied to the Company or its Subsidiaries by such Significant Supplier, as applicable, following the date hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE MERGER SUB
The Parent and the Merger Sub, jointly and severally, represent and warrant to the Company that the statements contained in this
Article IV
are true and correct.
4.1
Organization, Standing and Power.
Each of the Parent and the Merger Sub is a corporation duly
organized, validly existing and in good standing (to the extent such concepts are applicable) under
the laws of the jurisdiction of its incorporation, has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being
conducted, and is duly qualified to do business and, where applicable as a legal concept, is in good standing as a foreign corporation in each jurisdiction in which the character of the properties it
owns, operates or leases or the nature of its activities makes such qualification legally required, except for such failures to be so organized, qualified or in good standing, individually or in the
aggregate, that are not reasonably likely to have a Parent Material Adverse Effect. Parent has delivered or made available to the Company complete and correct copies of the certificate or articles of
incorporation and bylaws, or similar organizational documents as amended through the date of this Agreement, of Merger Sub and Parent.
4.2
Authority; No Conflict; Required Filings and Consents.
(a) Each
of the Parent and the Merger Sub has all requisite corporate power and authority to enter into this Agreement and, subject to the adoption of this Agreement by the
Parent as the sole stockholder of the Merger Sub (which shall occur immediately after the execution and delivery of this Agreement), to consummate the transactions contemplated hereby. The execution
and delivery of, and the consummation of the transactions contemplated by, this Agreement by the Parent and the Merger Sub have been duly authorized by all necessary corporate action on the part of
each of the Parent and the Merger Sub, subject to the adoption of this Agreement by the Parent as the sole stockholder of the Merger Sub (which shall occur immediately after the execution and delivery
of this Agreement). This Agreement has been duly executed and delivered by each of the Parent and the Merger Sub and, assuming the due authorization, execution and delivery of this Agreement by the
Company, constitutes the valid and binding obligation of each of the Parent and the Merger Sub, enforceable against each of them in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(b) The
execution and delivery of this Agreement by each of the Parent and the Merger Sub do not, and the consummation by the Parent and the Merger Sub of the Transactions
shall not, (i) conflict with, or result in any violation or breach of, any provision of the certificate of incorporation, bylaws or other organizational documents of the Parent or the Merger
Sub, (ii) conflict with, or result in any violation or breach of, or constitute a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any lease, license, contract or other agreement, instrument or obligation to which the
Parent or the Merger Sub is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to compliance with the requirements specified in
clauses (i), (ii), (iii), (iv) and (v) of
Section 4.2(c)
, conflict with or violate any permit, concession, franchise,
license, judgment, injunction, order, decree, statute, law, ordinance, rule or regulation applicable to the Parent or the Merger Sub or any of its or their respective properties or assets, except in
the case of clauses (ii) and (iii) of this
Section 4.2(b)
for any such conflicts, violations, breaches, defaults, terminations,
cancellations, accelerations, losses, penalties or Liens, and for any consents or waivers not obtained, that, individually or in the aggregate, are not reasonably likely to have a Parent Material
Adverse Effect.
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(c) No
consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with, any Governmental Entity or any stock market or
stock exchange on which shares of common stock of the Parent are listed for trading is required by or with respect to the Parent or the Merger Sub in connection with the execution and delivery of this
Agreement by the Parent or the Merger Sub or the consummation by the Parent or the Merger Sub of the Transactions, except for (i) the pre-merger notification requirements under the HSR Act and
any requirements under other applicable Antitrust Laws, (ii) the filing of the Certificate of Merger with the Secretary of State and appropriate corresponding documents with the appropriate
authorities of other states in which the Company is qualified as a foreign corporation to transact business, (iii) the filing of the Proxy Statement under the Exchange Act, (iv) the
filing of such reports, schedules or materials under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (v) such consents,
approvals, orders, authorizations, registrations, declarations, notices and filings as may be required under applicable state securities laws and the rules and regulations of the Nasdaq Stock Market,
and (vi) such other consents, approvals, licenses, permits, orders, authorizations, registrations, declarations, notices and filings which, if not obtained or made, are not reasonably likely to
have a Parent Material Adverse Effect.
(d) No
vote of the holders of any class or series of the Parent's capital stock or other securities is necessary for the consummation by the Parent of the Transactions.
4.3
Information Provided.
The information supplied or to be supplied by or on behalf of the Parent
for inclusion in the Proxy Statement, on the date the Proxy Statement is first mailed to
holders of shares of Company Common Stock, at the time of any amendment or supplement thereto and at the time of the Company Stockholders Meeting, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they shall be made, not misleading in
any material respect.
4.4
Operations of the Merger Sub.
The Merger Sub was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
4.5
Financing.
Parent has delivered to the Company true and complete copies, including all exhibits
and schedules thereto, of (a) the executed commitment letters, dated
as of the date hereof (collectively, the "
Equity Funding Letters
" and each, an "
Equity Funding Letter
"),
from the Guarantors, pursuant to which the Guarantors (the "
Equity Financing Sources
") have agreed to make an equity investment in Parent, subject to
the terms and conditions therein, in cash in the aggregate amounts set forth therein (the "
Equity Financing
") and (b) the executed commitment
letter and Redacted Fee Letter (together with the term sheet and any other annexes, exhibits, schedules and other attachments thereto), dated as of the date hereof (collectively, the
"
Debt Commitment Letter
" and, together with the Equity Funding Letters, the "
Financing Letters
"), from
the Debt Financing Sources, pursuant to which the Debt Financing Sources have agreed to provide, severally and not jointly, subject to the terms and conditions therein, debt financing in the amounts
set forth therein (such debt financing being collectively referred to as the "
Debt Financing
" and, together with the Equity Financing, collectively
referred to as the "
Financing
") for purposes of financing the Transactions and the related fees and expenses to be incurred by Parent in connection
therewith. As of the date of this Agreement, neither of the Financing Letters has been amended or modified, no such amendment or modification is contemplated, none of the respective obligations and
commitments contained in such letters have been withdrawn, terminated or rescinded in any respect and no such withdrawal, termination or rescission is contemplated. Parent or Merger Sub has fully paid
any and all commitment fees or other fees in connection with the Financing Letters that are payable on or prior to the date hereof. Assuming the Financing is funded in accordance with the Financing
Letters, the accuracy in all material respects of
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the
representations and warranties set forth in
Sections 3.2
,
3.5(b)
,
3.6
and
3.7(b)
(as it relates to
Section 5.1(a)
)
and performance in all material respects by the Company of its obligations under
Sections 5.1(a)
and
5.1(g)
, the net proceeds contemplated by the
Financing Letters (after netting out applicable fees, expenses, original issue discount and similar
premiums and charges and after giving effect to the maximum amount of flex (including original issue discount flex) provided under the Debt Commitment Letter), together with the cash of the Company
and its Subsidiaries as of the Effective Time (it being acknowledged that the Company makes no representation or warranty as to the amount or availability of cash as of the Effective Time), will in
the aggregate be sufficient for Merger Sub and the Surviving Corporation to pay the aggregate Merger Consideration (and any repayment or refinancing of debt contemplated by, or required in connection
with the transactions described in, this Agreement, the Equity Funding Letters or the Debt Commitment Letter) and any other amounts required to be paid in connection with the consummation of the
Transactions (including all amounts payable in respect of Company Stock Options, Company RSUs, Company July 2017 RSUs and Company Performance Share Awards under this Agreement) and to pay all related
fees and expenses of Parent and Merger Sub. The Financing Letters are (x) legal, valid and binding obligations of Parent and Merger Sub, as applicable, and, to the knowledge of Parent and
Merger Sub, each of the other parties thereto, (y) enforceable in accordance with their respective terms against Parent and Merger Sub, as applicable, and, to the knowledge of Parent and Merger
Sub, each of the other parties thereto, in each case except as such enforceability may be limited by the Bankruptcy and Equity Exception and (z) in full force and effect. As of the date of this
Agreement, no event has occurred which, with or without notice, lapse of time or both, would or would reasonably be expected to constitute a default or breach on the part of Parent or Merger Sub or
any other parties thereto under the Equity Funding
Letters or the Debt Commitment Letter. As of the date of this Agreement, Parent does not have any reason to believe that it or any of the other parties to the Financing Letters will be unable to
satisfy on a timely basis any term or condition of the Financing Letters required to be satisfied by it, that the conditions thereof will not otherwise be satisfied or that the full amount of the
Financing will not be available on the Closing Date. The only conditions precedent or other contingencies (including market "flex" provisions) related to the obligations of the Guarantor to fund the
full amount of the Equity Financing and the lenders to fund the full amount of the Debt Financing are those expressly set forth in the Equity Funding Letters and the Debt Commitment Letter,
respectively. As of the date of this Agreement, there are no side letters or other Contracts or arrangements to which Parent or any of its Affiliates are a party related to the Financing other than as
expressly contained in the Financing Letters and delivered to the Company prior to the date hereof (other than any customary engagement letter or any side letter solely with respect to the payment of
de minimis fees, credits, and/or appointment of roles and/or titles, in each case that does not impact the conditionality or amount of the Financing and would not reasonably be expected to prevent,
impair or delay the consummation of the Financing).
4.6
Limited Guarantees.
Concurrently with the execution of this Agreement, Parent has delivered to
the Company a duly executed limited guarantee of each Guarantor, dated as of the date
of this Agreement, in favor of the Company in respect of Parent's obligation to pay the Parent Termination Fee and certain of Parent's and Merger Sub's other payment or reimbursement obligations
arising under, or in connection with, this Agreement and the Transactions, up to the aggregate amount set forth therein (the "
Limited Guarantee
"),
subject to the terms and conditions set forth therein. Each Limited Guarantee is in full force and effect and is a legal, valid and binding obligation of the Guarantor party thereto, enforceable
against such Guarantor in accordance with its terms, subject to the Bankruptcy and Equity Exception and no event has occurred which, with or without notice, lapse of time or both, would or would
reasonably be expected to constitute a default or breach on the part of the Guarantor under such Limited Guarantee.
4.7
Solvency.
None of Parent, Merger Sub or the Guarantor is entering into this Agreement with the
actual intent to hinder, delay or defraud either present or future creditors
of the Company or any
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of
its Subsidiaries. Assuming (a) satisfaction or waiver of the conditions to Parent's and Merger Sub's obligation to consummate the Merger, (b) any estimates, projections or forecasts
prepared by the Company or its Representatives and made available to Parent, Merger Sub or their Representatives prior to the date hereof have been prepared in good faith based upon reasonable
assumptions (it being understood that the Company is not making any representation and warranty with respect thereto as a result of such assumption in this clause (b)) and (c) the
accuracy of the representations and warranties set forth in
Article III
hereof (for such purposes, such representations and warranties shall be
true and
correct in all material respects without giving any effect to any "knowledge", "materiality" or "Company Material Adverse Effect" qualification or exception), including the representations and
warranties set forth in
Section 3.5
, and after giving effect to the Transactions, any alternative financing incurred in accordance with
Section 6.11
and the payment of the aggregate Merger Consideration, any other repayment or refinancing of debt contemplated in this Agreement or
the Financing Letters, payment of all amounts required to be paid in connection with the consummation of the Transactions, and payment of all related fees and expenses of Parent and Merger Sub, each
of Parent and the Surviving Corporation will be Solvent as of the Effective Time and immediately after the consummation of the Transactions and in the event either the USR ABL Borrower (as defined in
the Debt Commitment Letter) or CAR ABL Borrower (as defined in the Debt Commitment Letter) have borrowed funds under the Debt Financing on the Closing Date to finance the Transactions, each of such
CAR ABL Borrower and such USR ABL Borrower will be Solvent as of the Effective Time and immediately after the consummation of the Transactions. For the purposes of this Agreement, the term
"
Solvent
", when used with respect to any Person, means that, as of any date of determination, (a) the fair value of the assets of such Person and
its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of such Person and its Subsidiaries on a
consolidated basis, (b) the present fair saleable value of the property of such Person and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay
the probable liability of such Person and its Subsidiaries on a consolidated basis on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured, (c) such Person and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date and (d) such Person and its Subsidiaries on a consolidated basis will be able to pay
their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured.
4.8
Section 203 of the DGCL.
As of the date of this Agreement, neither the Parent nor the Merger
Sub, nor any of their respective "Affiliates" or "Associates" (as those terms are defined in
Section 203 of the DGCL) (a) directly or indirectly "owns" or, within the three (3) years prior to the date hereof, has "owned," beneficially or otherwise, any shares of Company
Common Stock, any other securities of the Company or any options, warrants or other rights to acquire shares of Company Common Stock or other securities of the Company, or any other economic interest
(through derivative securities or otherwise) in the Company, or (b) has been an "Affiliate" or "Associate" (as those terms are defined in Section 203 of the DGCL) of the Company at any
time during the three (3) years prior to the date hereof. Assuming the accuracy of the Company's representations and warranties set forth in
Section 3.2(a)
and the second sentence of
Section 3.4(a)
, the restrictions contained in
Section 203 of the DGCL do not apply to the execution, delivery or performance of this Agreement or the consummation of the Merger or the other Transactions.
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4.9
Litigation.
As of the date of this Agreement, there is no action, suit,
proceeding, claim, arbitration or investigation pending and of which the Parent has been notified or,
to the Parent's knowledge, threatened against the Parent or any of its Subsidiaries, in each case that, individually or in the aggregate, is reasonably likely to have a Parent Material Adverse Effect.
As of the date of this Agreement, there are no judgments, orders or decrees outstanding against the Parent or any of its Subsidiaries that, individually or in the aggregate, is reasonably likely to
have a Parent Material Adverse Effect.
4.10
Other Agreements or Understandings.
There are no contracts, agreements or other arrangements or
understandings (whether oral or written) or commitments to enter into contracts, agreements or other
arrangements or understandings (whether oral or written) (a) between Parent, Merger Sub, the Guarantor or any of their Affiliates, on the one hand, and any member of the Company's management or
the Company Board, on the other hand or (b) pursuant to which any stockholder of the Company would be entitled to receive consideration of a different amount or nature than the Merger
Consideration or pursuant to which any stockholder of the Company agrees to vote to adopt this Agreement or approve the Merger or agrees to vote against any Superior Proposal.
4.11
Brokers.
No agent, broker, investment banker, financial advisor or other firm or Person is or
shall be entitled, as a result of any action or agreement of the Parent or
any of its Affiliates, to any broker's, finder's, financial advisor's or other similar fee or commission in connection with any of the Transactions for which the Company or any of its Subsidiaries
would have any obligations or liabilities prior to the Effective Time.
4.12
Independent Investigation.
Each of the Parent and the Merger Sub acknowledges that it has
conducted to its satisfaction its own independent investigation and analysis of the business,
operations, assets, liabilities, results of operations, condition (financial or otherwise) and prospects of the Company and the Company's Subsidiaries and that each of the Parent and the Merger Sub
and its Representatives have received access to certain books and records, facilities, equipment, contracts and other assets of the Company and the Company's Subsidiaries that it and its
Representatives have requested to review for such purpose, and that it and its Representatives have had a full opportunity to meet with the management of the Company and the Company's Subsidiaries and
to discuss the business, operations, assets, liabilities, results of operations, condition (financial or otherwise) and prospects of the Company and the Company's Subsidiaries.
4.13
No Other Company Representations or Warranties.
The Parent and the Merger Sub hereby acknowledge
and agree that, except for the representations and warranties set forth in
Article III
(in each case as qualified and limited by the Company Disclosure Schedule) and in any certificate delivered
pursuant to this
Agreement, none of the Company or any of its Subsidiaries, or any of its or their respective Affiliates, stockholders or Representatives, or any other Person acting on behalf of the Company, has made
or is making any express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their respective business or operations, including with respect to any
information provided or made available to the Parent, the Merger Sub or any of their respective Affiliates, stockholders or Representatives, or any other Person acting on behalf of the Parent, or,
except as otherwise expressly set forth in this Agreement or any certificate delivered pursuant to this Agreement, had or has any duty or obligation to provide any information to the Parent, the
Merger Sub or any of their respective Affiliates, stockholders or Representatives, or any other Person acting on behalf of Parent, in connection with this Agreement, the transactions contemplated
hereby or otherwise.
4.14
Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans.
In connection with the due diligence investigation of the Company by the Parent and the Merger Sub and their respective Affiliates, stockholders and
Representatives, the Parent and the Merger Sub and their respective Affiliates, stockholders and Representatives have received and may continue to receive after the date hereof (including pursuant to
Section 6.3(b)
) from the Company and
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its
Affiliates, stockholders and Representatives certain estimates, projections, forecasts and other forward-looking information, as well as certain business plan information, regarding the Company
and its business and operations. The Parent and the Merger Sub hereby acknowledge that there are uncertainties inherent in attempting to make such estimates, projections, forecasts and other
forward-looking statements, as well as in such business plans, with which the Parent and the Merger Sub are familiar, that the Parent and the Merger Sub are taking responsibility for making their own
evaluation of the adequacy and accuracy of all estimates, projections, forecasts and other forward-looking information, as well as such business plans, so furnished to them (including the
reasonableness of the assumptions underlying such estimates, projections, forecasts, forward-looking information or business plans), and that the Parent and the Merger Sub will have no claim against
the Company or any of its Subsidiaries, or any of their respective Affiliates, stockholders or Representatives, or any other Person acting on behalf of the Company, with respect thereto. Accordingly,
the Parent and the Merger Sub hereby acknowledge and agree that none of the Company or any of its Subsidiaries, nor any of their respective Affiliates, stockholders or Representatives, nor any other
Person acting on behalf of the Company, has made or is making any express or implied representation or warranty with respect to such estimates, projections, forecasts, forward-looking statements or
business plans (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, forward-looking statements or business plans), in each case, other than the express
representations and warranties set forth in this Agreement or any certificate delivered in connection with this Agreement.
ARTICLE V
CONDUCT OF BUSINESS
5.1
Covenants of the Company.
Except as otherwise expressly contemplated or required by this Agreement, as
required by applicable law or by any Company Material Contract in effect on the date
hereof and made available to the Parent, as set forth in
Section 5.1
of the Company Disclosure Schedule, or with the Parent's prior written
consent (which shall not be unreasonably withheld, conditioned or delayed), during the Pre-Closing Period, the Company shall, and shall cause each of its Subsidiaries to, use commercially reasonable
efforts to act and carry on its business in the Ordinary Course of Business, to preserve intact its business organization (except for actions taken by the Company upon the direction of Parent in
accordance with
Section 6.15
) and to preserve satisfactory business relationships with its Significant Suppliers and material customers,
licensors, licensees, lessors, Governmental Entities, creditors and others having material business dealings with the Company. Without limiting the generality of the foregoing, except as otherwise
expressly contemplated or required by this Agreement, as required by applicable law, as set forth in
Section 5.1
of the Company Disclosure
Schedule, or with the Parent's prior written consent (which shall not be unreasonably withheld, conditioned or delayed;
provided
,
however
, that the Parent
may withhold its consent in its sole discretion for matters contemplated by clauses (a), (b), (d), (f), (g),
(h) and (i) below and paragraph (q) of as it relates to paragraphs (a), (b), (d), (f), (g), (h) and (i) below), during the Pre-Closing Period the Company
shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, do any of the following:
(a) (i)
declare, set aside or pay any dividends on, or make any other distributions (whether in cash, securities or other property) in respect of, any of its capital stock
(other than dividends and distributions by a direct or indirect wholly owned Subsidiary of the Company to its parent), (ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or any of its other securities; or (iii) purchase, redeem or
otherwise acquire any shares of its capital stock or any other of its securities or any rights, warrants or options to acquire any such shares or other securities, except, in the case of this
clause (iii), for (A) the acquisition or redemption of shares of capital stock of wholly owned Subsidiaries of the Company or (B) the acquisition of Company Common Stock
(1) from holders of Company Stock Options in full or partial payment of the
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exercise
price, in accordance with the terms thereof as in effect on the date hereof, (2) from holders of Company Stock Options, Company RSUs or Company Performance Share Awards outstanding as
of the date hereof in full or partial payment of any applicable Taxes payable by such holder upon exercise or vesting thereof, as applicable, to the extent required or permitted under the terms
thereof as in effect on the date hereof, (3) from holders of Company July 2017 RSUs granted after the date of this Agreement in accordance with the terms and limitations set forth in
Section 5.1(b)
of the Company Disclosure Schedule, in full or partial payment of any applicable Taxes payable by such holder upon vesting
thereof, to the extent required or permitted under the terms thereof as disclosed to Parent prior
to the date hereof, or (4) from former employees, directors and consultants in accordance with agreements in effect as of the date hereof and made available to Parent prior to the date hereof
providing for the repurchase of shares at their original issuance price or forfeiture of shares for no consideration, in each case under this clause (3) in connection with any termination of
services to the Company or any of its Subsidiaries, except as may be required by the terms of this Agreement;
(b) issue,
deliver, sell, grant, pledge or otherwise dispose of or subject to any Lien any shares of its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible or exchangeable securities, in each case other than
(i) the issuance of shares of capital stock of wholly owned Subsidiaries of the Company in connection with capital contributions (which Subsidiaries shall continue to be wholly owned
Subsidiaries of the Company after completion of such capital contributions) or (ii) the issuance of shares of Company Common Stock (A) upon the exercise of Company Stock Options
outstanding on the date of this Agreement in accordance with the terms thereof as in effect on the date hereof, (B) upon settlement of (1) Company RSUs or Company Performance Share
Awards outstanding on the date of this Agreement in accordance with the terms thereof as in effect on the date hereof or (2) Company July 2017 RSUs granted after the date of this Agreement in
accordance with the terms and limitations set forth in
Section 5.1(b)
of the Company Disclosure Schedule or (C) pursuant to the Company
ESPP in accordance with the terms thereof as in effect on the date hereof (to the extent permitted under
Section 2.3(g)
);
(c) amend
the Company's or any of its Subsidiaries' certificate of incorporation, bylaws or other comparable charter or organizational documents (other than immaterial
amendments to the certificate of incorporation and bylaws (or comparable organizational documents) of the Company's Subsidiaries), other than amendments required in connection with capital
contributions to foreign Subsidiaries;
(d) acquire
(i) by merging or consolidating with, or by purchasing all or a substantial portion of the assets or any stock of, or by any other manner, any business or
any corporation, partnership, joint venture, limited liability company, association or other business organization or division thereof or (ii) any assets rights or properties, except purchases
of inventory and raw materials in the Ordinary Course of Business;
(e) sell,
lease, license, pledge, mortgage or otherwise dispose of or subject to any Lien (other than Liens arising in connection with immaterial security deposit or cash
collateral arrangements) any properties, rights or assets of the Company or of any of its Subsidiaries other than sales of inventory and disposition of obsolete equipment in the Ordinary Course of
Business;
(f) (i)
adopt any stockholder rights plan; (ii) adopt a plan of complete or partial liquidation, dissolution, recapitalization, restructuring or other reorganization
or (iii) subject to
Section 6.1
and
Section 8.1(f)
, merge or consolidate with any
Person;
(g) (i)
incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person (other than (A) to the Company or one of its wholly-owned
Subsidiaries,
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(B) letters
of credit, bank guarantees, security or performance bonds or similar credit support instruments, overdraft facilities, supplier financing programs or cash management programs or
other similar arrangements, in each case issued, made or entered into in the Ordinary Course of Business (other than guaranties of Subsidiaries' obligations under any lease by the Company or its other
Subsidiaries) and (C) indebtedness incurred under the Credit Facility in the Ordinary Course of Business in an aggregate amount (other than accrued but unpaid interest) not to exceed
$25,000,000 outstanding at any time), (ii) issue, sell or amend any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities of another Person, enter into any "keep well" or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, (iii) make any loans, advances (other than routine advances to employees of the Company and its Subsidiaries in the Ordinary Course of Business in an
amount not to exceed $40,000 per employee or $800,000 in the aggregate) or capital contributions to, or investment in, any other Person for business expenses, other than the Company or any of its
direct or indirect wholly owned Subsidiaries;
provided
,
however
, that the Company may continue to make
investments in highly-liquid, short-term interest bearing investments in accordance with its investment policy as in effect on the date hereof (a copy of which has been made available to Parent), or
(iv) enter into any hedging agreement or other financial agreement or arrangement designed to protect the Company or its Subsidiaries against fluctuations in exchange rates;
(h) make
(A)
any capital expenditures or other expenditures with respect to property, plant or equipment, other than
to the extent included in and in accordance with (both as to quantum and the planned timing with respect thereto) the Company's budget for capital expenditures set forth on
Section 5.1(h)(A)
of the
Company Disclosure Schedule or
(B)
any payments in respect of
fees (excluding for avoidance of doubt, any payments pursuant to usual and customary indemnities entered into between the Company and any such Person) to any of the Financial Advisors or the legal or
accounting service providers retained by the Company or any of its Subsidiaries in connection with this Agreement or the Transactions in excess of the fees set forth in
Section 5.1(h)(B)
of the
Company Disclosure Schedule;
(i) make
any material changes in accounting methods, principles or practices, except insofar as may be required by a change in GAAP;
(j) (i)
establish, adopt, enter into, terminate or amend any Company Employee Plan (including any plan, agreement or arrangement that would be a Company Employee Plan if in
effect on the date hereof), or any other employment, severance or similar agreement or compensation or benefit plan or arrangement, for the benefit or welfare of any current or former independent
contractor, employee, director, manager or officer (except in the Ordinary Course of Business and only if such arrangement is terminable on 30 days' or less notice without any penalty,
termination payment or other liability (other than for accrued but unpaid compensation through the termination date and subject to
Section 6.8(c)
)) to the Company or any of its Subsidiaries or, for
employment outside the United States, only to the extent required by
applicable law, or any collective bargaining or similar agreement (unless required to do so by applicable law), (ii) increase in any respect the compensation, benefits or severance or
termination pay of, or pay any bonus to, any current or former independent contractor, employee, director, manager or officer (except for (A) annual increases of base salaries of employees at
grade 40 or below in the Ordinary Course of Business not to exceed two percent (2%) of the employee's base salary prior to such increase or $2,500,000 in aggregate salary increases, (B) wage
increases for hourly employees earning less than $25 per hour or (C) payment of cash bonuses in the Ordinary Course of Business consistent with the existing terms of arrangements in effect as
of the date hereof and disclosed to the Parent prior to the date hereof), it being understood (for the avoidance of doubt) that the Company and its Subsidiaries may (x) hire new employees (to
the extent not prohibited under clause (iv) below) and
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promote
employees to grade 40 or below, in each case, in the Ordinary Course of Business and (y) provide compensation consistent with compensation paid in the Ordinary Course of Business for
such hired or promoted employees (provided that the aggregate increase in compensation payable to such promoted employees (assuming any bonuses are paid at target) does not exceed $2,500,000 in the
aggregate), (iii) accelerate the payment, funding, right to payment or vesting of any compensation or benefits, including, without limitation, the Company July 2017 RSUs and any outstanding
options, restricted stock, restricted stock units, or performance units, other than as expressly contemplated by
Section 2.3
of this Agreement,
(iv) hire or terminate (other than for "cause") any employee or officer of the Company or its Subsidiaries with annual compensation (assuming any bonuses are paid at target) in excess of
$200,000 (except that the Company may hire a replacement of an employee or officer of the Company or its Subsidiaries that is terminated or resigns who has annual compensation (assuming any bonuses
are paid at target) that is less than $450,000, which replacement employee or officer shall not have annual compensation (assuming any bonuses are paid at target) that is more than two percent (2%)
greater than the annual compensation (assuming any bonuses are paid at target) paid to the former employee or officer whom he or she is replacing), (v) grant any stock options, restricted stock
units, stock appreciation rights, stock based or stock related awards, performance units, restricted stock or other equity-based awards, or (vi) implement or announce any employee layoffs of
500 or more associates or location closings;
(k) (i)
enter into any Contract that if in effect on the date hereof, would have been a Company Material Contract, (ii) terminate any Company Material Contract,
except as a result of a material breach or a material default by the counterparty thereto or as a result of the expiration of such Company Material Contract in accordance with its terms as in effect
on the date of this Agreement, (iii) amend, waive or modify in a manner that is materially adverse to the Company and its Subsidiaries, taken as a whole, any Company Material Contract or
(iv) enter into any Company Material Contract that contains a change in control or similar provision that pursuant to its terms would require a payment to the other party or parties thereto in
connection with the transactions contemplated hereby or any subsequent change in control of the Company or any of its Subsidiaries;
(l) except
as permitted by and in accordance with
Section 6.13
, settle any action, suit, proceeding, claim,
arbitration or investigation, other than the settlement of any action, suit, proceeding, claim, arbitration or investigation (but not a criminal proceeding) that requires payments by the Company (net
of insurance proceeds received and indemnity, contribution, or similar payments actually received) in an amount not to exceed, individually or in the aggregate, $5,000,000, and in each case does not
involve any admission of wrongdoing or injunctive or other equitable relief;
(m) enter
into any new line of business;
(n) (i)
change or revoke any material Tax election or make any material tax election inconsistent with past practice, (ii) file any material amended Tax Return with
respect to any Tax, (iii) surrender any right to a material refund of Taxes, (iv) change any material method of accounting for Tax purposes, except as required by law or GAAP, or
(v) settle or compromise any material Tax claim or assessment;
(o) engage
in any transaction or enter into any Contract that would require disclosure under Item 404 of Regulation S-K promulgated under the Exchange Act;
(p) other
than in the Ordinary Course of Business, materially reduce the amount of insurance coverage under existing insurance policies or fail to renew or replace any
material existing insurance policies; or
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(q) authorize
any of, or commit or agree, in writing or otherwise, to take any of, the foregoing actions.
5.2
Conduct of Business by the Parent and the Merger Sub Pending the Merger.
Except as otherwise
expressly contemplated or permitted by this Agreement or as required by applicable law, during the Pre-Closing Period, (a) neither the
Parent nor the Merger Sub shall, directly or indirectly, without the prior consent of the Company, take or cause to be taken any action that would be reasonably expected to materially delay, impair or
prevent the consummation of the Transactions, or enter into any agreement to take any such action and (b) the Merger Sub shall not engage in any activity of any nature except for activities
related to or in furtherance of the Merger and the other Transactions.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1
No Solicitation.
(a)
No Solicitation or Negotiation.
Except as set forth in this
Section 6.1
, until the Specified Time, the Company and
its Subsidiaries shall not, and the Company shall cause its and its Subsidiaries' officers
and directors not to, and shall use reasonable efforts to cause its and its Subsidiaries' other Representatives not to, directly or indirectly:
(i) solicit,
initiate, knowingly facilitate or knowingly encourage (including by way of providing non-public information) any inquiries or the making of any proposal or
offer that constitutes, or that would reasonably be expected to lead to, any Acquisition Proposal;
(ii) amend
or grant a waiver or release, or publicly authorize or agree to enter into an amendment, waiver or release, under (A) any standstill or similar agreement
with respect to any Company Common Stock (other than for Parent or its Affiliate) or (B) any applicable anti-takeover law or anti-takeover provision in the certificate of incorporation or
bylaws (other than for Parent or its Affiliates), except, in each case, under the circumstances permitted under this
Section 6.1(a)
; or
(iii) other
than informing Persons of the existence of the provisions of this
Section 6.1
, enter into, continue or
otherwise participate in any discussions or negotiations regarding, or furnish or provide access to any non-public information to any Person who has made or would reasonably be expected to
make any Acquisition Proposal or otherwise for the purpose of encouraging or facilitating, any Acquisition Proposal.
Notwithstanding
the foregoing or anything to the contrary set forth in this Agreement, subject to compliance with
Section 6.1(c)
, at any time
prior to receipt of the Company Stockholder Approval the Company may, if the Company Board determines that failure to take such action would be inconsistent with its fiduciary duties,
(A) furnish non-public information with respect to the Company and its Subsidiaries to any Qualified Person (and the Representatives of such Qualified Person), pursuant to a confidentiality
agreement not materially less restrictive in any substantive manner, including with respect to standstill provisions, than the Confidentiality Agreement
(
provided
that such confidentiality agreement shall not in any event include an obligation of the Company to reimburse such Person's expenses);
provided
,
that the Company shall substantially concurrently (and in any event within twenty-four (24) hours) make available to Parent and
Parent's Representatives any material non-public information concerning the Company and its Subsidiaries that is provided to (or given access to) such Qualified Person and was not previously provided
or made available to Parent, (B) engage in discussions or negotiations (including solicitation of revised Acquisition Proposals) with any Qualified Person (and the Representatives of such
Qualified Person) regarding any Acquisition Proposal or (C) amend, or grant a waiver or release under, any standstill or similar agreement with respect to any Company Common Stock
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with
any Qualified Person solely to allow for an Acquisition Proposal to be made in a confidential manner to the Company or the Company Board.
(b)
No Change in Recommendation or Alternative Acquisition Agreement.
Prior to the Specified Time:
(i) the
Company Board shall not, except as set forth in this
Section 6.1
, (1) withhold, withdraw or modify, or
publicly propose to withhold, withdraw or modify, in each case in a manner adverse to the Parent, its recommendation to the Company's stockholders that the Company's stockholders adopt this Agreement
at the Company Stockholders Meeting (the "
Recommendation
"), (2) fail to include the Recommendation in the Proxy Statement, (3) fail to
publicly reaffirm its recommendation within five Business Days of a request therefor in writing by Parent following the public disclosure of an Acquisition Proposal with any Person other than Parent
and Merger Sub (which request may only be made once with respect to such Acquisition Proposal or any material modification to such Acquisition Proposal), (4) fail to recommend, in a
Solicitation/Recommendation Statement on Schedule 14D-9 against any Acquisition Proposal that is a tender offer or exchange offer subject to Regulation 14D promulgated under the Exchange
Act within ten Business Days after the commencement thereof or
(5) publicly announce an intention or resolution to effect any of the foregoing (each, a "
Company Board Recommendation Change
");
(ii) the
Company shall not, and shall cause each of its Subsidiaries not to, enter into, or publicly authorize or agree to enter into, any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement (an "
Alternative Acquisition Agreement
") relating to
any Acquisition Proposal (other than a confidentiality agreement referred to in
Section 6.1(a)
entered into in the circumstances referred to in
Section 6.1(a)
); and
(iii) the
Company Board shall not, except as set forth in this
Section 6.1
, adopt, approve, endorse or recommend, or
publicly propose to adopt, approve, endorse or recommend, any Acquisition Proposal.
Notwithstanding
the foregoing or anything to the contrary set forth in this Agreement (including the provisions of this
Section 6.1
), at any time
prior to receipt of the Company Stockholder Approval, the Company Board may (A) in response to a Superior Proposal that did not result from a material breach of this
Section 6.1
, either
(1) effect a Company Board Recommendation Change or (2) cause the Company to terminate this Agreement pursuant
to and in accordance with
Section 8.1(f)
(provided that (x) concurrently with or prior to such termination, the Company pays to Parent the
Company Termination Fee as required by
Section 8.3(b)(ii)
and, immediately after the termination of this Agreement, the Company enters into a
definitive agreement providing for such Superior Proposal) or (B) in response to an Intervening Event, effect a Company Board Recommendation Change contemplated by clauses (1) or
(2) of the definition thereof (or clause (4), solely to the extent related to clauses (1) or (2)) if, and only if, (in the case of either clause (A) or (B)): (i) the
Company Board shall have determined in good faith (after consultation with outside counsel) that the failure to effect a Company Board Recommendation Change would be reasonably likely to be
inconsistent with its fiduciary duties under applicable law; (ii) the Company has notified the Parent in writing that it intends to effect a Company Board Recommendation Change or termination
of this Agreement pursuant to
Section 8.1(f)
, describing in reasonable detail the reasons for such intended Company Board Recommendation Change
or termination (a "
Recommendation Change Notice
") (it being understood that the Recommendation Change Notice shall not, in and of itself, constitute a
Company Board Recommendation Change for purposes of this Agreement so long as such notice clearly states that it is not a Company Board Recommendation Change and that the Company Board has not
otherwise effected a Company Board Recommendation Change); (iii) if requested by the Parent, the Company shall
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have
made itself and its Subsidiaries and its and their respective Representatives available and the Company shall have and shall have caused its Subsidiaries and its and their respective
Representatives to discuss and negotiate with the Parent's Representatives any proposed modifications to the terms and conditions of this Agreement (in a manner that would obviate the need to effect
such Company Board Recommendation Change) during the four (4) Business Day period following delivery by the Company to the Parent of such Recommendation Change Notice (it being understood that
if there are any material amendments, revisions or changes to the terms of any such Superior Proposal (including any revision to the amount, form or mix of consideration the Company's stockholders
would receive as a result of the Superior Proposal, whether or not material), the Company shall notify the Parent of each such amendment, revision or change in compliance with
Section 6.1(c)
and
the applicable four (4) Business Day period described above shall be extended for until at least two
(2) Business Days from the date of such notice) (any such notice period, the "
Notice Period
"); and (iv) at the end of such Notice Period,
the Company Board shall have determined in good faith (after consultation with outside legal counsel), after considering any modified terms and conditions proposed by or on behalf of the Parent, that
the failure to effect a Company Board Recommendation Change would be reasonably likely to be inconsistent with its fiduciary duties under applicable law and, with respect to a Company Board
Recommendation Change in response to a Superior Proposal, the Company Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such initial or
revised (as applicable) Superior Proposal continues to constitute a Superior Proposal.
(c)
Notices to the Parent.
The Company shall promptly (and in any event within one (1) Business Day)
advise the Parent orally and in writing of the Company's or any of its Subsidiaries' or any of their respective Representatives' receipt of any Acquisition Proposal or request for material non-public
information or access to the Company or its Representatives by any third party that the Company reasonably believes is related to an Acquisition Proposal or potential Acquisition Proposal, including
the material terms and conditions of any such request for information or access or Acquisition Proposal and the identity of the Person making any such Acquisition Proposal. Thereafter, the Company
shall keep Parent informed on a reasonably prompt basis of any material developments with respect to any such request for information or access or Acquisition Proposal, including with respect to the
terms and status thereof and whether any such Acquisition Proposal has been withdrawn or rejected and shall provide Parent written notice of any such withdrawal or rejection and copies of any written
request for information or access or Acquisition Proposal within 48 hours. Neither the Company nor any of its Subsidiaries shall enter into any confidentiality agreement subsequent to the date
hereof which prohibits the Company from providing to the Parent the information or access required to be provided to the Parent pursuant to this
Section 6.1(c)
.
(d)
Certain Permitted Disclosure.
Notwithstanding anything to the contrary in this Agreement, nothing contained
in this Agreement shall prohibit the Company or the Company Board from (i) taking and disclosing to its stockholders a position with respect to a tender offer contemplated by Rule 14d-9
or Rule 14e-2 promulgated under the Exchange Act, or from issuing a "stop, look and listen" statement pending disclosure of its position thereunder (none of which, in and of itself, shall be
deemed to
constitute a Company Board Recommendation Change), or (ii) making any disclosure to the Company's stockholders if, in the good faith judgment of the Company Board, after consultation with
outside counsel, failure to so disclose would be reasonably likely to be inconsistent with its fiduciary duties under applicable law; provided that this
Section 6.1(d)
shall not permit the Company
Board to make a Company Board Recommendation Change except to the extent expressly permitted by, and in accordance with,
Section 6.1(b)
. For the avoidance of doubt, this
Section 6.1(d)
shall not be deemed to modify the definition of
"Company Board Recommendation Change," and if any public disclosure in accordance with this
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Section 6.1(d)
has the effect of a Company Board Recommendation Change, Parent shall have the right to terminate this Agreement to the extent set forth
in
Section 8.1(e)
.
(e)
Cessation of Ongoing Discussions.
The Company shall, and shall cause its Subsidiaries to, and shall direct
their respective Representatives to, except with respect to the Parent and the Merger Sub, (i) cease immediately all solicitations, discussions and negotiations that commenced prior to the date
of this Agreement regarding any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (ii) request the prompt return or destruction of all confidential
or non-public information or access previously furnished to any Person within the last twelve (12) months for the purpose of evaluating a possible Acquisition Proposal and
(iii) terminate access to any physical or electronic data rooms relating to a possible Acquisition Proposal;
provided, however
, that the
foregoing shall not in any way limit or modify any of the Company's rights under the other provisions of this
Section 6.1
.
(f)
Representatives.
Notwithstanding anything to the contrary in this
Section 6.1
, the Company agrees that in the event
any Subsidiary or Representative of the Company takes any action which, if taken by the Company, would constitute a
breach by the Company of this
Section 6.1
, then the Company shall be deemed to have so breached this
Section 6.1
.
6.2
Nasdaq Listing.
Until the Effective Time, the Company shall use its commercially reasonable
efforts to continue the listing of the Company Common Stock on the Nasdaq Stock
Market.
6.3
Confidentiality; Access to Information.
(a) Except
as expressly modified herein, the Confidentiality Agreement shall continue in full force and effect in accordance with its terms.
(b) During
the Pre-Closing Period, notwithstanding anything to the contrary in the Confidentiality Agreement, the Company shall (and shall cause each of its Subsidiaries to)
afford to the Parent and the Parent's Representatives (including any Financing Sources), reasonable access, upon reasonable notice, during normal business hours and in a manner that does not
unreasonably disrupt or interfere with business operations, to all of its properties, books, Contracts and records as the Parent shall reasonably request, and, during such period, the Company shall
(and shall cause each of its Subsidiaries to) promptly make available to the Parent (i) a copy of each report, schedule, registration statement and other document filed or received by it during
such period pursuant to the requirements of federal or state securities laws (without limitation of the Company's obligations set forth in
Section 6.5
and
6.14
) and (ii) all other information concerning its business, properties
and assets as the Parent may reasonably request;
provided
,
however
, that the Company shall not be
required to permit any inspection or other access, or to disclose any information, (A) to the extent related to an Acquisition Proposal, Company Board Recommendation Change or Recommendation
Change Notice (except as otherwise required by the terms of this Agreement) or (B) that in the reasonable judgment of the Company (after consultation with outside legal counsel) would:
(1) result in the disclosure of any trade secrets of any third party, (2) violate any legal requirement or Contract or any obligation of the Company with respect to confidentiality or
privacy, including under any privacy policy, or (3) jeopardize protections afforded the Company under the attorney-client privilege or the attorney work product doctrine (provided that in
connection with this clause (B), the Company shall use commercially reasonable efforts to make appropriate substitute arrangements (including a joint defense agreement) to permit reasonable
disclosure, to the extent permitted by applicable law and practicable under the circumstances). Any such information shall be subject to the Confidentiality Agreement. Prior to the Closing, neither
the Parent nor the Merger Sub shall (and each shall cause its Affiliates and Representatives not to) contact or communicate with any of the employees, customers, licensors or suppliers of the Company
or any of its Subsidiaries, without the prior written consent of the Company.
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6.4
Legal Conditions to the Merger.
(a) Subject
to the terms hereof, including
Section 6.1
,
Section 6.4(b)
,
Section 6.4(c)
and
Section 6.4(d)
, each party hereto shall each use its reasonable best efforts to:
(i) take,
or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties hereto in doing, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated hereby as promptly as practicable;
(ii) as
promptly as practicable, obtain any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained by such party (or any of its
Subsidiaries) from any Governmental
Entity or third party in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby;
provided
,
however
, that in no event shall the Parent or the Company or any of their respective
Subsidiaries be required to pay any monies (except for filings or similar fees) or (except, in the case of the Parent or its Subsidiaries, as contemplated by
Section 6.4(d)
) agree to any material
undertaking in connection with any of the foregoing;
(iii) as
promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Merger required
under (A) the Exchange Act, and any other applicable federal or state securities laws, (B) the HSR Act, any other applicable Antitrust Laws and any related governmental request
thereunder and (C) any other applicable law;
(iv) contest
and resist any action, including any administrative or judicial action, and seek to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent) (a "
Restrictive Order
") which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger or the other Transactions; and
(v) execute
or deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.
The
parties hereto shall cooperate with each other in connection with the making of all such filings and submissions contemplated by the foregoing clauses (ii) or (iii), including providing
copies of all such documents to the non-filing Person and its advisors prior to filing (to the extent permitted under applicable law) and, if requested, accepting reasonable additions, deletions or
changes suggested in connection therewith. Each party hereto shall use its reasonable best efforts to furnish to each other all information required for any application or other filing to be made
pursuant to any applicable law in connection with the Transactions. For the avoidance of doubt, nothing contained in this
Section 6.4(a)
shall
limit any obligation under any other provision in this
Section 6.4
.
(b) Without
limiting the generality of anything contained in this
Section 6.4
, each of the Parent and the Company
shall (i) as soon as reasonably practicable and in any event within ten (10) Business Days following the date of this Agreement, if required, make an appropriate filing of a Notification
and Report Form pursuant to the HSR Act (including seeking early termination of the waiting period under the HSR Act) with respect to the Transactions and (ii) promptly make all filings as may
be required under any other applicable Antitrust Laws with respect to the Transactions (to the extent required). None of the Parent, the Merger Sub or the Company shall commit to or agree with any
Governmental Entity to stay, toll or extend any applicable waiting period under the HSR Act or other applicable Antitrust Laws or enter into a timing agreement with any Governmental Entity, without
the prior written consent of the other parties.
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(c) Subject
to the terms hereof, and without limiting the Parent's obligations under
Section 6.4(d)
, the parties
hereto shall, and shall cause each of their respective Subsidiaries to, cooperate and use their respective reasonable best efforts to obtain any government clearances or approvals required for the
Closing under any Antitrust Law, to respond to any government requests for information under any Antitrust Law, to cause any waiting periods under any applicable Antitrust Laws to expire or be
terminated, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any Restrictive Order. The parties
hereto shall consult and cooperate with one another, and consider in good faith the views of one another, in connection with, and provide to the other parties in advance, any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to any Antitrust Law,
provided
,
however
, that materials provided according to this
Section 6.4(c)
or
Section 6.4(a)
may be redacted: (i) to remove references
concerning the valuation of the Company and its Subsidiaries; (ii) as necessary to comply with applicable laws; and (iii) as necessary to address reasonable attorney-client or other
privilege concerns. To the extent permitted by law or Governmental Entities reviewing the Transactions, the parties will provide each other the opportunity to participate in meetings and other
substantive conversations with any such Governmental Entities.
(d) Notwithstanding
anything to the contrary in this Agreement, the Parent shall propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and
effect), by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of such assets or businesses of the Parent or, effective as of the Effective Time, the Surviving
Corporation, or their respective Subsidiaries, or otherwise offer to take or offer to commit to take any action which it is capable of taking and if the offer is accepted, take or commit to take such
action that limits its freedom of action with respect to, or its ability to retain, any of the businesses, services or assets of the Parent, the Surviving Corporation or their respective Subsidiaries,
in order to avoid the entry of, or to effect the dissolution of, any Restrictive Order, which would have the effect of preventing or delaying the Closing beyond the Outside Date, provided that Parent
shall not be obligated to take any such action unless the taking of such action is expressly conditioned upon the consummation of the Merger. For the avoidance of doubt, the Parent shall take any and
all actions necessary in order to ensure that (i) no requirement for a waiver, consent, approval or termination of applicable waiting periods of the Federal Trade Commission, the Antitrust
Division of the Department of Justice, any State Attorney General or other Governmental Entity, (ii) no decree, judgment, injunction, temporary restraining order or any other order in any suit
or proceeding, and (iii) no other matter relating to any Antitrust Law, would preclude consummation of the Merger by the Outside Date.
6.5
Public Disclosure.
Except as may be required by law or stock market regulations, (a) the
press release announcing the execution of this Agreement shall be issued only in such
form as shall be mutually agreed upon by the Company and the Parent, (b) Parent and the Company shall mutually agree upon the form and substance of any (i) widespread internal written
communications (including scripts, Q&A materials, talking points and similar written materials) that may be made by the Company to its officers, employees, independent contractors, consultants,
directors, suppliers, customers, contract counterparties and/or other business relations of the Company or its Subsidiaries with respect to the Merger, this Agreement, the Transactions, the Financing
and/or the Carveout Transactions and/or (ii) any other press release or other public statement with respect to the Merger, this Agreement, the Transactions, the Financing and/or the Carveout
Transactions, in the case of clause (b) that is not limited to or consistent with previous mutually agreed upon public statements and (c) the Company shall use its commercially
reasonable efforts to consult with Parent prior to making any widespread internal oral communications to its employees (it being agreed this clause (c) shall not restrict the ability of members
of the Company's management team from responding to questions from employees,
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whether
in connection with "town hall" meetings or similar formats or otherwise);
provided
,
however
,
that, subject to compliance with
Section 6.1
, these restrictions shall not apply to any Company communications (or the Parent's or the Merger
Sub's response thereto) in connection with an Acquisition Proposal, Company Board Recommendation Change or Recommendation Change Notice.
6.6
Indemnification.
(a) From
and after the Effective Time, each of the Parent and the Surviving Corporation shall, jointly and severally, indemnify, defend and hold harmless each Indemnified
Party against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys' fees and disbursements, incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that the Indemnified Party is or was an officer, director
or manager of the Company or any of its Subsidiaries or, while a director, manager or officer of the Company or any of its Subsidiaries, is or was serving at the request of the Company or one of its
Subsidiaries as an officer, director or manager of another Person, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been
permitted to do so by law. Each Indemnified Party will be entitled to advancement of expenses (including attorneys' fees) incurred in the defense of any such claim, action, suit, proceeding or
investigation from each of the Parent and the Surviving Corporation within 10 Business Days of receipt by the Parent or the Surviving Corporation from the Indemnified Party of a request therefor;
provided
that any Indemnified Party to whom expenses are to be advanced provides prior to any receipt of such advances an undertaking, to the extent
required by the DGCL or other
applicable law, to repay such advances if it is determined by a final determination of a court of competent jurisdiction (which determination is not subject to appeal) that such Indemnified Party is
not entitled to indemnification under applicable law. Without limitation of the foregoing or any other provision of this
Section 6.6
, until the
six-year anniversary of the date on which the Effective Time occurs, the Parent and the Company agree that all rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time and rights to advancement of expenses relating thereto now existing in favor of any Indemnified Party, whether provided in the certificate of incorporation
or bylaws (or comparable organizational documents) of the Company or any of its Subsidiaries or in any indemnification agreement between such Indemnified Party and the Company or any of its
Subsidiaries as in effect on the date hereof, shall survive the Merger and continue in full force and effect, and shall not be amended, repealed or otherwise modified in any manner that would
adversely affect any right thereunder of any such Indemnified Party.
(b) From
the Effective Time through the six-year anniversary of the date on which the Effective Time occurs, the certificate of incorporation and bylaws of the Surviving
Corporation shall contain, and the Parent shall cause the certificate of incorporation and bylaws of the Surviving Corporation to so contain, provisions no less favorable with respect to
indemnification, advancement of expenses and exculpation of present and former directors and officers of the Company and its Subsidiaries in respect of acts or omissions occurring or alleged to have
occurred at or prior to the Effective Time than are set forth in the certificate of incorporation and bylaws of the Company as in effect on the date of this Agreement.
(c) Subject
to the next sentence, the Surviving Corporation shall either (i) maintain, and the Parent shall cause the Surviving Corporation to maintain, at no expense
to the beneficiaries, in effect for six (6) years from the Effective Time the Current D&O Insurance with respect to matters existing or occurring at or prior to the Effective Time (including
the Transactions), so long as the annual premium therefor would not exceed the Maximum Premium, or (ii) purchase a Reporting Tail Endorsement for an annual cost not to exceed the Maximum
Premium and maintain such endorsement in full force and effect for its full term. If the Company's or the Surviving Corporation's existing insurance expires, is terminated or canceled during such
six-year
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period
or exceeds the Maximum Premium, the Surviving Corporation shall obtain, and the Parent shall cause the Surviving Corporation to obtain, as much directors' and officers' liability insurance as
can be obtained for the remainder of such period for an annualized premium not in excess of the Maximum Premium, on terms and conditions no less advantageous to the Indemnified Parties than the
Current D&O Insurance. Notwithstanding anything to the contrary in this Agreement, the Company may, prior to the Effective Time and using a nationally recognized broker selected by Parent in
consultation with the Company (whose consent to using such broker shall not be unreasonably withheld), purchase a
Reporting Tail Endorsement, provided that the Company does not pay more than the Maximum Premium for such Reporting Tail Endorsement. If a Reporting Tail Endorsement has been purchased by the Company
prior to the Effective Time, the Parent shall cause such Reporting Tail Endorsement to be maintained in full force and effect for its full term and cause all obligations thereunder to be honored by
the Surviving Corporation and in such case it will be deemed to satisfy all obligations to obtain insurance pursuant to this
Section 6.6(c)
.
(d) In
the event the Parent or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so that the successors and assigns of the Parent or the Surviving Corporation, as the case may be, shall assume and succeed to the
obligations set forth in this
Section 6.6
.
(e) If
any Indemnified Party makes any claim for indemnification or advancement of expenses under this
Section 6.6
that is denied by the Parent and/or the Company or the Surviving Corporation, and a court of competent jurisdiction determines that the Indemnified Party is entitled to such indemnification or
advancement of expenses, then the Parent, the Company or the Surviving Corporation shall pay the Indemnified Party's costs and expenses, including reasonable legal fees and expenses, incurred by the
Indemnified Party in connection with pursuing his or her claims to the fullest extent permitted by law.
(f) The
provisions of this
Section 6.6
are intended to be in addition to the rights otherwise available to any
Indemnified Party by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their
representatives.
6.7
Notification of Certain Matters.
Prior to the Effective Time, the Parent shall give prompt notice
to the Company, and the Company shall give prompt notice to the Parent, of (a) the
occurrence, or failure to occur, of any event, which occurrence or failure to occur is reasonably likely to cause any representation or warranty of such Person (or, in case of the Parent's obligation
to provide notice, any representation or warranty of the Merger Sub) contained in this Agreement to be untrue or inaccurate (i) in the case of any representation or warranty of the Company, in
any manner that would result in the failure of the condition set forth in
Section 7.3(a)
or (ii) in the case of any representation or
warranty of the Parent or the Merger Sub, in any manner that would result in the failure of the condition set forth in
Section 7.2(a)
or
(b) any material breach by such Person (or (x) in case of the Parent's obligation to provide notice, any material breach by the Merger Sub or (y) in the case of the Company's
obligations under
Section 6.1
, any material breach by any Representative attributed to the Company pursuant to
Section 6.1(f)
) of any covenant or
agreement set forth in this Agreement, (c) any written notice or other written communication from any
Governmental Entity or counterparty to a Company Material Contract alleging that the consent of such Governmental Entity or such counterparty, as applicable, is required in connection with the
Transactions, or (d) any actions, suits claims or proceedings commenced or, to its knowledge (in the case of the Company, the Company's Knowledge), threatened in writing against such Person or
any of its Subsidiaries that relate to the consummation of the Transactions. The parties hereto agree that (i) the Company's compliance or
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failure
to comply with this
Section 6.7
shall not be taken into account for purposes of determining whether the condition referred to in
Section 7.3(b)
has been satisfied and (ii) the delivery of any notice pursuant to this
Section 6.7
shall not, in and of itself, affect or be deemed to modify any representation or warranty in this Agreement
or the conditions to the
obligations of the parties to consummate the Transactions or the remedies available to the parties hereunder.
6.8
Employee Benefits Matters.
(a) Subject
to the foregoing, for a period of one year following the Effective Time (or, if shorter, the period of employment of the relevant Company Employee), the Parent
shall provide, or shall cause to be provided, (i) to each Company Employee a total compensation package no less favorable in the aggregate than the total compensation package (including base
salary or wage rates, commissions and target annual cash bonus opportunities but excluding the value of annual equity awards and cash payments in lieu of equity awards) provided to such Company
Employee immediately before the Effective Time and (ii) to all Company Employees in the aggregate other employee benefits (other than the Company ESPP, long-term incentive or defined benefit
pension or equity awards or cash payments in lieu thereof) that are substantially comparable, in the aggregate, to the other benefits provided to such Company Employees immediately before the
Effective Time.
(b) For
purposes of vesting and eligibility to participate (but not for accrual or level of benefits) under the New Plans, each Company Employee shall, subject to applicable
law and applicable tax qualification requirements, be credited with his or her years of service with the Company and its Subsidiaries and their respective predecessors before the Effective Time, to
the same extent as such Company Employee was entitled, before the Effective Time, to credit for such service under any similar Company Employee Plan in which such Company Employee participated or was
eligible to participate immediately prior to the Effective Time;
provided
that the foregoing shall not apply to the extent that its application would
result in a duplication of benefits. In addition, and without limiting the generality of the foregoing, (i) each Company Employee shall be immediately eligible to participate, without any
waiting time, in any and all New Plans to the extent coverage under such New Plan is of the same type as the Company Employee Plan in which such Company Employee participated immediately before the
Effective Time (such plans, collectively, the "
Old Plans
"), and (ii)(A) for purposes of each New Plan providing medical, dental, pharmaceutical or
vision benefits to any Company Employee, the Parent shall cause all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such Company Employee and his
or her covered dependents, unless such conditions would not have been waived under the Old Plan of the Company or its Subsidiaries in which such Company Employee participated immediately prior to the
Effective Time and (B) the Parent shall cause any eligible expenses incurred by such employee and his or her covered dependents during the portion of the plan year of the Old Plan ending on the
date such employee's participation in the corresponding New Plan begins to be taken into account under such New Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such
New Plan.
(c) If
any Company Employee (who is not otherwise a party to an employment agreement, offer letter or similar agreement or arrangement or any amendment or supplement of any
of the foregoing, in each case that provides for a different treatment with respect to severance) whose employment is terminated on or prior to the first anniversary of the Effective Time under
circumstances under which such Company Employee would have received severance benefits under the Company Severance Policy, the Parent will cause the Surviving Corporation to provide that such Company
Employee shall be entitled to severance benefits from the Surviving Corporation that are no less favorable than the severance benefits that would have been granted under the Company Severance Policy
as in existence on the date of this Agreement and shall notify such Company Employee of such benefits in a manner consistent with the Company's past practices prior to the date of this Agreement.
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(d) From
and after the Effective Time, the Parent shall cause the Surviving Corporation and its Subsidiaries to assume, in accordance with their terms, all obligations of
the Company under contracts, agreements, arrangements, policies, plans and commitments of the Company and the Subsidiaries of the Company as in effect immediately prior to the date hereof and in the
form provided to Parent prior to the date hereof that are applicable to any current or former employees or directors of the Company or any Subsidiary of the Company, including any employment,
severance, and termination plans and agreements.
(e) All
provisions contained in this Agreement with respect to employee benefit plans or employee compensation are included for the sole benefit of the respective Parties
and shall not create any right (including any third party beneficiary rights) in any other Person, including any employee or former employee of Company or any of its Subsidiaries or any participant or
beneficiary in any Company Employee Plan. Nothing in this Agreement (i) shall require Parent, the Surviving Corporation or any of their subsidiaries to continue to employ any particular Company
Employee following the Effective Time or to provide any right to a particular term or condition of employment, (ii) shall, for a period of one year following the Effective Time, permit the
reduction of the existing severance or acceleration benefits in effect on the date of this Agreement for any Company Employee, or (iii) except as provided in the foregoing clause (ii),
shall be construed to prohibit Parent, the Surviving Corporation or any of their subsidiaries from amending or terminating any Employee Benefit Plan in accordance with its terms or to
amend or create any Employee Benefit Plan or any similar plan or agreement from Parent or its Affiliates. The provisions of
Sections 6.8(a)
through
6.8(c)
shall not apply to persons employed by the Company or any of its Subsidiaries outside the United States or covered by collective
bargaining or other labor agreements, it being agreed that such persons shall be treated in accordance with applicable law and the terms of any contracts covering them.
6.9
State Takeover Laws.
The Company and the Company Board shall not take any action
that would cause any anti-takeover or other similar law to become applicable to restrict or prohibit
the Merger or any other Transactions. If any "fair price," "business combination" or "control share acquisition" statute or other similar statute or regulation is or may become applicable to any of
the Transactions, the parties hereto shall use their respective reasonable best efforts to (a) take such actions as are reasonably necessary so that the transactions contemplated hereunder may
be consummated as promptly as practicable on the terms contemplated hereby and (b) otherwise take all such actions as are reasonably necessary to eliminate or, if unable to be eliminated,
minimize the effects of any such statute or regulation on such transactions; provided that, the Parent and the Merger Sub shall only be required to take any action pursuant to this
Section 6.9
if
they have received written notice from the Company regarding the applicability of such statute or regulation and the Company has
requested in such written notice that the Parent and the Merger Sub take specified actions to render such statute or regulation inapplicable.
6.10
Rule 16b-3.
Prior to the Effective Time, the Company shall take all reasonable steps as may
be required to cause any dispositions of Company equity securities (including
derivative securities) pursuant to the Transactions by each individual who is a director or officer of the Company and who would otherwise be subject to Rule 16b-3 promulgated under the
Exchange Act to be exempt under such rule to the extent permitted by applicable law.
6.11
Financing.
(a) Each of Parent and Merger Sub shall use, and shall cause their respective
Affiliates to use, reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the Financing on the terms and subject only to the conditions (including the market flex
provisions set forth in the Redacted Fee Letter) set forth in the Financing Letters, including using reasonable best efforts to (i) maintain in effect and comply with the Financing Letters,
(ii) negotiate and enter into definitive agreements with respect to the Debt Financing on the terms and subject only to the conditions (including the market
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flex
provisions) set forth in the Debt Commitment Letter, (iii) satisfy (and cause its Affiliates to satisfy) on a timely (taking into account the Marketing Period) basis all conditions
applicable to Parent and its Affiliates in the Financing Letters and the definitive agreements related thereto (or, if necessary or deemed advisable by Parent, seek the waiver of conditions applicable
to Parent and Merger Sub contained in such Financing Letter or such definitive agreements related thereto), (iv) consummate the Financing at or prior to the Closing Date, (v) enforce its
rights under the Financing Letters and the definitive agreements relating to the Financing and (vi) comply with its covenants and other obligations under the Financing Letters and the
definitive agreements relating to the Financing. Parent shall not, and shall not permit any of its Affiliates to, take any action not otherwise required under this Agreement that is a breach of, or
would result in termination of, any of the Financing Letters. Parent, Merger Sub and the Guarantors shall not, without the prior written consent of the Company, agree to or permit any termination of
or amendment, supplement or modification to be made to, or grant any waiver of any provision under, the Financing Letters or the definitive agreements relating to the Financing if such termination,
amendment, supplement, modification or waiver would be reasonably likely to (A)(1) reduce (or could have the effect of reducing) the aggregate amount of any portion of the Debt Financing (including by
increasing the amount of fees to be paid or original issue discount) unless an alternative source of the Equity Financing or other financing is increased by a corresponding amount, so long as in the
case of such alternative source of Equity Financing or other financing, the terms thereof are not of the type that would consitute a Prohibited Amendment under clauses (B) or (C) below,
is then made available, including by increasing the amount of the Equity Financing or (2) reduce the amount of Equity Financing unless the Debt Financing or alternative financing is increased
by a corresponding amount, so long as in the case of any alternative financing, the terms thereof are of the type that would not constitute a Prohibited Amendment under clauses (B) or
(C) below, (B) adversely impact the ability of Parent or Merger Sub, as applicable, to enforce its rights against other parties to the Financing Letters or the definitive agreements with
respect to the Financing or (C) impose new or additional conditions precedent to the availability of the Financing or otherwise expand, amend or modify any of the conditions precedent to the
Financing, or otherwise expand, amend or modify any other provision of the Financing Letters in a manner that could reasonably be expected to materially delay or prevent or make less likely to occur
the funding of the Financing (or satisfaction of the conditions to the Financing) on the Closing Date (taking into account the Marketing Period) (the amendments described in the foregoing
clauses (A), (B) and (C), the "
Prohibited Amendments
"). Parent shall deliver to the Company true and complete copies of any amendment,
modification, supplement, consent or waiver to or under any Financing Letter or the definitive agreements relating to the Financing promptly upon execution thereof other than (1) amendments or
modifications solely for the purpose of joining additional arrangers or financing sources following the date hereof to the extent effected pursuant to the terms of the Debt Commitment Letter or
(2) any amendments or modifications to the terms that have been redacted under the Redacted Fee Letter. In addition to and not in limitation of the foregoing, Parent shall not permit the
consummation of the Carveout Transactions prior to the payment in full of the Merger Consideration unless the net cash proceeds of the Carveout Transactions payable to the Company on the Closing Date
equal or exceed the sum of (i) the amounts permitted to be borrowed on the Closing Date under each of the CAR ABL Facility (as defined in the Debt Commitment Letter) and the USR ABL Facility
(as defined in the Debt Commitment Letter) and (ii) any reduction in the NAD ABL Closing Amount (as defined in the Debt Commitment Letter) as a result of the consummation of the Carveout
Transactions on the Closing Date, in each case in order to finance the Transaction.
(b) Parent
shall keep the Company informed on a current basis and in reasonable detail, upon reasonable request by the Company, of the status of its efforts to arrange the
Debt Financing and provide to the Company drafts (reasonably in advance of execution) and thereafter complete, correct and executed copies of the material definitive documents for the Debt Financing.
Parent and Merger Sub shall give the Company prompt notice (i) of any actual breach, default (or any
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event
that, with or without notice, lapse of time or both, would reasonably be expected to give rise to any default or breach), termination, cancellation or repudiation by any party to any of the
Financing Letters or definitive documents related to the Financing of which Parent or Merger Sub becomes aware, (ii) of the receipt of any written notice or other written communication from any
Financing Source with respect to any (A) actual or potential breach, default, termination, cancellation or repudiation by any party to any of the Financing Letters or any definitive document
related to the Financing of any provisions of the Financing Letters or any definitive document related to the Financing or (B) material dispute or disagreement between or among any parties to
any of the Financing Letters or any definitive document related to the Financing with respect to the conditionality or amount of the Financing or the obligation to fund the Financing or the amount of
the Financing to be funded at the Closing (but excluding ordinary course negotiations) and (iii) of the occurrence of an event or development that could reasonably be expected to adversely
impact the ability of Parent or Merger Sub to obtain all or any portion of the Financing contemplated by the Financing Letters in an amount sufficient to consummate the Transactions. As soon as
reasonably practicable, but in any event within two Business Days of the date the Company delivers to Parent or Merger Sub a written request, Parent and Merger Sub shall provide any information
reasonably requested by the Company relating to any circumstance referred to in the immediately preceding sentence. If any portion of the Debt Financing becomes unavailable on the terms and conditions
(including any applicable market flex provisions) contemplated by the Debt Commitment Letter and alternative financing (so long as the terms thereof are of the type that would not constitute a
Prohibited Amendment) or an increase in the Equity Financing is not then made available in an amount equal to such portion, and such portion is required to fund the Merger Consideration and all fees,
expenses and other amounts contemplated to be paid by Parent pursuant to this Agreement, Parent shall promptly notify the Company in writing and Parent and Merger Sub shall use their reasonable best
efforts to arrange and obtain in replacement thereof, and negotiate and enter into definitive agreements with respect to, alternative financing from alternative sources in an amount sufficient to
consummate the Transactions with terms and conditions (including market flex provisions) not materially less favorable, taken as a whole, to Parent and Merger Sub (or their respective Affiliates) than
the terms and conditions set forth in the Debt Commitment Letter, as promptly as practicable following the occurrence of such event but no later than the final day of the Marketing Period;
provided
,
that in no event will the reasonable best efforts of Parent be deemed or construed to require Parent to (A) pay fees materially in
excess of those contained in the Debt Commitment Letter (including the market flex provisions) or agree to "market flex" terms, materially less favorable to Parent than the corresponding market flex
terms contained in or contemplated by the Debt Commitment Letter or (B) enter into any alternative financing terms the terms of which are materially less favorable to Parent than the terms
contained in the Debt Commitment Letter on the date hereof (taken as a whole). In furtherance of and not in limitation of the foregoing, in the event
that (1) any portion of the Debt Financing anticipated under the Debt Commitment Letter to be structured as a high yield bond financing is unavailable, regardless of the reason therefor, and
such amount is not funded through a securities demand under the Debt Commitment Letter, (2) all conditions contained in
Section 7.1
and
Section 7.3
have been satisfied or waived (other than (x) any such conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of such conditions at the Closing, and (y) those conditions the failure of which to be satisfied is attributable to a breach by Parent or Merger Sub of
their representations, warranties, covenants or agreements contained in this Agreement) and (3) a bridge facility contemplated by the Debt Commitment Letter (or an alternative bridge facility
or other financing obtained in accordance with this
Section 6.11(b)
) is available on the terms described in the Debt Commitment Letter, then
Parent and Merger Sub shall cause the applicable Financing Sources to fund such bridge financing in accordance with the terms of the Debt Commitment Letter and the proceeds shall be used in lieu of
the affected portion of the high yield bond financing. Parent shall deliver to
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the
Company true and complete copies of all contracts, agreements or other arrangements (including Redacted Fee Letters) pursuant to which any such alternative source shall have committed to provide
any portion of the Debt Financing. For purposes of this
Section 6.11
, (x) references to the "Financing" shall include the financing
contemplated by the Financing Letters as permitted to be amended, modified, supplemented or replaced by this
Section 6.11
, (y) references
to the "Debt Commitment Letter" shall include such documents as permitted to be amended, modified, supplemented or replaced by this
Section 6.11
and (z) references to "Debt Financing" shall include the debt financing contemplated by the Debt Commitment Letter as permitted to be amended, modified, supplemented or replaced by this
Section 6.11
.
(c) Prior
to the Closing Date, the Company shall use its reasonable best efforts to provide, and to cause its Subsidiaries to provide, to Parent and Merger Sub, in each case
at Parent's sole cost and expense, such reasonable cooperation as is customary and reasonably requested by Parent in connection with the arrangement, syndication and consummation of the Debt
Financing, including using its reasonable best efforts to (i) furnish Parent and Merger Sub and their Debt Financing Sources, as promptly as reasonably practicable, all Required Financial
Information, (ii) have the Company designate members of senior management of the Company to execute customary authorization letters with respect to Company information included in a customary
confidential information memorandum for a syndicated bank financing and cause management of the Company to participate in a reasonable number of meetings, presentations, road shows, sessions (upon
reasonable request) with rating agencies, due diligence sessions, drafting sessions and sessions between senior management and the sources of the Debt Financing, (iii) provide reasonable and
customary assistance with the preparation of materials for rating agency presentations, road shows, bank information memoranda, private placement memoranda and other customary marketing materials and
provide reasonable cooperation with the due diligence efforts of the Debt Financing Sources to the extent reasonable and customary (and, to the extent applicable, subject to the limitations contained
in
Section 6.3
hereof and customary authorization letters
with respect to Company information included in a customary confidential information memorandum for a syndicated bank financing), (iv) request the Company's independent auditors to cooperate
with Parent to obtain the Agreed Upon Form Comfort Letter, (v) to the extent timely requested by Parent and required under the Debt Commitment Letter, to (A) obtain documents reasonably
requested by Parent or its Debt Financing Sources relating to the repayment of the existing indebtedness of the Company and its Subsidiaries (including the Company's senior notes to the extent
required under
Section 6.17
) and the release of related liens and related guarantees, including a customary payoff letter for the Credit Facility
and (B) provide all documentation and other information required by U.S. bank regulatory authorities under applicable "know-your-customer" and anti-money laundering rules and regulations,
including without limitation the USA PATRIOT Act, relating to the Company or any of its Subsidiaries, in each case as reasonably requested by Parent at least ten (10) Business Days prior to the
Closing Date, (vi) assist in the preparation, executing and delivering of definitive financing documents, including guarantee and collateral documents and customary closing certificates as may
be required by the Debt Financing (including a solvency certificate from the chief financial officer or other officer of equivalent duties (on the terms and of the type in the form attached to the
Debt Commitment Letter) so long as (I) such certificate is not effective prior to the Closing, (II) such certificate shall not be required to be provided in the case of any financing
borrowed by the CAR ABL Borrower or the USR ABL Borrower (unless either of the CAR ABL Borrower or USR ABL Borrower constitute existing subsidiaries of the Company in which case this
clause (II) shall not apply) and (III) such certificate shall only address the solvency of the Company and its Subsidiaries on a consolidated basis); and other customary documents as may
be reasonably requested by Parent and cooperate to facilitate the pledging of, granting of security interests in and obtaining perfection of any liens on, collateral in connection with the Debt
Financing, but in no event shall any of the
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foregoing
be effective until as of or after the Closing, (vii) cooperate with Parent, and taking all corporate actions or other similar actions reasonably necessary to permit the consummation
of the Financing, including customary resolutions, consents or approvals, (viii) use reasonable best efforts to assist Parent in obtaining legal opinions from local outside counsel as
reasonably requested by Parent for financings similar to the Financing, (ix) use reasonable best efforts to (A) subject to
Section 6.3
, permit the prospective lenders involved in the
Financing to evaluate the Company and its Subsidiaries' current assets, cash
management and accounting systems, policies and procedures relating thereto for the purpose of establishing collateral arrangements, (B) cooperate with Parent to establish bank and other
accounts and blocked account agreements and lock box arrangements in connection with the foregoing and (C) permit representatives of the prospective lenders to conduct commercial field
examinations, inventory and intellectual property appraisals, Phase I environmental assessments and an appraisal of the owned real property, and make audits and appraisals delivered for the
purposes of any credit facility available to Parent for purposes of its Financing, (x) provide monthly financial statements (excluding footnotes) of the Company and its Subsidiaries or business
units to the extent the Company customarily prepares (and has prepared) such financial statements and (xi) use commercially reasonable efforts to assist Parent in benefiting from the existing
lending relationships of the Companies and the Companies' Subsidiaries. Such requested cooperation shall not, in the Company's reasonable judgment, unreasonably interfere with the ongoing business or
operations of the Company and any of its
Subsidiaries. In no event shall the Company or any of its Subsidiaries be required to bear any cost or expense, pay any commitment or other fee, enter into any definitive agreement, incur any other
liability or obligation, make any other payment or agree to provide any indemnity in connection with the Financing or any of the foregoing prior to the Effective Time. In addition, nothing in this
Section 6.11
shall require any action that would conflict with or violate the Company's or any of its Subsidiaries' organizational documents or
any laws or result in, prior to the Effective Time, the contravention of, or that would reasonably be expected to result in, prior to the Effective Time, a violation or breach of, or default under,
any contract to which the Company or any of its Subsidiaries is a party. In addition, if, in connection with a marketing effort contemplated by the Debt Commitment Letter, Parent reasonably requests
the Company to file a Current Report on Form 8-K pursuant to the Exchange Act that contains material non-public information with respect to the Company, which Parent reasonably desires
to include in a customary offering memorandum for the Debt Financing, then the Company shall discuss in good faith whether or not the Company shall file a Current Report on Form 8-K or
similar document containing such material non-public information. For the avoidance of doubt, none of the Company or its Subsidiaries or their respective officers, directors (with respect to any
Subsidiary of the Company) or employees shall be required to execute or enter into or perform any agreement with respect to the Financing contemplated by the Financing Letters that is not contingent
upon the Closing or that would be effective prior to the Closing and no directors of the Company that will not be continuing directors, acting in such capacity, shall be required to execute or enter
into or perform any agreement, or to pass any resolutions or consents, with respect to the Financing, except for any customary authorization letters pursuant to clauses (ii) or (iii) of
the first sentence of this
Section 6.11(c)
. Parent shall promptly, upon request by the Company, reimburse the Company for all reasonable
out-of-pocket costs and expenses (including (A) reasonable attorneys' fees and (B) fees and expenses of the Company's accounting firms engaged to assist in connection with the Financing)
incurred by the Company or any of its Subsidiaries or any of their respective Representatives in connection with the Financing, including the cooperation of the Company or any of its Subsidiaries or
any of their respective Representatives contemplated by this
Section 6.11
and the compliance by the Company or any of its Subsidiaries or any of
their respective Representatives with its obligations under this
Section 6.11
, and shall indemnify and hold harmless the Company, its
Subsidiaries and their respective Representatives from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with
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the
arrangement of the Financing and any information used in connection therewith, including compliance by the Company or any of its Subsidiaries or any of their respective Representatives with its
obligations under this
Section 6.11
. Nothing contained in this
Section 6.11
or otherwise
shall require the Company or any of its Subsidiaries to be an issuer or obligor with respect to the Debt Financing prior to the Effective Time.
(d) Parent
shall, and shall cause its Affiliates to, refrain from taking, directly or indirectly, any action that could reasonably be expected to result in the failure of
any of the conditions contained in the
Financing Letters or in any definitive agreement relating to the Financing. Parent and Merger Sub acknowledge and agree that, notwithstanding the Company's obligations under
Section 6.11(c)
, none
of the obtaining of the Financing or any permitted alternative financing, the completion of any issuance of securities
contemplated by the Financing, or the Company or any of its Subsidiaries having or maintaining any available cash balances is a condition to the Closing, and reaffirm their obligation to consummate
the Transactions irrespective and independently of the availability of the Financing or any permitted alternative financing, the completion of any such issuance, or the Company or any of its
Subsidiaries having or maintaining any available cash balances subject to the applicable conditions set forth in
Section 7.1
and
Section 7.3
.
(e) All
non-public or otherwise confidential information regarding the Company obtained by Parent or its Representatives pursuant to clause (c) above shall be kept
confidential in accordance with the Confidentiality Agreement;
provided
that, upon notice to the Company, Parent may provide such information to
potential sources of capital and to rating agencies and prospective lenders and investors during syndication and marketing of the Debt Financing (including any permitted alternative financing) subject
to customary confidentiality arrangements with such Persons regarding such information.
6.12
Control of Operations.
Without in any way limiting any party's rights or obligations under this
Agreement, (a) nothing contained in this Agreement shall give the Parent or the
Merger Sub, directly or indirectly, the right to control or direct the Company's operations prior to the Effective Time and (b) prior to the Effective Time, the Company shall exercise, subject
to the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries' operations.
6.13
Security Holder Litigation.
In the event that any litigation related to this Agreement, the
Merger or the other transactions contemplated hereby is brought by any stockholder of the Company
or any holder of the Company's other securities against the Company and/or its directors or officers, the Company shall promptly notify Parent of such litigation and shall keep Parent reasonably
informed with respect to the status thereof. Notwithstanding anything to the contrary herein (but subject to the following sentence), the Company shall have the right to control the defense and
settlement of any litigation related to this Agreement, the Merger or the other Transactions brought by any stockholder of the Company or any holder of the Company's other securities against the
Company and/or its directors or officers, provided that the Company shall give the Parent the opportunity to participate, at the Parent's expense, in the defense of any such litigation and the Company
shall consider in good faith the Parent's advice with respect to such litigation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not settle any such litigation
without the prior written consent of Parent.
6.14
Preparation of Proxy Statement; Stockholders' Meeting.
(a) As
promptly as reasonably practicable after the date of this Agreement, the Company shall (i) prepare (with the Parent's reasonable cooperation) and file with the
SEC within twenty (20) Business Days after the date hereof (subject to Parent's reasonable cooperation in connection therewith) a proxy statement (as amended or supplemented from time to time,
including the form of proxy card, the "
Proxy Statement
") to be sent to the stockholders of the Company relating to the special meeting of the Company's
stockholders (the "
Company Stockholders Meeting
") to be held to
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consider,
among other matters, the adoption of this Agreement and (ii) set a record date for determining the stockholders entitled to notice of and to vote at the Company Stockholders Meeting
and commence a broker search pursuant to Section 14a-13 of the Exchange Act in connection therewith. No filing of, or amendment or supplement to, the Proxy Statement will be made by the Company
without providing the Parent a reasonable opportunity to review and comment thereon which comments the Company will consider for inclusion in good faith. The Company will advise the Parent promptly
after it receives any oral or written request by the SEC for amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information, and will
promptly provide the Parent with copies of any written communication from the SEC or any state securities commission and a reasonable opportunity to participate in the responses thereto. If, at any
time prior to the Effective Time, any information relating to the Company or the Parent, or any of their respective Affiliates, officers or directors, should be discovered by the Company or the Parent
that should be set forth in an amendment or supplement to the Proxy Statement, so that the Proxy Statement would not contain any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that discovers such information shall promptly notify the other parties
hereto and an appropriate amendment or supplement describing such information shall promptly be filed with the SEC and, to the extent required under applicable law, disseminated to stockholders of the
Company;
provided
that the delivery of such notice and the filing of any such amendment or supplement shall not affect or be deemed to modify any
representation or warranty made by any party hereunder or otherwise affect the remedies available hereunder to any party.
(b) As
promptly as reasonably practicable following the Company's receipt of notice from the SEC that the SEC has completed its review of the Proxy Statement (or, if the SEC
does not inform the Company that it intends to review the Proxy Statement on or before the 10
th
calendar day following the filing of the preliminary Proxy Statement pursuant to
Rule 14a-6 under the Exchange Act, as promptly as reasonably practicable following such 10
th
calendar day), the Company, acting through the Company Board, shall duly call,
give notice of, convene and hold the Company Stockholders Meeting for the purpose of obtaining the Company Stockholder Approval and, if applicable, the advisory vote required by Rule 14a-21(c)
under the Exchange Act in connection therewith;
provided
,
however
, that the Company Board shall be
permitted to adjourn, delay or postpone the Company Stockholders Meeting in accordance with applicable law (but not beyond the Outside Date) (i) to the extent necessary to allow reasonable
additional time for the filing and mailing of any supplemental or amended disclosure which
the Company Board has determined in good faith after consultation with outside counsel is reasonably likely to be necessary or appropriate under applicable law and for such supplemental or amended
disclosure to be disseminated and reviewed by the Company's stockholders prior to the Company Stockholders Meeting, (ii) if there are insufficient shares of Company Common Stock represented
(either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Stockholders Meetings or (iii) on one occasion to allow reasonable additional time to
solicit additional proxies to the extent the Company Board or any committee thereof reasonably believes necessary in order to obtain the Company Stockholder Approval. Except to the extent that the
Company Board shall have effected a Company Board Recommendation Change in accordance with
Section 6.1(b)
, the Company, through the Company
Board, shall (A) recommend to its stockholders that they adopt this Agreement and (B) include such recommendation in the Proxy Statement.
6.15
Carveout Transaction Matters.
If requested by the Parent, at the Parent's sole expense, the
Company shall (i) provide commercially reasonable cooperation to the Parent and the Merger
Sub's review of and planning for the Carveout Transactions, which such cooperation shall be limited to cooperation with Parent and Merger Sub in connection with both parties taking the actions set
forth on
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Section 6.15
of the Company Disclosure Schedule and (ii) without limitation or modification to the restrictions set forth in
Section 5.1
,
refrain from taking actions to effect any internal reorganization to implement the Carveout Transactions without the prior written
consent of the Parent; provided that nothing set forth in this
Section 6.15
shall require the Company to take any corporate action, to execute
any document or other instrument, or to incur any liability that is not conditioned upon or that would be effective prior to the Effective Time. Without limitation of the Company's obligations set
forth in
Section 6.11
, the Parties agree and acknowledge that (i) the Company's compliance or failure to comply with this
Section 6.15
shall
not be taken into account for purposes of determining whether the condition referred to in
Section 7.3(b)
shall have been satisfied with respect to performance in all material respects with this
Section 6.15
, (ii) upon satisfaction or waiver of the conditions set forth in
Article VII
and completion of the Marketing Period, the Closing will proceed in accordance with
Section 1.3
notwithstanding the status of the
review, planning, preparation or implementation of any Carveout Transaction, (iii) Parent
and Merger Sub's sole remedy for the Company's breach of this
Section 6.15
shall be specific performance (and the Company acknowledges and agrees
that such remedy shall be available against it) and (iv) no action taken by the Company prior to Closing at the request of the Parent pursuant to a Carveout Transaction shall be a breach of any
representation, warranty or covenant included in this Agreement.
6.16
Repatriation.
Parent may periodically request from the Company, and the Company will provide (but
not more often than monthly), an estimate of the amount of cash that it
believes could be repatriated by the Company as of a Closing Date estimated by Parent in good faith, understanding that such amounts are only an estimate, that actual amounts may vary from such
estimates and that the Company shall not be liable for any such variances. Not less than fifteen (15) Business Days prior to the Closing, Parent may request in writing to the Company (the
"
Repatriation Notice
") that the Company and its wholly owned Subsidiaries use their reasonable best efforts to cooperate to transfer in any jurisdiction
located outside of the United States (the "
Repatriation Jurisdictions
") legally or contractually unrestricted cash balances held in commercial bank
accounts in the name of the Company or such wholly owned Subsidiary to accounts in the name of the Company or a wholly owned Subsidiary located in the United States (the
"
Repatriation
"; and "
Repatriate
" shall have a correlative meaning) effective as of the Effective Time.
The Repatriation Notice shall specify the Repatriation Jurisdictions that Parent would like the Company to repatriate cash from and Parent's good faith estimate of the Closing Date. The Company will
review the Repatriation Notice and send to Parent, as promptly as practicable after the receipt thereof (and in any event within five (5) Business Days), a written response setting forth the
following information with respect each Repatriation Jurisdiction (the "
Repatriation Response
"): (a) the amount of cash in each Repatriation
Jurisdiction that the Company believes could be reasonably Repatriated, taking into account (i) Parent's estimate of the Closing Date, (ii) the amount of cash reasonably needed in such
Repatriation Jurisdiction to operate the business in the ordinary course and meet working capital requirements in such Repatriation Jurisdiction, (iii) applicable law, including those relating
to solvency, adequate surplus, similar capital adequacy tests, corporate benefit, financial assistance, distributable reserves and directors' duties, and (iv) any estimated Taxes or fees and
expenses to be paid in such Repatriation Jurisdiction in connection with the Repatriation, (b) the estimated costs and expenses that would be incurred by the Company and its Subsidiaries in
connection with the Repatriation, including estimated Taxes that would be payable on such Repatriated amount and the estimated fees and expenses of counsel and accountants in connection with any such
Repatriation (collectively, the "
Estimated Costs
") and (c) the amount of time that the Company estimates it would take for the Repatriation to be
completed in each such Repatriation Jurisdiction identified in the Repatriation Notice; provided that, in each case it is understood that such amounts and other information in any Repatriation
Response are only estimates, that actual amounts and timing may vary from such estimates and that the Company shall not be liable for any such variances. The Company shall not unreasonably deny a
request for repatriation set forth in a Repatriation Notice. Within five (5) Business Days following delivery of the Repatriation Response,
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Parent
shall notify the Company in writing whether or not Parent wishes for the Company to consummate as of the Effective Time any or all of the Repatriations set forth in the Repatriation Response
(including the amount of any such Repatriation, subject to increases or decreases of such amounts by the Company as may be reasonable at the time of Repatriation based on the amount of unrestricted
cash actually available at such time) (the "
Repatriation Confirmation
") and if it requests any such Repatriation, confirming with respect to each such
Repatriation, (x) that it approves of the Company and its Subsidiaries taking the actions reasonably necessary in the Company's sole judgment to effect such Repatriation and (y) that it
approves of the Company incurring the Estimated Costs (and any additional costs as may be reasonably incurred in connection with the Repatriation). Parent shall
indemnify and hold harmless the Company, its Subsidiaries and its and their Representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards,
judgments, Taxes (including loss of tax attributes) and penalties suffered or incurred by them in connection with the Repatriation, including any action taken in accordance with this
Section 6.16
and including the Estimated Costs (and any additional costs). Without limiting the generality of the immediately preceding sentence,
Parent shall, promptly upon request by the Company, reimburse the Company for all Estimated Costs (and any additional costs) actually incurred by the Company or its Subsidiaries in connection with
this
Section 6.16
. Without limitation of the Company's obligations set forth in
Section 6.11
, the Parties agree and acknowledge that (1) the
Company's compliance or failure to comply with this
Section 6.16
shall not be taken into account for purposes of determining whether the condition referred to in
Section 7.3(b)
shall have been satisfied with respect to performance in all material respects with this
Section 6.16
, (2) upon satisfaction or waiver of
the conditions set forth in
Article VII
and completion of the Marketing Period, the Closing will proceed in accordance with
Section 1.3
notwithstanding the status of any Repatriation and (3) Parent and Merger Sub's sole remedy for the Company's breach of this
Section 6.16
shall be specific performance (and the Company acknowledges and agrees that such remedy shall be available against it). Nothing in
this
Section 6.16
shall require any action that would conflict with or violate the Company's or any of its Subsidiaries' organizational documents
or any applicable laws or result in, prior to the Effective Time, the contravention of, or that would reasonably be expected to result in, prior to the Effective Time, a violation or breach of, or
default under, any contract to which the Company or any of its Subsidiaries is a party.
6.17
Treatment of Certain Notes.
(a) Reference
is made to each of (i) the 2.750% Senior Notes Due 2018 issued by the Company (the "
2018 Notes
") and
(ii) the 4.375% Senior Notes Due 2023 issued by the Company (the "
2023 Notes
and, collectively with the 2018 Notes, the
"
Notes
"; the indenture governing the Notes being the "
Indenture
").
(b) At
the Effective Time, Parent shall cause the Surviving Corporation under any of the then outstanding Notes to comply with all of the terms and conditions of the then
outstanding Notes and the Indenture, including, to the extent required by the terms and conditions of any of the then outstanding Notes or the Indenture, causing the Surviving Corporation under any
series of Notes to obtain and deliver officers' certificates and opinions of counsel stating that the Merger and the other Transactions comply with the Indenture.
(c) At
the request and expense of Parent, the Company shall promptly at a time reasonably requested by Parent, commence an offer to purchase for any and all of the
outstanding aggregate principal amount of the Notes on price terms that are acceptable to Parent and such other customary terms and conditions as are reasonably acceptable to the Company and Parent to
be consummated substantially simultaneously with the Closing using funds provided by Parent (the "
Debt Tender Offer
") and Parent shall assist the
Company in connection therewith. The Company shall adopt any corporate authorizations that are reasonable and necessary for the Debt Tender Offer. The Company shall and shall use reasonable best
efforts to cause its Representatives to,
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provide
all cooperation reasonably requested by Parent in connection with the Debt Tender Offer. The closing of the Debt Tender Offer shall be conditioned on the occurrence of the Closing, and the
parties shall use reasonable best efforts to cause the Debt Tender Offer to close on the Closing Date;
provided
that the consummation of the Debt Tender
Offer with respect to any series of Notes shall not be a condition to Closing. Concurrent with the Effective Time, and in accordance with the terms of the Debt Tender Offer, the Surviving Corporation
shall accept for purchase and purchase each series of Notes properly tendered and not properly withdrawn in the Debt Tender Offer using funds provided by or at the direction of Parent. Parent hereby
covenants and agrees to provide (or to cause to be provided) immediately available funds to the Company for the full payment at the Effective Time of all Notes properly tendered and not withdrawn to
the extent required pursuant to the terms of the Debt Tender Offer.
(d) If
reasonably requested by the Parent in writing, the Company shall, in accordance with the applicable redemption provisions of the applicable series of Notes and the
Indenture, (A) substantially simultaneous with, but in no event prior to, the Effective Time issue a notice of optional redemption for all of the outstanding aggregate principal amount of such
series of Notes, pursuant to the redemption provisions of the Indenture and (B) use reasonable best efforts to take any other actions reasonably requested by the Parent to facilitate the
satisfaction and discharge of such series of Notes pursuant to the satisfaction and discharge provisions of the Indenture and the other provisions of the Indenture applicable thereto; provided that
prior to the Company's being required to take any of the actions described in clauses (A) and (B) above, the Parent shall have, or shall have caused to be, set aside sufficient and
immediately available funds to deliver to the Company to effect such redemption and satisfaction and discharge. The redemption and satisfaction and discharge of any series of Notes pursuant to the
preceding sentence are referred to collectively as the "
Discharge
" of such series of Notes. The Company shall use reasonable best efforts to cause its
Representatives to provide all cooperation reasonably requested by Parent in connection with the Discharge of any series of Notes identified to the Company by Parent in writing at any time.
(e) Parent
shall (or the Company, if directed by Parent, shall), at a time at or after the Effective Time selected by Parent, commence a change of control offer to purchase
all of the 2023 Notes (in accordance with the requirements of the Indenture) at the price required pursuant to the Indenture using funds provided by Parent. The Company shall and shall use reasonable
best efforts to cause its Representatives to, provide all cooperation reasonably requested by Parent in connection with such change of control offer for the 2023 Notes. In accordance with the terms of
the change of control offer for the 2023 Notes, the Surviving Corporation shall accept for purchase and purchase each of the 2023 Notes properly tendered and not properly withdrawn in such change of
control offer using funds provided by or at the direction of Parent. Parent hereby covenants and agrees to provide (or to cause to be provided) immediately available funds to the Company for the full
payment all 2023 Notes validly
tendered and not validly withdrawn to the extent required pursuant to the terms of such change of control offer.
(f) Parent
shall prepare all necessary and appropriate documentation in connection with any change of control offer for the 2023 Notes or any Debt Tender Offer, including
the offer to purchase, related letter of transmittal, and other related documents (collectively, the "
Offer Documents
"), and provide the Company with a
reasonable opportunity to comment and make reasonable changes to such documents. Parent and the Company shall reasonably cooperate with each other in the preparation of the Offer Documents. The Offer
Documents (including all amendments or supplements) and all mailings to the holders of the Notes in connection with any Debt Tender Offer or such change of control offer shall be subject to the prior
review of, and comment by, the Company and Parent and shall be reasonably acceptable to each of them. If at any time prior to the completion of any Debt Tender Offer or change of control offer any
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information
in the Offer Documents should be discovered by the Company, on the one hand, or Parent, on the other, which should be set forth in an amendment or supplement to the Offer Documents, so
that the Offer Documents shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of circumstances under which they are made, not misleading, the party that discovers such information shall use commercially reasonable efforts to promptly notify the other party,
and an appropriate amendment or supplement prepared by Parent describing such information shall be disseminated by or on behalf of the Company to the holders of the Notes (which supplement or
amendment and dissemination may, at the reasonable direction of Parent after consultation with the Company, take the form of a filing of a Current Report on Form 8-K). Notwithstanding anything
to the contrary in this
Section 6.17(f)
, the Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other
applicable law to the extent such laws are applicable in connection with the any change of control offer for the 2023 Notes or any Debt Tender Offer and such compliance will not be deemed a breach
hereof.
(g) So
long as the Company has sufficient immediately available funds for the full payment of the 2023 Notes validly tendered, the Company shall waive any of the conditions
to any Debt Tender Offer (other than that the Merger shall have been consummated and that there shall be no final order, decree, judgment, injunction, ruling or other non-appealable action prohibiting
consummation of any Debt Tender Offer) as may be reasonably requested by Parent in writing and shall not, without the written consent of Parent, waive any condition to any Debt Tender Offer or make
any changes to any Debt Tender Offer or such change of control offer other than as agreed between Parent and the Company.
(h) In
connection with the change of control offer for the 2023 Notes or any Debt Tender Offer, Parent may select one or more dealer managers, information agents,
depositaries and other agents, in each case as shall be reasonably acceptable to the Company, to provide assistance in connection therewith and the Company shall enter into customary agreements
(including indemnities) with such parties so selected; provided that the Company shall not be responsible for the delivery of any legal opinions with respect thereto. Parent shall pay the fees and
out-of-pocket expenses of any dealer manager, information agent, depositary or other agent retained in connection with any Debt Tender Offer or such change of control offer upon the incurrence of such
fees and out-of-pocket expenses.
(i) Parent
shall promptly, upon request by the Company, reimburse the Company for all reasonable and documented out-of-pocket costs, fees and expenses incurred by or on
behalf of the Company in connection with the Company's compliance with its obligations under this
Section 6.17
, including all reasonable and
documented out-of-pocket costs, fees and expenses incurred by or on behalf of the Company in connection with any Debt Tender Offer, Discharge or change of control offer made in respect of any series
of Notes (including any out-of-pocket costs, fees and expenses incurred in connection with the preparation or distribution of any Offer Documents or other documents related thereto). Parent shall
indemnify and hold harmless the Company and its Representatives from and against any and all losses, damages, claims, costs or liabilities incurred by any of them in connection with any action taken
by them pursuant to this
Section 6.17
with respect to any Debt Tender Offer, Discharge or change of control offer (in each case other than as a
result of the Company's fraud or willful misconduct);
provided
,
however
, that the Parent shall not have
any obligation to indemnify and hold harmless any such party or person to the extent such damages suffered or incurred are directly attributable to the information provided by the Company for use in
connection with such Debt Tender Offer, Discharge or change of control offer that is finally determined by a court of competent jurisdiction to have contained a material misstatement or omission.
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(j) Without
limitation of the Company's obligations set forth in
Section 6.11
, the Parties agree and acknowledge that
(i) the Company's compliance or failure to comply with this
Section 6.17
shall not be taken into account for purposes of determining
whether the condition referred to in
Section 7.3(b)
shall have been satisfied with respect to performance in all material respects with this
Section 6.17
, (ii) upon satisfaction or waiver of the conditions set forth in
Article VII
and completion of the Marketing Period, the Closing will proceed in accordance with
Section 1.3
notwithstanding the status of any Debt Tender Offer, Discharge or change of control offer and (iii) no action taken by the
Company prior to Closing at the request or direction of the Parent pursuant to any Debt Tender Offer, Discharge or change of control offer shall be a breach of any representation, warranty or covenant
included in this Agreement. In addition, nothing in this
Section 6.17
shall require any action that would conflict with or violate the Company's
or any of its Subsidiaries' organizational documents or any laws or result in, prior to the Effective Time, the contravention of, or that would reasonably be expected to result in, prior to the
Effective Time, a violation or breach of, or default under, any contract to which the Company or any of its Subsidiaries is a party.
ARTICLE VII
CONDITIONS TO MERGER
7.1
Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party
hereto to effect the Merger shall be subject to the satisfaction (or written waiver, if permissible under applicable law,
by the Parent and the Company) prior to the Effective Time of the following conditions:
(a) the
Company Stockholder Approval shall have been obtained;
(b) the
waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act and other applicable Antitrust Laws set forth on
Section 7.1
of the Company Disclosure
Schedule shall have expired or early termination thereof shall have been granted; and
(c) No
Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or
injunction (temporary, preliminary or permanent) or statute, rule or regulation which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting, restraining,
preventing or enjoining consummation of the Merger.
7.2
Conditions to the Obligations of the Company.
The obligation of the Company to effect the Merger
is also subject to the satisfaction, or written waiver, if permissible under applicable law, by the Company,
prior to the Effective Time of the following conditions:
(a) the
representations and warranties of the Parent and the Merger Sub contained in this Agreement that (i) are not made as of a specific date shall be true and
correct as of the Effective Time, as though made as of the Effective Time, and (ii) are made as of a specific date shall be true and correct as of such date, in each case, except where the
failure of such representations or warranties to be true and correct (without giving effect to any limitation as to "materiality" or "Parent Material Adverse Effect"
set forth in such representations and warranties) is not reasonably likely to have a Parent Material Adverse Effect;
(b) each
of the Parent and the Merger Sub shall have performed in all material respects its covenants and obligations required to be performed by it under this Agreement
prior to the Effective Time; and
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(c) the
Company shall have received a certificate, dated the Closing Date, signed by an executive officer of the Parent certifying as to the matters set forth in
Section 7.2(a)
and
Section 7.2(b)
.
7.3
Conditions to the Obligations of the Parent and the Merger Sub.
The obligation
of the Parent and the Merger Sub to effect the Merger is also subject to the satisfaction, or written waiver, if permissible under applicable law,
by the Parent (on behalf of the Parent and the Merger Sub), prior to the Effective Time of the following conditions:
(a) (i)
the representations and warranties of the Company contained in the first sentence of
Section 3.7
shall be true
and correct in all respects as of the date hereof and as of the Effective Time, as though made as of the Effective Time; (ii) the representations and warranties of the Company contained in the
third and fourth sentence of
Section 3.2(a)
, in the first sentence of
3.2(b)
, in the first and
second sentence of
3.2(c)
and
Section 3.2(e)
shall be true and correct in all respects as of the
date hereof and the Effective Time, as though made as of the Effective Time (other than any such representation or warranty that is made as of a specific date, which need only be true and correct in
all respects as of such date), except where the failure of such representations and warranties to be so true and correct
would, individually or in the aggregate, be reasonably expected to result in more than $5,000,000 in the aggregate of additional Merger Consideration payable and/or amounts payable pursuant to
Section 2.3
; (iii) the representations and warranties of the Company contained in
Section 3.1
,
Section 3.2(a)
(other than the third sentence,
which is subject to
clause (ii) above),
Section 3.4(a)
,
Section 3.19
and
Section 3.20
shall be true and
correct in all material respects (other than any such representation or warranty that is qualified by
"materiality" or "Company Material Adverse Effect," which shall be true and correct in all respects) as of the Effective Time, as though made on and as of the date hereof and the Effective Time (other
than any such representation or warranty that is made as of a specific date, which need only be true and correct in all material respects as of such date) and (iv) all other representations and
warranties of the Company contained in this Agreement shall be true and correct as of the Effective Time, as though made as of the Effective Time (other than any such representation or warranty that
is made as of a specific date, which need only be true and correct as of such date), except where the failure of such representations or warranties to be true and correct (without giving effect to any
limitation as to "materiality" or "Company Material Adverse Effect" set forth in such representations and warranties) is not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect;
(b) the
Company shall have performed in all material respects its covenants and obligations required to be performed by it under this Agreement prior to the Effective Time;
and
(c) the
Parent shall have received a certificate, dated the Closing Date, signed by an executive officer of the Company certifying as to the matters set forth in
Section 7.3(a)
and
Section 7.3(b)
.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1
Termination.
This Agreement may be terminated and the Merger may be abandoned (with respect to
Sections 8.1(b)
through
8.1(i)
, by written notice by the terminating party to the other party) (with any termination by the Parent also being an
effective termination by the
Merger Sub):
(a) by
mutual written consent of the Parent and the Company at any time prior to the Effective Time;
(b) by
either the Parent or the Company at any time prior to the Effective Time and after the Outside Date if the Effective Time shall not have occurred on or before the
Outside Date;
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provided
that the right to terminate this Agreement pursuant to this
Section 8.1(b)
shall (i) not be available to any party hereto if the
failure of such party (or, in the case of the Parent, the Merger Sub and vice versa) to fulfill, in any material respect, any obligation under this Agreement has been a principal cause of or resulted
in the failure of the Effective Time to occur on or before the Outside Date) and (ii) be subject to the proviso set forth in
Section 8.1(i)
;
(c) by
either the Parent or the Company at any time prior to the Effective Time if a Governmental Entity of competent jurisdiction shall have issued a nonappealable final
order, decree, judgment, injunction or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining, preventing or otherwise prohibiting
the consummation of the Merger;
provided
,
however
, that a party hereto shall not be permitted to
terminate this Agreement pursuant to this
Section 8.1(c)
if the failure of such party (or any Affiliate of such party) to use such standard of
efforts to the extent required pursuant to
Section 6.4
to prevent and oppose such order, decree, ruling or the taking of such other action has
been a principal cause of or resulted in the issuance of any such order, decree, ruling or the taking of such other action;
(d) by
the Parent or the Company if the Company Stockholder Approval shall not have been obtained at the Company Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof at which a vote on the adoption of this Agreement was taken;
(e) by
the Parent, prior to the Effective Time, if the Company Board shall have effected a Company Board Recommendation Change;
(f) by
the Company, at any time prior to receipt of the Company Stockholder Approval, in order to enter into a definitive agreement providing for a Superior Proposal after
complying with the terms and conditions of
Section 6.1
in all material respects; provided that any purported termination of this Agreement
pursuant to this
Section 8.1(f)
shall be null and void if the Company does not, prior to or concurrently with the termination of this Agreement,
pay the Parent the Company Termination Fee contemplated by
Section 8.3(b)(ii)
;
(g) by
the Parent, prior to the Effective Time, if there has been a breach of, inaccuracy in or failure to perform any representation, warranty, covenant or agreement of the
Company set forth in this Agreement, which breach, inaccuracy or failure to perform (i) would cause the conditions set forth in
Section 7.3(a)
or
Section 7.3(b)
not to be satisfied, and (ii) is not capable of
being cured by the Outside Date or, if capable of being cured by the Outside Date, shall not have been cured within 20 Business Days following receipt by the Company of written notice of such breach,
inaccuracy or failure to perform from the Parent;
provided
that neither the Parent nor the Merger Sub is then in material breach of any representation,
warranty or covenant under this Agreement that would cause a condition set forth in
Section 7.1
or
Section 7.2
not to be satisfied;
(h) by
the Company, prior to the Effective Time, if there has been a breach of, inaccuracy in or failure to perform any representation, warranty, covenant or agreement of
the Parent or the Merger Sub set forth in this Agreement, which breach, inaccuracy or failure to perform (i) would cause the conditions set forth in
Section 7.2(a)
or
Section 7.2(b)
not to be satisfied, and (ii) is not capable of
being cured by the Outside Date or, if capable of being cured by the Outside Date, shall not have been cured within 20 Business Days following receipt by the Parent of written notice of such breach,
inaccuracy or failure to perform from the Company;
provided
that the Company is not then in material breach of any representation, warranty or covenant
under this Agreement that would cause a condition set forth in
Section 7.1
or
Section 7.3
not to be satisfied; or
(i) by
the Company if (A) the Marketing Period has ended and the conditions set forth in
Sections 7.1
and
7.3
(other than those conditions that by their
nature are to be satisfied by actions taken at the Closing each of which is capable of being satisfied at
the Closing) have been and
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continue
to be satisfied, (B) the Company has confirmed by written notice to Parent after the end of the Marketing Period that all conditions set forth in
Section 7.2
have been satisfied (other than
those conditions that by their nature are to be satisfied by actions taken at the Closing each of
which is capable of being satisfied at the Closing) or that it irrevocably waives (solely to the extent necessary to permit the Closing to occur in accordance with this
Section 8.1(i)
) in writing
any unsatisfied conditions in
Section 7.2
that may be waived
under applicable law; (C) the Merger shall not have been consummated within three (3) Business Days after the date on which Parent is required to consummate the Merger pursuant to
Section 1.3
; and (D) at all times during such three (3) Business Day period described in clause (C), the Company stood
ready, willing and able to consummate the Merger;
provided
, that notwithstanding anything in
Section 8.1(b)
to the contrary, no party shall be
permitted to terminate this Agreement pursuant to
Section 8.1(b)
during such three Business Day period following delivery of the notice referred to in clause (B) above.
8.2
Effect of Termination.
In the event of valid termination of this Agreement as provided in
Section 8.1
, written notice thereof
shall be given to the other party or parties hereto, specifying the provision hereof pursuant to which such termination is made and this Agreement shall immediately become void and there shall be no
liability or obligation on the part of the Parent, the Company, the Merger Sub or their respective Representatives, stockholders or Affiliates;
provided
that, subject to
Section 10.4(b)
and
Section 10.10(c)
, (a) any such termination
shall not relieve any party hereto from liability for any Willful Breach prior to such valid termination and (b) the provisions of
Section 6.3(a)
(Confidentiality), this
Section 8.2
(Effect of Termination),
Section 8.3
(Fees and Expenses),
Article IX
(Defined Terms),
Article X
(Miscellaneous), the expense reimbursement and indemnification provisions of
Sections 6.11(c)
,
6.15
,
6.16
and
6.17
, the Confidentiality Agreement and the Limited Guarantee shall remain in full force and effect and
survive any valid termination of this Agreement
in accordance with their respective terms and conditions.
8.3
Fees and Expenses.
(a) All
fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees and expenses,
whether or not the Merger is consummated, except as set forth in this
Section 8.3
.
(b) The
Company shall pay the Parent the Company Termination Fee (less, if applicable, the Parent Expenses previously paid to Parent) in the event that this Agreement is
terminated:
(i) by
the Parent pursuant to
Section 8.1(e)
or
Section 8.1(b)
under circumstances in which Parent would have been entitled to terminate this Agreement pursuant to
Section 8.1(e)
;
(ii) by
the Company pursuant to
Section 8.1(f)
; or
(iii) by
Parent pursuant to
Section 8.1(g)
or either the Parent or the Company pursuant to
Section 8.1(b)
(if such termination occurs prior to obtaining
the Company Stockholder Approval) or
Section 8.1(d)
, if (A) before the date of such termination, an Acquisition Proposal shall have been publicly announced, made or disclosed
and not irrevocably withdrawn without encouragement by or consultation with (excluding arms-length negotiations regarding the terms of the Acquisition Proposal) the Company or its Representatives,
(B) at the time of the stockholder vote, the Financing Letters shall be in full force and effect or shall have been replaced by alternative financing commitments in corresponding amounts
sufficient to consummate the Transactions and (C) within 12 months after the date of termination, the Company shall have entered into a definitive agreement with respect to any
Acquisition Proposal (which is subsequently consummated) or shall have consummated any Acquisition Proposal;
provided
,
however
, that, for purposes of this
Section 8.3(b)
, all references to "20%" and "80%" in the
definition of "Acquisition Proposal" shall be deemed to be references to "50%." Any fee
due
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under
Section 8.3(b)(i)
shall be paid to the Parent by wire transfer of same-day funds within two Business Days after the date of termination of
this Agreement. Any fee due under
Section 8.3(b)(ii)
shall be paid to the Parent by wire transfer of same-day funds on or before the date of (and
as a condition to the effectiveness of) such termination of this Agreement. Any fee due under
Section 8.3(b)(iii)
shall be paid to the Parent by
wire transfer of same-day funds within two (2) Business Days after the date on which the transaction referenced in clause (C) of
Section 8.3(b)(iii)
is consummated. In no event shall the
Company be required to pay the Company Termination Fee on more than one occasion,
whether or not the Company Termination Fee may be payable under more than one provision of this Agreement at the same or at different times and the occurrence of different events.
(c) In
the event that the Company shall terminate this Agreement pursuant to
Section 8.1(h)
or
Section 8.1(i)
(or pursuant to
Section 8.1(b)
under circumstances in which the Company
would have been entitled to terminate the Agreement pursuant to
Section 8.1(h)
or
Section 8.1(i)
), then Parent shall pay to the Company as
promptly as reasonably practicable (and, in any event, within two Business Days
following such termination) the Parent Termination Fee. In no event shall Parent be required to pay the Parent Termination Fee on more than one occasion, whether or not the Parent Termination Fee may
be payable under more than one provision of this Agreement at the same or at different times and the occurrence of different events.
(d) If
either the Company or the Parent terminates this Agreement pursuant to
Section 8.1(d)
and at the time of the
stockholder vote, the Financing Letters shall be in full force and effect or shall have been replaced with letters providing for alternative financing commitments in a corresponding amount sufficient
to consummate the Transactions, the Company shall pay to Parent as promptly as reasonably practicable (and, in any event, within two Business Days following the delivery by Parent of an invoice
therefor) any and all out-of-pocket fees and expenses (including fees and expenses of financial advisors, outside legal counsel, accountants, experts, consultants and other Representatives) actually
incurred by the Parent or on its behalf in connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of this Agreement and the transactions
contemplated hereby (the "
Parent Expenses
"), up to a maximum amount of $15,000,000;
provided
, that the
payment by the Company of the Parent Expenses pursuant to this
Section 8.3(d)
shall not relieve the Company for damages resulting from a Willful
Breach. To the extent a Company Termination Fee becomes payable, any payment previously made pursuant to this
Section 8.3(d)
shall be credited
against such obligation of the Company to pay the Company Termination Fee.
(e) Each
of the parties hereto acknowledges that the agreements contained in this
Section 8.3
are an integral part of
the Transactions, that the parties hereto would not enter into this Agreement absent such agreement and that each of the Company Termination Fee and the Parent Termination Fee is not a penalty.
Accordingly, if the Company or Parent, as the case may be, fails to timely pay any amount due pursuant to this
Section 8.3
, and, in order to
obtain the payment, Parent or the Company, as the case may be, commences a suit, action or proceeding which results in a final and non-appealable judgment against the other party, with respect to
Parent or Merger Sub, or parties, with respect to the Company, for the applicable payment set forth in this
Section 8.3
, such paying party shall
pay the other party or parties, as applicable, its or their reasonable and documented out-of-pocket costs and expenses (including reasonable and documented out-of-pocket attorneys' fees) in connection
with such suit, action or proceeding, together with interest on such amount at the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made through
the date such payment was actually received.
8.4
Amendment.
This Agreement may be amended, modified or supplemented by the parties hereto by
action taken or authorized by their respective Boards of Directors at any time
prior to the
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Effective
Time, whether before or after receipt of the Company Stockholder Approval;
provided
,
however
,
that after receipt of the Company Stockholder Approval, no amendment may be made that pursuant to applicable law requires further approval or adoption by the stockholders of the Company without such
further approval or adoption. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically
designated as an amendment, modification or supplement hereto (as applicable), signed on behalf of each of the parties hereto. Notwithstanding anything to the contrary contained herein,
Section 10.4
,
Section 10.5
,
Section 10.9
,
Section 10.10
,
Section 10.11
and
Section 10.12
and this last sentence of
Section 8.4
(and any other provision of this
Agreement to the extent an amendment, supplement, waiver or other modification of such provision
would modify the substance of such sections) may not be amended, waived, modified or supplemented in any manner to the extent such amendment, waiver, supplement or other modification is adverse to the
Financing Sources without the prior written consent of the Financing Sources.
8.5
Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action taken
or authorized by their respective Boards of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. Such extension or waiver shall not apply to any time for performance, inaccuracy
in any representation or warranty, or noncompliance with any agreement or condition, as the case may be, other than that which is specified in the extension or waiver. The failure of any party hereto
to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.
8.6
Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement
pursuant to
Section 8.1
, an amendment, modification or supplement of this
Agreement pursuant to
Section 8.4
or an extension or waiver of this Agreement pursuant to
Section 8.5
shall, in order to be effective, require
action by the respective Board of Directors of the applicable parties.
ARTICLE IX
DEFINED TERMS
The following capitalized terms shall have the respective meanings set forth below:
"
2018 Notes
" has the meaning set forth in
Section 6.17(a)
.
"
2023 Notes
" has the meaning set forth in
Section 6.17(a)
.
"
Acquisition Proposal
" means any written (a) proposal or offer for a merger, consolidation, dissolution, recapitalization, share
exchange, tender offer or other business combination involving the Company and its Subsidiaries (other than (i) mergers, consolidations, recapitalizations, share exchanges or other business
combinations involving solely the Company and/or one or more Subsidiaries of the Company and (ii) mergers, consolidations, recapitalizations, share exchanges, tender offers or other business
combinations that if consummated would result in the holders of the outstanding shares of Company Common Stock immediately prior to such transaction owning more than 80% of the equity securities of
the Company, or any successor or acquiring entity, immediately thereafter), (b) proposal for the direct or indirect disposition, sale or issuance by the Company of 20% or more of any class of
its equity securities or (c) proposal or offer to acquire, combine, license, reorganize or subject to a joint venture, in any manner, directly or indirectly, 20% or more of the equity
securities or consolidated total assets of the Company and its Subsidiaries, in each case other than the Transactions or any offer or proposal by Parent or any Subsidiary of Parent.
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"
Affiliate
" when used with respect to any Person, means any other Person who is an "affiliate" of that first Person within the meaning of
Rule 405 promulgated under the Securities Act, except as otherwise set forth in
Section 4.8
.
"
Agreed Upon Form Comfort Letter
" means a comfort letter from the Company's independent auditors covering the matters set forth in
Section 6.11
of the Company
Disclosure Schedule.
"
Agreement
" has the meaning set forth in the preamble.
"
Alternative Acquisition Agreement
" has the meaning set forth in
Section 6.1(b)(ii)
.
"
Antitrust Laws
" means the HSR Act, the Sherman Act, the Clayton Act, the Federal Trade Commission Act, and any other applicable federal,
state or foreign law, regulation or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade.
"
Bankruptcy and Equity Exception
" has the meaning set forth in
Section 3.4(a)
.
"
Business Day
" means any day on which the principal offices of the SEC in Washington, DC are open to accept filings other than a day on
which banking institutions located in Boston, Massachusetts are permitted or required by law, executive order or governmental decree to remain closed.
"
Capitalization Date
" means the close of business on June 26, 2017.
"
Carveout Transaction
" shall mean an internal reorganization of certain of the assets, liabilities and business operations of the Company
and its Subsidiaries into separate internal organizations for the United States retail, Canadian retail (including the .ca business), and North American delivery businesses (including the United
States ecommerce business).
"
Certificate
" means a certificate that immediately prior to the Effective Time represents shares of Company Common Stock.
"
Certificate of Merger
" has the meaning set forth in
Section 1.2
.
"
Closing
" means the closing of the Merger.
"
Closing Date
" means the date on which the Closing occurs.
"
Code
" means the Internal Revenue Code of 1986, as amended.
"
Company
" has the meaning set forth in the preamble.
"
Company 401(k) Plan
" means the Staples, Inc. Employees' 401(k) Savings Plan.
"
Company Balance Sheet
" means the consolidated unaudited balance sheet of the Company as of April 29, 2017.
"
Company Board
" means the Board of Directors of the Company (together with any duly constituted and authorized committee thereof).
"
Company Board Recommendation Change
" has the meaning set forth in
Section 6.1(b)(i)
.
"
Company Common Stock
" means the common stock, par value $0.0006 per share, of the Company.
"
Company Disclosure Schedule
" means the disclosure schedule delivered by the Company to the Parent and the Merger Sub concurrently with
the execution of this Agreement and dated as of the date of this Agreement.
"
Company Employee Plans
" means all Employee Benefit Plans maintained, or contributed to, by the Company, any of the Company's Subsidiaries
or any of their ERISA Affiliates or for which the Company or any of the Company's Subsidiaries has any liability or obligation (including contingent liability or obligation).
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"
Company Employees
" means, as of any date, each employee of the Company or any of its Subsidiaries as of such
date.
"
Company ESPP
" means the Company's 2012 Employee Stock Purchase Plan, as amended.
"
Company Intellectual Property
" means any Intellectual Property owned by the Company or its Subsidiaries that is material to the business
of the Company and its Subsidiaries, taken as a whole, as currently conducted.
"
Company July 2017 RSUs
" mean restricted stock units with respect to shares of Company Common Stock granted in July 2017 and described in
Section 5.1(b)
of the
Company Disclosure Schedule.
"
Company Leases
" means all leases and subleases pursuant to which the Company or any of its Subsidiaries holds any Leased Real Property,
including the right to all security deposits and other recoverable amounts deposited by or on behalf of the Company or any of its Subsidiaries thereunder.
"
Company Material Adverse Effect
" means any effect, change, event, occurrence or development that is materially adverse to the business,
financial condition or results of operations of the Company and its Subsidiaries, taken as a whole;
provided
,
however
, that no effect, change, event,
occurrence or development (by itself or when aggregated or taken together with any and all other effects,
changes, events, occurrences or developments) to the extent resulting from, arising out of, attributable to, or related to any of the following shall be deemed to be or constitute a "Company Material
Adverse Effect," and no effect, change, event, occurrence or development (by itself or when aggregated or taken together with any and all other such effects, changes, events, occurrences or
developments) to the extent resulting from, arising out of, attributable to, or related to any of the following shall be taken into account when determining whether a "Company Material Adverse Effect"
has occurred or may, would or could occur: (a) general economic conditions (or changes in such conditions) in the United States or any other country or region in the world, or conditions in the
global economy generally; (b) conditions (or changes in such conditions) in the securities markets, credit markets, currency markets or other financial markets in the United States or any other
country or region in the world, including (i) changes in interest rates in the United States or any other country or region in the world and changes in exchange rates for the currencies of any
countries and (ii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in
the United States or any other country or region in the world; (c) conditions (or changes in such conditions) in the industries in which the Company and its Subsidiaries conduct business;
(d) political conditions (or changes in such conditions) in the United States or any other country or region in the world or acts of war, sabotage or terrorism (including any escalation or
general worsening of any such acts of war, sabotage or terrorism) in the United States or any other country or region in the world; (e) earthquakes, hurricanes, tsunamis, tornadoes, floods,
mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world; (f) the announcement of
this Agreement or the pendency or consummation of the transactions contemplated hereby, including (i) the identity of the Parent and (ii) the loss or departure of officers or other
employees of the Company or any of its Subsidiaries directly resulting from, arising out of, attributable to, or related to the Transactions (provided that this clause (f) shall not apply to
any representation or warranty in
Section 3.4(b)
and, solely to the extent related thereto, the condition set forth in
Section 7.3(a)
);
(g) the taking of any action expressly required by this Agreement (other than any action required solely by the first
sentence of
Section 5.1
) or the failure to take any action expressly prohibited by this Agreement; (h) changes in law or other legal or
regulatory conditions (or the interpretation thereof) or changes in GAAP or other accounting standards (or the interpretation thereof); (i) changes in the Company's stock price or the trading
volume of the Company's stock, or any failure by the Company to meet any public estimates or expectations of the Company's revenue, earnings or other financial performance or results of
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operations
for any period, or any failure by the Company or any of its Subsidiaries to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results
of operations (but not, in each case, the underlying cause of such changes or failures, unless such changes
or failures would otherwise be excepted from this definition); or (j) any litigation related to this Agreement, the Merger or other transactions contemplated hereby brought by any of the
current or former stockholders of the Company (on their own behalf or on behalf of the Company) against the Company, the Merger Sub, the Parent or any of their directors or officers; except to the
extent such effects, changes, events, occurrences or developments to the extent resulting from, arising out of, attributable to or related to the matters described in the foregoing clauses (a)
through (e) and (h) disproportionately adversely affect the Company and its Subsidiaries, taken as a whole, as compared to other companies that conduct business in the countries and
regions in the world and in the industries in which the Company and its Subsidiaries conduct business in any material respect (in which case, such adverse effects (if any) shall be taken into account
when determining whether a "Company Material Adverse Effect" has occurred or may, would or could occur solely to the extent they are disproportionate).
"
Company Material Contract
" means any Contract to which the Company or one of its Subsidiaries is a party or by which any of them or any
of their respective properties, rights or assets are bound:
(a) pursuant
to which the Company and its Subsidiaries spent, in the aggregate, during the fiscal year ended December 31, 2016, or expect to spend, in the aggregate,
during the fiscal year ended December 31, 2017, more than (i) in the case of agreements or contracts for the purchase of merchandise for resale, $100,000,000 (or, for purposes of
Section 5.1(k)
only, $50,000,000), (ii) $10,000,000 in the case of agreements or contracts with a Significant Supplier and (iii) in
the case of all other agreements or contracts, $20,000,000 (or, for purposes of
Section 5.1(k)
only, $7,500,000), in each case, other than
Contracts referred to in clause (m) below or otherwise permitted under
Section 5.1(h)
;
(b) which
contains (i) any non-competition provision or that otherwise prohibits or otherwise restricts, in any material respect, the Company or any of its
Subsidiaries from freely engaging in any business anywhere in the world, (ii) any "most favored nation" or similar provision to the benefit of any other party or (iii) "exclusivity",
rights of first refusal, rights of first negotiation, rights of first offer or any similar requirements in favor of a third party, in each case (clauses (i) through (iii)) other than such
rights set forth in real estate leases or Liens of record or that would not reasonably be expected to be material to the business of the Company and its Subsidiaries, taken as whole;
(c) any
"material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to the Company and its Subsidiaries;
(d) provides
for or governs the formation, creation, operation, management or control of any partnership, joint venture or similar arrangement;
(e) pursuant
to which the Company has continuing guarantee, "earn-out" or other contingent purchase price obligations (other than indemnification or performance guarantee
obligations provided for in the
Ordinary Course of Business), in each case that would reasonably be expected to result in payments in excess of $1,000,000;
(f) which
constitutes a settlement, conciliation or similar agreement (A) that has been entered with any Governmental Entity since January 1, 2015 and is
limited to the payment of money not in excess of $500,000 individually or $5,000,000 in the aggregate, (B) pursuant to which the Company has material payment obligations to a Governmental
Entity after the date of this Agreement or (C) that would otherwise limit the operation of the Company in any material respect after the Closing;
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(g) pursuant
to which any indebtedness for borrowed money of the Company is outstanding with respect to a principal amount in excess of $100,000,000 (or, for purposes of
Section 5.1(k)
only, $20,000,000);
(h) was
entered into after January 1, 2015 and provides for the acquisition or disposition, directly or indirectly (by merger or otherwise), of a business, capital
stock, other equity interests or all or substantially all the assets of another Person;
(i) that
would be required to be disclosed by Item 404(a) of Regulation S-K promulgated under the Exchange Act;
(j) that
is a Company Lease with annual base rental payments in excess of $2,000,000 (or, for purposes of
Section 5.1(k)
only, $500,000);
(k) for
the employment or engagement of any officer, employee or other individual on a full-time, part-time or consulting basis that provides for annual compensation
(assuming any bonuses are paid at target) of $400,000 (or, for purposes of
Section 5.1(k)
only, $200,000), other than offer letters entered in
the Ordinary Course of Business providing for at will employment and terminable upon notice without any liability to the Company or any of its Subsidiaries (other than for accrued but unpaid
compensation through the termination date);
(l) any
change in control, transaction bonus, retention or similar contract with payments or other benefits or rights triggered by the execution of this Agreement or the
transactions contemplated thereby;
(m) that
requires any capital commitment or capital expenditure (or series of capital expenditures) or any loan or investment, by the Company or any of its Subsidiaries in
an amount in excess of $20,000,000 (or, for purposes of
Section 5.1(k)
only, $5,000,000 or such other amount as is permitted under
Section 5.1(h)
) individually, other than any purchase order or Contract for supply, inventory or trading stock acquired in the Ordinary Course of
Business or rental payments made under real property leases;
(n) any
prime Contract of any kind, between the Company or any of its Subsidiaries, on the one hand, and (a) any Governmental Entity, (b) any prime contractor
of a Governmental Entity in its capacity as a prime contractor or (c) any subcontractor at any tier with respect to any Contract of a type described in clauses (a) or (b) above,
on the other hand, in each case that provides for the sale of goods and services for annual payments in excess of $10,000,000.
"
Company Performance Share Awards
" mean any performance-based share units with respect to shares of Company Common Stock granted under any
Company Stock Plan or otherwise.
"
Company Permits
" has the meaning set forth in
Section 3.16
.
"
Company Preferred Stock
" has the meaning set forth in
Section 3.2(a)
.
"
Company RSUs
" mean restricted stock units with respect to shares of Company Common Stock granted under any Company Stock Plan or
otherwise, other than the Company July 2017 RSUs.
"
Company SEC Reports
" has the meaning set forth in
Section 3.5(a)
.
"
Company SERP
" means the Staples, Inc. Supplemental Executive Retirement Plan.
"
Company Severance Policy
" means the Company's severance policy as in effect on the date hereof (a copy of which has been made available
to Parent).
"
Company Stock Option
" means each option to purchase shares of Company Common Stock granted pursuant to any Company Stock Plan or
otherwise.
"
Company Stock Plan
" means any stock incentive or equity-related plan of the Company.
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"
Company Stockholder Approval
" means the adoption of this Agreement by the holders of a majority of the outstanding shares of Common Stock
entitled to vote on such matter at the Company Stockholders Meeting.
"
Company Stockholders Meeting
" has the meaning set forth in
Section 6.14(a)
.
"
Company Termination Fee
" means a termination fee of $171,000,000 in cash.
"
Company's Knowledge
" or a phrase of similar import means the actual knowledge of the individuals identified in
Section 10.1
of the Company Disclosure Schedule
after reasonable inquiry of the employee with primary responsibility for the applicable subject
matter.
"
Compliant
" means, with respect to the Required Financial Information, that (a) such Required Financial Information, taken as a
whole, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such Required Financial Information not misleading, in light of the
circumstances under which the statements contained in such Required Financial Information were made, (b) in the case of the Required Financial Information delivered in connection with the
offering of high yield debt securities as part of the Debt Financing is, and remains throughout the Marketing Period, compliant in all material respects with all applicable requirements of
Regulations S-K and S-X under the Securities Act applicable to offerings of debt securities on a registration statement on Form S-1 that are applicable to such Required Financial
Information (other than such provisions for which compliance is not customary in a Rule 144A offering of high yield debt securities and, for the avoidance of doubt, provisions to the extent
solely applicable to any Excluded Information), (c) the Company's auditors have not objected to the use of their audit opinions related to any audited financial statements included in such
Required Financial Information and any interim quarterly financial statements included in such Required Financial Information have been reviewed by the Company's independent auditors as provided in
the procedures specified by the Public Company Accounting Oversight Board in AU Section 722 and (d) in the case of the Required Financial Information delivered in connection with the
offering of high yield debt securities as part of the Debt Financing and any pro forma financial statements contained in the offering memorandum and any marketing materials utilized as part of the
Debt Financing, the Company's auditors have confirmed that they are prepared to issue the Agreed Upon Form Comfort Letter (by delivering drafts thereof) when customarily required to be delivered
during the Marketing Period.
"
Confidentiality Agreement
" means the Confidentiality and Standstill Agreement, dated as of December 21, 2016, between the Company
and Sycamore Partners Management, L.P.
"
Contract
" means, with respect to any Person, any agreement, lease, sublease, license, contract, note, bond, mortgage, indenture, deed of
trust, franchise, concession or other legally binding arrangement to which such Person or any of its Subsidiaries is a party or by which any of their respective properties or assets is bound.
"
Credit Facility
" means the Credit Agreement, dated as of November 22, 2016, as amended, supplemented or otherwise modified from
time to time, by and among the Company, Bank of America, N.A. and the other lenders named therein, Bank of America, N.A., as administrative agent for the lenders, and Barclays Bank PLC, HSBC
Bank USA, National Association, MUFG Union Bank N.A. and Wells Fargo Bank, National Association as co-syndication agents for the lenders.
"
Current D&O Insurance
" means the current directors' and officers' liability insurance policies maintained by the Company.
"
Debt Financing Sources
" means the financial institutions identified in the Debt Commitment Letter, together with the agents, arrangers,
lenders and other entities that have committed to provide or arrange or otherwise entered into agreements in connection with all or any part of the Debt Financing and each other Person that commits to
provide or otherwise provides the Debt Financing in
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accordance
with this Agreement, whether by joinder to the Debt Commitment Letter or otherwise, including the parties to any joinder agreements, indentures or credit agreements entered into in
connection therewith, together with their respective affiliates and their respective affiliates' officers, directors, employees, controlling persons, agents and representatives and their respective
successors and assigns.
"
Debt Tender Offer
" has the meaning set forth in
Section 6.17(c)
.
"
DGCL
" means the General Corporation Law of the State of Delaware.
"
Discharge
" has the meaning set forth in
Section 6.17(d)
.
"
Dissenting Shares
" means shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by a
holder who has not voted in favor of the Merger or consented thereto in writing and properly demands appraisal rights of such shares pursuant to, and who is complying in all respects with, the
provisions of Section 262 of the DGCL (until such time as such holder effectively withdraws, fails to perfect or otherwise loses such holder's appraisal rights under the DGCL with respect to
such shares, at which time such shares shall cease to be Dissenting Shares).
"
Effective Time
" has the meaning set forth in
Section 1.2
.
"
Employee Benefit Plan
" means any "employee pension benefit plan" (as defined in Section 3(2) of ERISA), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), in each case whether or not subject to ERISA, and any other agreement, plan, policy or arrangement involving direct or indirect compensation
or benefits, including insurance coverage, severance benefits, change in control, retention, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement compensation, vacation, fringe benefit, and all unexpired severance and employment agreements for the benefit of, or relating
to, any current or former officer, employee or other service provider of the Company or any of its Subsidiaries or an ERISA Affiliate (or any of their respective beneficiaries), but excludes any plan,
agreement, or arrangement required to be maintained by non-U.S. law.
"
Environmental Law
" means any applicable law, regulation, order, decree or permit requirement of any governmental jurisdiction relating
to: (a) the protection, investigation or restoration of the environment, human health and safety, or natural resources, (b) the handling, use, storage, treatment, transport, disposal,
release or threatened release of, or contamination by, any Hazardous Substance or (c) noise, odor or wetlands protection.
"
ERISA
" means the Employee Retirement Income Security Act of 1974, as amended.
"
ERISA Affiliate
" means any entity which is a member of (a) a controlled group of corporations (as defined in Section 414(b)
of the Code), (b) a group of trades or businesses under common control (as defined in Section 414(c) of the Code) or (c) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company or any of its Subsidiaries.
"
Exchange Act
" means the Securities Exchange Act of 1934, as amended.
"
Excluded Information
" has the meaning set forth in the definition of Required Financial Information.
"
Financial Advisors
" has the meaning set forth in
Section 3.18
.
"
Financing Sources
" means the Equity Financing Sources and the Debt Financing Sources.
"
GAAP
" means United States generally accepted accounting principles.
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"
Governmental Entity
" means any foreign or domestic court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority, agency or instrumentality.
"
Hazardous Substance
" means: (a) any substance that is regulated by or which falls within the definition of a "hazardous
substance," "hazardous waste" or "hazardous material" pursuant to any Environmental Law or (b) any petroleum product or by-product, asbestos-containing material, polychlorinated biphenyls,
radioactive materials or radon.
"
HSR Act
" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
"
Indemnified Party
" means each Person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective
Time a director, manager or officer of the Company or any of its Subsidiaries.
"
Indenture
" has the meaning set forth in
Section 6.17(a)
.
"
Intellectual Property
" means (a) patents, trademarks, trade names, domain names, copyrights, designs and trade secrets,
(b) applications for and registrations of such patents, trademarks, service marks, trade names, domain names, copyrights and designs, (c) processes, formulae, methods, schematics,
technology,
know-how, computer software programs and applications and (d) other tangible or intangible proprietary or confidential information and materials.
"
Intervening Event
" means any material event, development or occurrence that was not known to the Company Board as of the date hereof (or,
if known, the consequences of which were not known to or reasonably foreseeable by the Company Board as of the date of this Agreement) and becomes known to the Company Board after the date hereof and
prior to the Company Stockholder Approval;
provided
,
however
, that in no event shall the receipt,
existence or terms of an Acquisition Proposal or any matter relating thereto or consequences thereof constitute or be deemed to be an Intervening Event.
"
July 2017 RSU Vesting Date
" has the meaning set forth in
Section 2.3(b)(iii)
.
"law"
means any law (including common law), act, statute, code, order, judgment, injunction, ruling, decree or writ, ordinance or regulation of any Governmental Entity.
"
Leased Real Property
" means all leasehold or subleasehold estates and other contractual rights to use or occupy any land, buildings,
structures, improvements, fixtures or other interest in real property held by the Company or any of its Subsidiaries for (a) a retail store or (b) other facilities in excess of 20,000
square feet.
"
Lien
" means any mortgage, security interest, pledge, lien, charge or encumbrance, other than (a) mechanics', carriers', workmen's,
warehousemen's, repairmen's or other statutory liens arising in the Ordinary Course of Business, (b) liens for Taxes, assessments and other governmental charges and levies that are not due and
payable or that are being contested in good faith by appropriate proceedings, (c) liens related to the Financing (including any permitted alternative financing) or arising from actions of the
Parent or the Merger Sub, (d) liens, defects or irregularities in title, easements, rights-of-way, covenants, restrictions, and other, similar matters of record that are shown in public
records, (e) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business, (f) liens relating to capitalized
lease financings or purchase money financings that have been entered into in the Ordinary Course of Business, (g) liens arising under applicable securities laws, (h) any lien or
encumbrance arising out of any license to Company Intellectual Property granted in the Ordinary Course of Business, (i) zoning, building and other similar codes and regulations, and
(j) any conditions that would be disclosed by a current, accurate survey or physical inspection.
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"
Marketing Period
" means the first period of 18 consecutive Business Days throughout which (i) Parent shall have all of the
Required Financial Information and such Required Financial Information is Compliant and (ii) the conditions set forth in
Section 7.1
shall
be satisfied or waived (other than those conditions that by their nature can only be satisfied at the Closing) and nothing has occurred and no condition exists that would cause any of the conditions
set forth in
Section 7.3
to fail to be satisfied, assuming that the Closing Date were to be scheduled for any time during such 18 consecutive
Business Day period;
provided
that the Marketing Period will not be deemed to commence if prior to the completion of the Marketing Period,
(A) the Company's auditors shall have withdrawn their audit opinion contained in the Required Financial Information, (B) the Company issues a public statement indicating its intent to
restate any historical financial statements of the Company or that any such restatement is under consideration or may be a possibility, in which case the Marketing Period shall not be deemed to
commence unless and until such restatement has been completed and the relevant financial statements have been amended or the Company has announced that it has concluded that no restatement shall be
required in accordance with GAAP, (C) the Company shall have been delinquent in filing any Annual Report on Form 10-K or Quarterly Report on Form 10-Q, in which case the Marketing
Period will not be deemed to commence unless and until all such delinquencies have been cured or (D) the Required Financial Information ceases to be Compliant or would be required to be updated
in order to be Compliant on any day during such 18 consecutive Business Day period, in which case the Marketing Period shall not be deemed to commence until the receipt by Parent of such Compliant
updated Required Financial Information;
provided further
that the Marketing Period shall end on any earlier date that is the date on which all of the
Debt Financing or any alternative financing as set forth in
Section 6.11
is obtained. If the Company shall in good faith reasonably believe it
has delivered the applicable Required Financial Information, it may deliver to Parent a written notice to that effect (stating when it believes it completed such delivery), in which case the Marketing
Period shall be deemed to have commenced on the date specified in that notice unless Parent in good faith reasonably believes the Company has not completed delivery of the Required Financial
Information and, within two Business Days after the delivery of such notice by the Company, delivers a written notice to the Company to that effect (stating with reasonable specificity which Required
Financial Information Parent reasonably believes the Company has not delivered); provided that (i) each of July 3, 2017, July 4, 2017, July 5, 2017, November 23,
2017 and November 24, 2017 shall not be considered a Business Day for the purposes of the Marketing Period (for the avoidance of doubt, the aforementioned dates shall be excluded for purposes
of, but shall not reset, the 18 consecutive Business Day period), (ii) the Marketing Period shall either end on or prior to August 18, 2017 or, if the Marketing Period has not ended on
or prior to August 18, 2017, then the Marketing Period shall commence no earlier than September 5, 2017 and (iii) the Marketing Period shall either end on or prior to
December 15, 2017 or, if the Marketing Period has not ended on or prior to December 15, 2017, then the Marketing Period shall commence no earlier than January 3, 2017.
"
Maximum Premium
" means 300% of the last annual premium paid prior to the Effective Time for the Current D&O Insurance (which the Company
represents is set forth in
Section 6.6
of the Company Disclosure Schedule).
"
Merger
" has the meaning set forth in the Recitals.
"
Merger Consideration
" has the meaning set forth in
Section 2.1(c)
.
"
Merger Sub
" has the meaning set forth in the preamble.
"
New Plans
" means employee benefit plans of the Parent and its Subsidiaries providing benefits to any Company Employees after the
Effective Time.
"
Notes
" has the meaning set forth in
Section 6.17(a)
.
"
Offer Documents
" has the meaning set forth in
Section 6.17(f)
.
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"
Old Plans
" has the meaning set forth in
Section 6.8(b)
.
"
Ordinary Course of Business
" means the ordinary course of business consistent in all material respects with past practice.
"
Outside Date
" means December 22, 2017.
"
Owned Real Property
" means all land, together with all buildings, structures, improvements and fixtures located thereon, and all
easements and other rights and interests appurtenant thereto, owned by the Company or any of its Subsidiaries.
"
Parent
" has the meaning set forth in the preamble.
"
Parent Expenses
" has the meaning set forth in
Section 8.3(d)
.
"
Parent Material Adverse Effect
" means any change, event or development that would reasonably be expected to prevent, or materially impair
or delay, the ability of the Parent or the Merger Sub to consummate the Merger or any of the other Transactions or otherwise perform any of its obligations under this Agreement.
"
Parent Termination Fee
" means a termination fee of $343,000,000 in cash.
"
Paying Agent
" means a bank or trust company mutually acceptable to the Parent and the Company, which shall be engaged by Parent to act as
paying agent for the payment of the Merger Consideration to the holders of shares of Company Common Stock outstanding immediately prior to the Effective Time.
"
Payment Fund
" means cash in an amount sufficient to make payment of the Merger Consideration pursuant to
Section 2.1(c)
in exchange for all of the outstanding
shares of Company Common Stock (other than shares of Company Common Stock cancelled in
accordance with
Section 2.1(b)
).
"
Person
" means any individual, corporation, partnership, limited partnership, limited liability company, joint venture, association,
trust, estate, Governmental Entity, association, enterprise, unincorporated organization or other entity.
"
Pre-Closing Period
" means the period commencing on the date of this Agreement and ending at the Effective Time or such earlier time as
this Agreement may be terminated in accordance with its terms.
"
Prohibited Amendment
" has the meaning set forth in
Section 6.11
.
"
Proxy Statement
" has the meaning set forth in
Section 6.14(a)
.
"
Qualified Person
" means any Person or group of Persons who has made an Acquisition Proposal that did not result from a material breach of
Section 6.1
that the
Company Board determines in good faith (after consultation with outside counsel and its financial advisor) is, or could
reasonably be expected to
lead to, a Superior Proposal;
provided
,
however
, that such Qualified Person shall cease being a
"Qualified Person" if such Acquisition Proposal is withdrawn or the Company Board determines in good faith (after consultation with outside counsel and its financial advisor) such Acquisition Proposal
is not, and could not reasonably be expected to lead to, a Superior Proposal.
"
Recommendation Change Notice
" has the meaning set forth in
Section 6.1(b)
.
"
Redacted Fee Letter
" means the fee letter referred to in the Debt Commitment Letter in which the only redactions relate to fee amounts,
"market flex" provisions, "securities demand" provisions,
provided
that such redactions do not relate to any terms that could adversely affect the
conditionality, enforceability, availability, termination or aggregate principal amount of the Debt Financing or other funding being made available by such financing source.
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"
Release
" means any release, spill, emission, leaking, injection, emptying, pumping, escaping, dumping, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into or through the indoor or outdoor environment.
"
Reporting Tail Endorsement
" means a six (6) year extended reporting period endorsement with respect to the Current D&O Insurance.
"
Representatives
" means, with respect to any Person, such Person's directors, managers, officers, employees, investment bankers,
attorneys, accountants and other advisors or representatives.
"
Required Financial Information
" means (a) all of the financial statements (and related audit reports) described in
paragraph 10 of
Exhibit E
of the Debt Commitment Letter as in effect as of the date hereof and all financial information and data derived
from the historical books and records of the Company and its Subsidiaries that is required to permit Parent and Merger Sub to prepare the pro forma financial statements required pursuant to
paragraphs 9 and 11(a) of
Exhibit E
of the Debt Commitment Letter as in effect as of the date hereof, and provided that Parent shall be
responsible for the preparation of any pro forma financial statements and pro forma adjustments giving effect to the Transactions and the Carveout Transactions for use in connection with the offering
of the Financing, it being understood that the Company shall cooperate with Parent in the preparation of such pro forma information to the extent its cooperation relates to financial information and
data derived from the Company's historical books and records, and (b) such other pertinent and customary financial and other information (other than pro forma financial statements) as Parent
shall reasonably request of the type
and form that are customarily included in private placements of non-convertible debt securities pursuant to Rule 144A promulgated under the Securities Act (including information required by
Regulation S-X and Regulation S-K under the Securities Act, which is understood not to include any Excluded Information) and syndicated term loan financings;
provided
that in no event shall
the Required Financial Information be deemed to include or shall the Company otherwise be required to provide
(A) consolidating financial statements, separate subsidiary financial statements and other financial statements, data and analysis that would be required by Sections 3-09, 3-10 and 3-16
of Regulation S-X and Item 402 of Regulation S-K, (B) information regarding executive compensation and related party disclosure related to SEC Release Nos. 33-8732A,
34-54302A and IC-27444A, (C) any description of all or any component of the Financing, including any such description to be included in liquidity and capital resources disclosure or any
"description of notes", or other information customarily provided by the Financing sources or their counsel, (D) risk factors relating to all or any component of the Financing, (E) any
information regarding any post-Closing or pro forma financial statements, post-Closing pro forma adjustments desired to be incorporated into any information used in connection with the Financing
(including any synergies or cost savings), projections, ownership or an as adjusted capitalization table (other than information to be provided by the Company pursuant to clause (a)) or
(F) other information customarily excluded from a Rule 144A offering memorandum (the information described in clauses (A) through (F), the "
Excluded
Information
").
"
Restrictive Order
" has the meaning set forth in
Section 6.4(a)(iv)
.
"
RSU Vesting Date
" has the meaning set forth in
Section 2.3(b)(ii)
.
"
Sarbanes-Oxley Act
" means the Sarbanes-Oxley Act of 2002, as amended.
"
SEC
" means the United States Securities and Exchange Commission.
"
Secretary of State
" means the Secretary of State of the State of Delaware.
"
Securities Act
" means the Securities Act of 1933, as amended.
"
Significant Supplier
" has the meaning set forth in
Section 3.22
.
"
Solvent
" has the meaning set forth in
Section 4.7
.
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"
Specified Time
" means the earlier of (a) time at which this Agreement is terminated in accordance with the terms hereof and
(b) the Effective Time.
"
Subsidiary
" means, with respect to any Person, another Person (a) of which such first Person owns or controls, directly or
indirectly, securities or other ownership interests representing (i) more than 50% of the voting power of all outstanding stock or ownership interests of such second Person or (ii) the
right to receive more than 50% of the net assets available for distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution, or (b) of which such
first Person is a general partner or managing member.
"
Superior Proposal
" means any
bona fide
Acquisition Proposal made by a third party after
the date of this Agreement to acquire, directly or indirectly, more than 50% of the equity securities or consolidated total assets of the Company and its Subsidiaries, (a) on terms which the
Company Board determines in its good faith judgment to be more favorable to the holders of Company Common Stock than the Transactions (after consultation with its financial and legal advisors), taking
into account all the terms and conditions of such proposal (including financial, regulatory, legal and other aspects of such proposal) and this Agreement (including any written, binding offer by the
Parent to amend the terms of this Agreement) that the Company Board determines to be relevant and (b) which the Company Board determines to be reasonably capable of being completed on the terms
proposed, taking into account all financial, regulatory, legal and other aspects of such proposal that the Company Board determines to be relevant. In no event shall an Acquisition Proposal be
considered a "Superior Proposal" if it was solicited, initiated, facilitated, encouraged or negotiated in material breach of
Section 6.1
by the
Company.
"
Surviving Corporation
" means the Company following the Merger.
"
Tax Returns
" means all reports, returns, forms, or statements required to be filed with a Governmental Entity with respect to Taxes.
"
Taxes
" means all taxes or other assessments or liabilities of any kind whatsoever in the nature of a tax, including income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, services, transfer, withholding, employment, payroll and franchise taxes imposed by the United States
of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, or
additions to tax imposed or assessed with respect thereto.
"
Transactions
" means, collectively, the transactions contemplated by this Agreement, including the Merger and the Financing, but excluding
the Carveout Transactions and any Repatriation.
"
Uncertificated Shares
" means uncertificated shares that immediately prior to the Effective Time represented shares of Company Common
Stock.
"
Willful Breach
" means a material breach of any covenant or agreement set forth in this Agreement that is a consequence of an act, or
failure to act, undertaken by the breaching party with the actual knowledge that the taking of such act, or failure to act, would result, or would reasonably be expected to result, in such breach.
ARTICLE X
MISCELLANEOUS
10.1
Nonsurvival of Representations and Warranties.
None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time.
10.2
Notices.
All notices and other communications hereunder shall be in writing and shall be deemed
duly delivered (i) four Business Days after being sent by registered
or certified mail, return
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receipt
requested, postage prepaid, (ii) one Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service, or (iii) on
the date of confirmation of receipt (or, the first Business Day following such receipt if the date of such receipt is not a Business Day) of transmission by facsimile or electronic mail, in each case
to the intended recipient as set forth below:
(a) if
to the Parent or the Merger Sub, to:
c/o
Sycamore Partners Management, L.P.
9 West 57th Street, 31st Floor
New York, NY 10019
Facsimile: (212) 796-8560
Attention: Stefan Kaluzny and Peter Morrow
E-mail: skaluzny@sycamorepartners.com
pmorrow@sycamorepartners.com
with
a copy (which shall not constitute notice) to:
Kirkland &
Ellis LLP
601 Lexington Avenue
New York, NY 10022
Facsimile: (212) 446-6460
Attention: Sean D. Rodgers, P.C., Mikaal Shoaib, P.C. and Laura Sullivan
E-mail: sean.rodgers@kirkland.com
mshoaib@kirkland.com
laura.sullivan@kirkland.com
(b) if
to the Company, to:
Staples, Inc.
500 Staples Drive
P.O. Box 9271
Framingham, MA 01701-9271
Attn: Michael T. Williams, Chief Legal Officer
E-mail: LegalGeneralMail@staples.com
Facsimile: 508-382-4707
with
a copy (which shall not constitute notice) to:
Wilmer
Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: Mark G. Borden, Esq.
Jay E. Bothwick, Esq.
Andrew R. Bonnes, Esq.
E-mail: mark.borden@wilmerhale.com
jay.bothwick@wilmerhale.com
andrew.bonnes@wilmerhale.com
Facsimile: +1 617 526 5000
Any
party hereto may give any notice or other communication hereunder using any other means (including personal delivery, messenger service, or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party hereto may change the address to which notices and
other communications hereunder are to be delivered by giving the other parties hereto notice in the manner herein set forth.
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10.3
Entire Agreement.
This Agreement (including the Schedules and Exhibits hereto
and the documents and instruments referred to herein) constitutes the entire agreement among the
parties hereto and supersedes any prior understandings, agreements or representations by or among the parties hereto, or any of them, written or oral, with respect to the subject matter hereof.
Notwithstanding the foregoing, the Confidentiality Agreement shall remain in effect in accordance with its terms.
10.4
Third Party Beneficiaries; No Recourse.
(a) This
Agreement is not intended to, and shall not, confer upon any other Person any rights or remedies hereunder, except (a) as set forth in or contemplated by the
terms and provisions of
Section 6.6
(with respect to which the Indemnified Parties shall be third party beneficiaries), (b) from and after
the Effective Time, the rights of holders of shares of Company Common Stock, Company Stock Options, Company RSUs, Company July 2017 RSUs and Company Performance Share Awards to receive the
consideration set forth in
Article I
, (c) the rights of Persons who are explicitly provided to be third-party beneficiaries of the Limited
Guarantee and the Equity Funding Letters solely to the extent of the rights set forth therein, (d) the rights of the Parent Related Parties and the Company Related Parties set forth in
Section 10.10(c)
, (e) the rights of the Company's Subsidiaries and the respective Representatives of the Company and its Subsidiaries set
forth in
Sections 6.11(c)
,
6.16
and
6.17
and
(f) with respect to the Debt Financing Sources, the provisions of this
Section 10.4
(Third Party Beneficiaries), the last sentence of
Section 8.4
(Modification or Amendment),
Section 10.5
(Assignment),
Section 10.9
(Governing Law),
Section 10.10
(Remedies),
Section 10.11
(Submission to Jurisdiction) and
Section 10.12
(Waiver of Jury
Trial) (and
the related defined terms contained in the foregoing provisions), each of which shall expressly inure to the benefit of the Debt Financing Sources and which the Debt Financing Sources shall be
entitled to rely on and enforce the provisions of as they relate to the Debt Financing Sources.
(b) This
Agreement may only be enforced against, and any claims or causes of action that may be based upon, arise out of or relate to this Agreement, or the negotiation,
execution or performance of this Agreement or the Transactions may only be made against the entities that are expressly identified as signatories hereto and no Parent Related Party (other than each
Guarantor to the extent set forth in such Guarantor's Limited Guarantee or such Guarantor's Equity Funding Letter) shall have any liability for any obligations or liabilities of the parties to this
Agreement or for any claim (whether in tort, contract or otherwise) based on, in respect of, or by reason of, the transactions contemplated hereby or in respect of any oral representations made or
alleged to be made in connection herewith. Without limiting the rights of the Company against Parent or Merger Sub hereunder, in no event shall the Company or any of its Affiliates, and the Company
agrees not to and to cause its Affiliates not to, seek to enforce this Agreement against, make any claims for breach of this Agreement against, or seek to recover monetary damages from, any Parent
Related Party (other than Parent or Merger Sub or any payment from a Guarantor to the extent set forth in the applicable Limited Guarantee).
10.5
Assignment.
Neither this Agreement nor any of the rights, interests or obligations under this
Agreement may be assigned or delegated, in whole or in part, by operation of law
or otherwise by any of the parties hereto without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void;
provided
,
however
, that each of the Parent and the Merger Sub (i) any or all of its rights (but
not its obligations) hereunder to one or more of its Affiliates controlled by Sycamore Partners Management, L.P. that was formed solely for the purpose of engaging in the Transactions, has
engaged in no other business activities and has conducted its operations only as contemplated by this Agreement (provided that no such assignment shall (x) affect the obligations of any such
Affiliate who has committed to provide Equity Financing under the applicable Equity Funding Letter or the Guarantors under the Limited Guarantees, (y) impede or delay the consummation of the
Transactions or (z) relieve Parent or Merger Sub of any of its
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obligations
under this Agreement), and (ii) may, from and after the Closing, assign in whole or in part, this Agreement or any or all of its rights and obligations hereunder to one or more of
its Affiliates or
for collateral security purposes to any lender or Financing Sources;
provided
,
further
, that no such
assignment shall relieve such party of any of its obligations under this Agreement. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective successors and permitted assigns.
10.6
Severability.
Any term or provision (or part thereof) of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions (or parts thereof) hereof or the validity or enforceability of the offending term or provision (or part thereof) in any other situation or in any
other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision (or part thereof) hereof is invalid or unenforceable, the court making such
determination shall have the power to limit the term or provision (or part thereof), to delete specific words or phrases, or to replace any invalid or unenforceable term or provision (or part thereof)
with a term or provision (or part thereof) that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision (or part thereof), and
this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto shall replace such invalid or
unenforceable term or provision (or part thereof) with a valid and enforceable term or provision (or part thereof) that will achieve, to the extent possible, the economic, business and other purposes
of such invalid or unenforceable term (or part thereof).
10.7
Counterparts and Signature.
This Agreement may be executed in two or more counterparts (including
by facsimile or by an electronic scan delivered by electronic mail), each of which shall be
deemed an original but all of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties hereto and delivered to
the other parties, it being understood that all parties need not sign the same counterpart. This Agreement may be executed and delivered by facsimile or by an electronic scan delivered by electronic
mail.
10.8
Interpretation.
Except where expressly stated otherwise in this Agreement, the following rules
of interpretation apply to this Agreement: (a) "include", "includes" and
"including" are not limiting; (b) "hereof", "hereto", "hereby", "herein" and "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement; (c) "date hereof" refers to the date set forth in the initial caption of this Agreement; (d) "extent" in the phrase "to the extent" means the
degree to which a subject or other thing extends, and such phrase does not mean simply "if"; (e) descriptive headings, the table of defined terms and the table of contents are inserted for
convenience only and do not affect in any way the meaning or interpretation of this Agreement; (f) definitions contained in this Agreement are applicable to the singular as well as the plural
forms of such terms; (g) references to a Person are also to its permitted successors and assigns; (h) references to an "Article", "Section", "Recital", "preamble", "Annex", "Exhibit" or
"Schedule" refer to an Article, Section, Recital or preamble of, or an Annex, Exhibit or Schedule to, this Agreement; (i) references to "$" or otherwise to dollar amounts refer to the lawful
currency of the United States; (j) references to a federal, state, local or foreign statute or law include any rules, regulations and delegated legislation issued thereunder;
(k) references to a communication by a regulatory agency include a communication by the staff of such regulatory agency; and (l) references to "make available" or "made available" shall
include availability through an electronic data room, through EDGAR or otherwise, in each case at least four hours prior to the execution of this Agreement. 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 hereto. No summary of this Agreement
prepared by any party shall affect the meaning or interpretation of this Agreement.
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10.9
Governing Law.
This Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware without giving effect to any choice or conflict of
law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware;
provided
that,
except as specifically set forth in the Debt Commitment Letters, all claims or causes of action (whether at law, in equity, in contract,
in tort or otherwise) against any of the Debt Financing Sources in any way relating to the Debt Commitment Letters or the performance thereof or the financings contemplated thereby, shall be
exclusively governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to principles or rules or conflict of laws to the extent such principles or
rules would require or permit the application of laws of another jurisdiction.
10.10
Remedies.
(a) Except
as otherwise provided herein, any and all remedies herein expressly conferred upon a Person will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such Person, and the exercise by a Person of any one remedy will not preclude the exercise of any other remedy.
(b) The
parties hereto agree that irreparable damage for which monetary relief (including any fees payable pursuant to
Section 8.3
), even if available, would not be an adequate remedy, would occur in the
event that any provision of this Agreement is not performed
in accordance with its specific terms or is otherwise breached, including if the parties hereto fail to take any action required of them hereunder to consummate this Agreement. Subject to the
following sentence and
Section 10.10(c)
, the parties acknowledge and agree that (a) the parties shall be entitled to an injunction or
injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the courts described in
Section 10.11
without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement,
(b) the provisions set forth in
Section 8.3
and
10.10(c)
(i) are not intended to
and do not adequately compensate for the harm that would result from a breach of this Agreement and (ii) shall not be construed to diminish or otherwise impair in any respect any party's right
to specific enforcement and (c) the right of specific enforcement is an integral part of the Transactions and without that right, neither the Company nor Parent would have entered into this
Agreement. Notwithstanding the foregoing or anything else to the contrary herein, it is explicitly agreed that the right of the Company to obtain an injunction, specific performance or other equitable
remedies in connection with enforcing Parent's obligation to cause the Equity Financing to be funded in accordance with the terms and conditions of the applicable Equity Funding Letter and to effect
the Closing in accordance with
Section 1.3
(but not the right of the Company to such injunctions, specific performance or other equitable
remedies for any other reason) shall be subject in all events to the requirements that (i) the Marketing Period has ended and the satisfaction, or express written waiver by Parent of all
conditions precedent to the obligations of Parent to consummate the transactions contemplated hereby set forth in in
Sections 7.1
and
7.3
(other than
those conditions that by their nature are to be satisfied at the Closing, but subject to such conditions being satisfied at the Closing)
at the time when the Closing would have been required to occur pursuant to
Section 1.3
, but for the failure of the Equity Financing to be funded,
(ii) the Debt Financing (including any alternative financing that has been obtained in accordance with
Section 6.11(b)
) has been funded or
will be funded in accordance with the terms thereof at the Closing if the Equity Financing is or were to be funded at the Closing, and (iii) the Company has irrevocably confirmed in writing to
Parent that (x) if specific performance is granted and the Equity Financing and Debt Financing were funded, then it would take such actions required of it by this Agreement to cause the Closing
to occur and (y) it stands ready, willing and able to consummate the Merger. The parties hereto agree not to assert that a remedy of specific enforcement is contrary to law or inequitable for
any reason, and not to assert
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that
a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this
Section 10.10(b)
shall not be required
to provide any bond or other security in connection with any such order or injunction.
(c) Notwithstanding
anything in this Agreement to the contrary:
(i) in
the event that the Company shall terminate this Agreement in circumstances where the Parent Termination Fee is owed pursuant to
Section 8.3(c)
, then, the Company's right to receive payment of the
Reverse Termination Fee pursuant to
Section 8.3(c)
shall, together with any indemnification for or reimbursement of any applicable expenses pursuant to
Section 6.11(c)
,
6.15
,
6.16
,
6.17
or
8.3(e)
, be the
sole and exclusive remedy for any and all losses or damages suffered or incurred
by the Company, the Company Related Parties or any other Person arising out of or in connection with this Agreement, the Financing Letters or the Limited Guarantee, the transactions contemplated
hereby and thereby (and the abandonment or termination hereof or thereof), any breach (including any Willful Breach) or failure to perform hereunder or thereunder, the failure of the Merger or the
other Transactions to be consummated, or any matter forming the basis for such termination, and, upon payment of such amount, neither the Company, any Company Related Party nor any other Person shall
be entitled to bring or maintain any claim, action or proceeding against Parent, Merger Sub, any Guarantor, the Financing Sources or any of their respective representatives (including any investment
banker, financial advisors, attorneys, accountants or other advisors) or any of their respective Affiliates or any of their or their Affiliates' respective direct or indirect, former, current or
future general or limited partners, stockholders, equityholders, securityholders, financing sources, managers, members, directors, officers, representatives, employees, controlling persons, agents or
assignees (collectively, the "
Parent Related Parties
") for any loss or damage arising out of or in connection with any breach (including any Willful
Breach) or failure to perform under this Agreement, the Financing Letters or the Limited Guarantee, any of the Transactions (or the abandonment or termination thereof), the failure of the Merger or
the other Transactions to be consummated or any matters forming the basis for such termination (but excluding, for the avoidance of doubt, the Confidentiality Agreement);
provided
that nothing in this
Section 10.10(c)
shall limit the rights of the Company, its
Subsidiaries and their respective Representatives under the Confidentiality Agreement or to be indemnified and reimbursed for expenses in accordance with
Section 6.11(c)
,
6.15
,
6.16
,
6.17
or
8.3(e)
. For the avoidance of doubt, subject to the
proviso in the immediately preceding
sentence, upon payment to the Company of such Parent Termination Fee, none of Parent or the Parent Related Parties or any of their representatives, including any investment banker, financial advisor,
any Debt Financing Source, attorney, accountant or other advisor, agent, representative or affiliate shall have any further liability or obligation to the Company or any Company Related Party relating
to or arising out of this Agreement or the transactions contemplated hereby;
(ii) in
the event that Parent or its designee shall become entitled to receive full payment of the Company Termination Fee pursuant to
Section 8.3(b)
, then Parent's right to receive payment of the Company
Termination Fee pursuant to
Section 8.3(b)
shall, together with any reimbursement of applicable expenses pursuant to
Section 8.3(e)
, be the sole
and exclusive remedy for any and all losses or damages suffered or incurred by Parent, Merger Sub, the Parent Related
Parties or any other Person arising out of or in connection with this Agreement, the Transactions (and the abandonment or termination thereof) any breach (including any Willful Breach) or failure to
perform hereunder, the failure of the Merger or
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the
other Transactions to be consummated, or any matter forming the basis for such termination, and, upon payment of such amount, none of Parent, Merger Sub, any of their respective Affiliates or any
other Person shall be entitled to bring or maintain any claim, action or proceeding against the Company and its Subsidiaries and any of their respective direct or indirect, former, current or future
officers, directors, partners, stockholders, managers, members, financing sources, representatives, employees, controlling persons, agents or Affiliates or any other Person claiming by, through or for
the benefit of the Company (collectively, "
Company Related Parties
") arising out of or in connection with this Agreement (including any Willful Breach),
any of the Transactions, the failure of the Merger or the other Transactions to be consummated or any matters forming the basis for such termination;
provided
that nothing in this
Section 10.10(c)
shall limit the rights of the Parent and any of
its applicable Representatives under the Confidentiality Agreement or to be indemnified and reimbursed for expenses in accordance with
Section 8.3(e)
; and
(iii) in
connection with any loss suffered by the Company or any Company Related Party arising out of or in connection with this Agreement, the Financing Letters or the
Limited Guarantees and the Transactions, including as a result of the failure of the transactions contemplated hereby and thereby to be consummated or for a breach (including Willful Breach) or
failure to perform hereunder or otherwise (other than in the circumstances in which the Company is entitled to receive the Parent Termination Fee pursuant to
Section 8.3(c)
) the Company agrees, on
behalf of itself and the Company Related Parties, that the maximum aggregate monetary liability of Parent
and the Parent Related Parties, if any, shall be limited to the amount of the Parent Termination Fee, and in no event shall the Company or any Company Related Party seek or be entitled to recover from
Parent or any Parent Related Parties, and the Company on behalf of itself and the Company Related Parties hereby irrevocably waives and relinquishes any right to seek or recover, any monetary damages
in excess of such amount, including through Parent, Merger Sub, any Parent Related Party or otherwise, whether by or through attempted piercing of the corporate, limited partnership or limited
liability company veil, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any applicable law, through a claim based in tort, contract or otherwise (except that
Parent shall be obligated to the Company under the Confidentiality Agreement,
Section 8.3(e)
and for any of its expense reimbursement and
indemnification obligations contained in
Sections 6.11(c)
,
6.15
,
6.16
and
6.17
).
(iv) In
connection with any loss suffered by any Parent Related Party as a result of the failure of the Transactions to be consummated or for a breach or failure to perform
hereunder or otherwise, other than in the circumstances in which Parent is entitled to receive the Company Termination Fee pursuant to
Section 8.3(b)
, Parent agrees, on behalf of itself and the
Parent Related Parties, that the maximum aggregate monetary liability of the Company
and the Company Related Parties, if any, shall be limited to the amount of the Company Termination Fee, and in no event shall Parent or any Parent Related Party seek or be entitled to recover from the
Company or any Company Related Parties, and Parent on behalf of itself and the Parent Related Parties hereby irrevocably waives and relinquishes any right to seek or recover, any monetary damages in
excess of such amount (except that the Company shall be obligated to the Parent under the Confidentiality Agreement and
Section 8.3(e)
).
Notwithstanding the foregoing, Parent acknowledges and agress that it shall not be entitled to monetary damages for any breach of
Section 6.15
or
Section 6.16
by the Company and that its sole and exclusive remedy for any breach of
Section 6.15
or
Section 6.16
by the Company shall be specific performance (and the Company
acknowledges and agrees that such remedy shall be available against it).
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For
the avoidance of doubt, while each of the Company and Parent may pursue both a grant of specific performance in accordance with
Section 10.10(b)
and the payment of the Parent Termination Fee or the
Company Termination Fee, as applicable, under
Section 8.3(b)
or
Section 8.3(c)
, respectively, or the recovery of monetary damages
subject to the limitations set forth in
Section 10.10(c)(iii)
or
Section 10.10(c)(iv)
,
under no circumstances shall the Company or Parent be permitted or entitled to receive both (1) a grant of specific performance of the Equity Financing to be funded and/or that results in a
Closing and consummation of the Transactions and (2) any money damages, including monetary damages in lieu of specific performance and all or any portion of the Parent Termination Fee or the
Company Termination Fee, as applicable, and in no event shall the Company Related Parties or the Parent Related Parties be entitled to receive any damages whatsoever if the Parent Termination Fee or
the Company Termination Fee, as applicable, is paid (except for any obligations arising under the Confidentiality Agreement,
Section 8.3(e)
,
Section 6.11(c)
,
Section 6.15
,
Section 6.16
and
Section 6.17
). The parties
acknowledge and agree that the fact that the
parties have agreed to this
Section 10.10(c)
shall not be deemed to affect any party's right to specific performance under
Section 10.10(b)
(subject to the limitations set forth therein). Notwithstanding the foregoing, no Debt Financing Source shall be liable for any
indirect, special, punitive or consequential damages (including, without limitation, any loss of profits, business or anticipated savings) in connection with the Debt Commitment Letter, this
Agreement, the Transactions, or with respect to any activities related to the Debt Financing.
10.11
Submission to Jurisdiction.
Each of the parties hereto (a) consents to submit itself to
the exclusive personal jurisdiction of the Court of Chancery of the State of Delaware, New
Castle County, or, if that court does not have jurisdiction, a federal court sitting in the State of Delaware in any action or proceeding arising out of or relating to this Agreement or any of the
Transactions, (b) agrees that all claims in respect of such action or proceeding shall be heard and determined in any such court, (c) agrees that it shall not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or any of
the transaction contemplated by this Agreement in any other court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other Person with respect thereto. Any party hereto may make service on another party by sending or delivering a copy of the
process to the party to be served at the address and in the manner provided for the giving of notices in
Section 10.2
. Nothing in this
Section 10.11
, however, shall affect the right of any Person to serve legal process in any other manner permitted by law. Notwithstanding the
foregoing, each of the parties hereto agrees that it will not, and will not permit its Affiliates to, bring or support any action, cause of action, claim, cross-claim or third-party claim of any kind
or description, whether in law or in equity, whether in contract or in tort or otherwise, against any of the Debt Financing Sources and their respective former, current or future affiliates and their
former, current or future general or limited partners, shareholders, directors, officers, managers, employees, members, agents, representatives, controlling persons, advisors or attorneys and any
heirs, successors or assigns of any of the foregoing in any way relating to this Agreement or any of the Transactions, including with respect to any dispute arising out of or relating in any way to
the Debt Commitment Letters and any transactions contemplated thereby, including the Debt Financing or the performance thereof, in any forum other than the United States District Court for the
Southern District of New York or the Supreme Court of the State of New York, New York County, located in the Borough of Manhattan in the City of New York or, in either case, any appellate court
thereof, and agree that the waiver of jury trial set forth in
Section 10.12
hereof shall be applicable to any such proceeding.
10.12
WAIVER OF JURY TRIAL.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
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RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY AND FOR ANY LITIGATION (WHETHER IN LAW OR IN EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING IN ANY WAY TO THE DEBT COMMITMENT LETTERS, THE TRANSACTIONS AND FINANCINGS CONTEMPLATED THEREBY OR THE PERFORMANCE THEREOF, INCLUDING ANY ACTION, PROCEEDING OR COUNTERCLAIM AGAINST ANY
DEBT FINANCING SOURCE. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY
AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS
SECTION 10.12
.
10.13
Disclosure Schedule.
The Company Disclosure Schedule shall be arranged in Sections corresponding
to the numbered sections contained in this Agreement, and the disclosure in any
section shall qualify (a) the corresponding section or subsection of this Agreement and (b) the other sections or subsections of this Agreement, to the extent that it is reasonably
apparent from a reading of the text of such disclosure that it also qualifies or applies to such other sections. The inclusion of any information in the Company Disclosure Schedule shall not be deemed
to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material, has resulted in or would result in a Company Material
Adverse Effect or is outside the Ordinary Course of Business.
10.14
Parent Guarantee.
The Parent agrees to take all action necessary to cause the Merger Sub or the
Surviving Corporation, as applicable, to perform all of its agreements, covenants
and obligations under this Agreement. The Parent unconditionally guarantees to the Company the full and complete performance by the Merger Sub or the Surviving Corporation, as applicable, of its
respective obligations under this Agreement and shall be liable for any breach of any representation, warranty, covenant or obligation of the Merger Sub or the Surviving Corporation, as applicable,
under this Agreement.
[Remainder of Page Intentionally Left Blank.]
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The Parent, the Merger Sub and the Company have executed this Agreement as of the date set forth in the initial caption of this Agreement.
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ARCH PARENT INC.
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By:
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/s/ STEFAN KALUZNY
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Name:
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Stefan Kaluzny
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Title:
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President
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ARCH MERGER SUB INC.
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By:
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/s/ STEFAN KALUZNY
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Name:
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Stefan Kaluzny
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Title:
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President
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STAPLES, INC.
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By:
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/s/ SHIRA GOODMAN
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Name:
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Shira Goodman
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Title:
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Chief Executive Officer
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Table of Contents
EXHIBIT A
Form
of Certificate of Incorporation
of the Surviving Corporation
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
STAPLES, INC.
ARTICLE I
The name of the corporation is Staples, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the corporation has authority to issue is one thousand (1,000) shares of Common Stock, with a par
value of $0.01 per share.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE VII
Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Election of
directors need not be by written ballot unless the by-laws of the corporation so provide.
ARTICLE VIII
No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation law, or (iv) for any transaction in which the director derived an
improper personal benefit. Any repeal or modification of the foregoing paragraph by the stockholders
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of
the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.
ARTICLE IX
The Corporation shall indemnify its present and former directors and officers to the maximum extent permitted by the General Corporation Law as
from time to time amended. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise.
ARTICLE X
The corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware.
ARTICLE XI
The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner
now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation.
* * * * *
Exhibit A Page 2
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Annex B
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745 Seventh Avenue
New York, NY 10019
United States
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June 28,
2017
Board
of Directors
Staples, Inc.
500 Staples Dr.
Framingham, MA 01702
Members
of the Board of Directors:
We
understand that Staples, Inc. (the "Company") intends to enter into a transaction (the "Proposed Transaction") with Arch Parent Inc. ("Parent") and Arch Merger
Sub Inc. ("Merger Sub"), pursuant to which (i) Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation (the "Merger"), and
(ii) each share of common stock, par value $0.0006, issued and outstanding immediately prior to the Effective Time (as defined in the Agreement (as defined below)), other than shares held in
treasury or held by any subsidiary of the Company, the Parent, Merger Sub or any other affiliate of Parent or as to which dissenters' rights have been perfected (collectively, the "Excluded Shares"),
will be converted into the right to receive $10.25 per share in cash (the "Merger Consideration"). The terms and conditions of the Proposed Transaction are set forth in more detail in the Agreement
and Plan of Merger (the "Agreement") to be dated as of June 28, 2017 by and among the Company, Parent and Merger Sub. The summary of the Proposed Transaction set forth above is qualified in its
entirety by the terms of the Agreement.
We
have been requested by the Board of Directors of the Company to render our opinion with respect to the fairness, from a financial point of view, to the Company's stockholders (other
than the holders of Excluded Shares) of the Merger Consideration to be offered to such stockholders in the Proposed
Transaction. We have not been requested to opine as to, and our opinion does not in any manner address, the Company's underlying business decision to proceed with or effect the Proposed Transaction or
the likelihood of consummation of the Proposed Transaction. In addition, we express no opinion on, and our opinion does not in any manner address, the fairness of the amount or the nature of any
compensation to any officers, directors or employees of any parties to the Proposed Transaction, or any class of such persons, relative to the Merger Consideration to be offered to the stockholders of
the Company in the Proposed Transaction. Our opinion does not address the relative merits of the Proposed Transaction as compared to any other transaction or business strategy in which the Company
might engage.
In
arriving at our opinion, we reviewed and analyzed: (1) a draft of the Agreement, dated as of June 28, 2017 and the specific terms of the Proposed Transaction;
(2) publicly available information concerning the Company that we believe to be relevant to our analysis, including its Annual Report on Form 10-K for the fiscal year ended
January 28, 2017 and Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017; (3) financial and operating information with respect to the business,
operations and prospects of the Company furnished to us by the Company, including financial projections of the Company prepared by management of the Company; (4) a trading history of the
Company's common stock from June 27, 2014 to June 27, 2017 and a comparison of that trading history with those of other companies that we deemed relevant; (5) a comparison of the
historical financial results and present financial condition of the Company with those of other companies that we deemed relevant; (6) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other transactions that we deemed relevant; (7) the results of our efforts to solicit
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indications
of interest from third parties with respect to a sale of the Company; and (8) published estimates of independent research analysts with respect to the future financial performance
and price targets for the Company. In addition, we have had discussions with the management of the Company concerning its business, operations, assets, liabilities, financial condition and prospects
and have undertaken such other studies, analyses and investigations as we deemed appropriate.
In
arriving at our opinion, we have assumed and relied upon the accuracy and completeness of the financial and other information used by us without any independent verification of such
information (and have not assumed responsibility or liability for any independent verification of such information) and have further relied upon the assurances of the management of the Company that
they are not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of the Company, upon the advice of the Company, we
have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial
performance of the Company and that the Company will perform substantially in accordance with such projections. We assume no responsibility for and we express no view as to any such projections or
estimates or the assumptions on which they are based. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of the Company and have not made or
obtained any evaluations or appraisals of the assets or liabilities of the Company. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated
as of, the date of this letter. We assume no responsibility for updating or revising our opinion based on events or circumstances that may occur after the date of this letter.
We
have assumed that the executed Agreement will conform in all material respects to the last draft reviewed by us. In addition, we have assumed the accuracy of the representations and
warranties contained in the Agreement and all agreements related thereto. We have also assumed, upon the advice of the Company, that all material governmental, regulatory and third party approvals,
consents and releases for the Proposed Transaction will be obtained within the constraints contemplated by the Agreement and that the Proposed Transaction will be consummated in accordance with the
terms of the Agreement without waiver, modification or amendment of any material term, condition or agreement thereof. We understand that Parent has received draft equity commitment letters from
Sycamore Partners II, L.P. ("Sycamore Partners"), an affiliate of the Parent, NB Arch LP ("Neuberger"), and affiliates of HarbourVest Partners, L.P. ("Harbourvest" and, together
with Neuberger, the "Co-Investors"), each dated June 28, 2017, as applicable, and draft debt commitment letters from certain lenders dated June 28, 2017. We express no opinion with
respect to the terms of the equity or debt commitment letters or the availability of the financing contemplated thereby. We do not express any opinion as to any tax or other consequences that might
result from the Proposed Transaction, nor does our opinion address any legal, tax, regulatory or accounting matters, as to which we understand that the Company has obtained such advice as it deemed
necessary from qualified professionals.
Based
upon and subject to the foregoing, we are of the opinion as of the date hereof that, from a financial point of view, the Merger Consideration to be offered to the stockholders of
the Company (other than the holders of Excluded Shares) in the Proposed Transaction is fair to such stockholders.
We
have acted as financial advisor to the Company in connection with the Proposed Transaction and will receive fees for our services a portion of which is payable upon rendering this
opinion and a substantial portion of which is contingent upon the consummation of the Proposed Transaction. In addition, the Company has agreed to reimburse a portion of our expenses and indemnify us
for certain liabilities that may arise out of our engagement. We have performed various investment banking services for the Company in the past, and expect to perform such services in the future, and
have received, and expect to receive, customary fees for such services. Specifically, in the past two years, we
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have
performed the following investment banking and financial services: (i) acted as financial advisor to the Company in connection with the terminated acquisition of Office Depot;
(ii) acted as Lead Arranger and Joint Lead Bookrunner in connection with the financing for the terminated acquisition of Office Depot; (iii) acted as Joint Lead Arranger and Joint
Bookrunner on the Company's Senior Secured Credit Facilities raised in April 2015; (iv) acted as Joint Lead Arranger on the Company's revolver refinancing in October 2016; and (v) acted
as financial advisor to the Company in connection with the sale of its European assets in December 2016.
In
addition, we and our affiliates in the past have provided, currently are providing, or in the future may provide, investment banking services to Sycamore Partners and certain of its
affiliates and portfolio companies and have received or in the future may receive customary fees for rendering such services. However, we have not in the past two years, performed any investment
banking services for which we have received any fees from Sycamore Partners.
In
addition, we and our affiliates in the past have provided, currently are providing or in the future may provide, investment banking services to Neuberger and certain of its affiliates
and have received or in the future may receive customary fees for rendering such services. Specifically, in the past two years, we have performed the following investment banking and financial
services for certain affiliates of Neuberger: (i) having acted as underwriter for various debt offerings, (ii) having performed various activities relating to hedging and credit
origination and risk management services; and (iii) acting as a lender under a warehouse credit facility. We have not in the past two years performed any investment banking services for
HarbourVest for which we have received any fees. In the future we and our affiliates may provide investment banking services for HarbourVest and its affiliates or portfolio companies and may receive
customary fees for rendering such services.
Barclays
Capital Inc., its subsidiaries and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other
financial and non-financial services. In the ordinary course of our business, we and our affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any
derivatives thereof) and financial instruments (including loans and other obligations) of the Company, the Co-Investors and Sycamore Partners and certain of Sycamore Partners' and the Co-Investors'
respective portfolio companies and/or affiliates for our own account and for the accounts of our customers and, accordingly, may at any time hold long or short positions and investments in such
securities and financial instruments.
This
opinion, the issuance of which has been approved by our Fairness Opinion Committee, is for the use and benefit of the Board of Directors of the Company and is rendered to the Board
of Directors in connection with its consideration of the Proposed Transaction. This opinion is not intended to be and does not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote with respect to the Proposed Transaction.
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Very truly yours,
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/s/ BARCLAYS CAPITAL INC.
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BARCLAYS CAPITAL INC.
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Annex C
June 28, 2017
Board
of Directors
Staples, Inc.
500 Staples Drive
Framingham, MA 01702
Members
of the Board:
We
understand that Staples, Inc. ("Staples" or the "Company"), Arch Parent Inc. (the "Buyer") and Arch Merger Sub Inc., a wholly owned subsidiary of the Buyer
("Acquisition Sub"), propose to enter into an Agreement and Plan of Merger, substantially in the form of the draft dated June 28, 2017 (the "Merger Agreement"), which provides, among other
things, for the merger (the "Merger") of Acquisition Sub with and into the Company. Pursuant to the Merger, the Company will become a wholly owned subsidiary of the Buyer, and each outstanding share
of common stock, par value $0.0006 per share, of the Company (the "Company Common Stock") other than shares held in treasury, or held by any subsidiary of the Company, the Buyer, Acquisition Sub or
any other affiliate of the Buyer, or as to which dissenters' rights have been perfected (collectively, the "Excluded Shares"), will be converted into the right to receive $10.25 per share in cash (the
"Consideration"). The terms and conditions of the Merger are more fully set forth in the Merger Agreement.
You
have asked for our opinion as to whether the Consideration to be received by the holders of shares of the Company Common Stock (other than holders of Excluded Shares) pursuant to the
Merger Agreement is fair from a financial point of view to such holders of shares of the Company Common Stock.
For
purposes of the opinion set forth herein, we have:
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1)
-
Reviewed
certain publicly available financial statements and other business and financial information of the Company;
-
2)
-
Reviewed
certain internal financial statements and other financial and operating data concerning the Company;
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3)
-
Reviewed
certain financial projections prepared by the management of the Company;
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4)
-
Discussed
the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;
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5)
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Reviewed
the reported prices and trading activity for the Company Common Stock;
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6)
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Compared
the financial performance of the Company and the prices and trading activity of the Company Common Stock with that of certain other publicly-traded companies
comparable with the Company and their securities;
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7)
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Reviewed
the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
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8)
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Participated
in certain discussions and negotiations among representatives of the Company and the Buyer and their legal advisor;
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9)
-
Reviewed
the Merger Agreement, the draft equity commitment letters from an affiliate of the Buyer, NB Arch LP ("Neuberger Berman"), and Harbourvest
Partners, L.P. (together with Neuberger Berman, the "Co-Investors"), each dated June 28, 2017, and the draft debt commitment letters from certain lenders dated June 28, 2017
(collectively, the "Financing Letters") and certain related documents; and
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10)
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Performed
such other analyses and considered such other factors as we have deemed appropriate.
We
have assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to
us by the Company, and formed a substantial basis for this opinion. With respect to the financial projections, we have assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company of the future financial performance of the Company. In addition, we have assumed that the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that the Buyer will obtain equity and debt
financing in accordance with the terms indicated in the Financing Letters and express no opinion with respect to the terms of the Financing Letters or the availability of the financing contemplated
thereby, and that the definitive Merger Agreement will not differ in any material respect from the draft thereof furnished to us. Morgan Stanley has assumed that in connection with the receipt of all
the necessary governmental, regulatory or other approvals and consents required for the proposed Merger, no delays, limitations, conditions or restrictions will be imposed that would have a material
adverse effect on the contemplated benefits expected to be derived in the proposed Merger. We are not legal, tax or regulatory advisors. We are financial advisors only and have relied upon, without
independent verification, the assessment of the Company and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. We express no opinion with respect to the fairness
of the amount or nature of the compensation to any of the Company's officers, directors or employees, or any class of such persons, relative to the Consideration to be received by the holders of
shares of the Company Common Stock in the transaction. We have not made any independent valuation or appraisal of the assets or liabilities of the Company, nor have we been furnished with any such
valuations or appraisals. Our opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Events
occurring after the date hereof may affect this opinion and the assumptions used in preparing it, and we do not assume any obligation to update, revise or reaffirm this opinion.
We
have acted as financial advisor to the Board of Directors of the Company in connection with this transaction and will receive a fee for our services, a portion of which is contingent
on the delivery of this financial opinion and a substantial portion of which is contingent upon the closing of the Merger. In the two years prior to the date hereof, we have provided financial
advisory and financing services to the Company, the Co-Investors and their respective affiliates and have received fees in connection with such services. Morgan Stanley may also seek to provide
financial advisory and financing services to the Buyer, the Company, the Co-Investors and their respective affiliates in the future and would expect to receive fees for the rendering of these
services.
Please
note that Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Our securities business
is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and
financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance
positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of the Buyer and its affiliates,
the Co-Investors and their respective affiliates, the Company, or any other company, or any currency or commodity, that may be involved in this transaction, or any related derivative instrument. In
addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with the Company in connection with this transaction, may have committed and may commit in the future to
invest in private equity funds managed by affiliates of the Buyer or any of the Co-Investors.
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This
opinion has been approved by a committee of Morgan Stanley investment banking and other professionals in accordance with our customary practice. This opinion is for the information
of the Board of Directors of the Company and may not be used for any other purpose or disclosed without our prior written consent, except that a copy of this opinion may be included in its entirety in
any filing the Company is required to make with the Securities and Exchange Commission in connection with this transaction if such inclusion is required by applicable law. In addition, Morgan Stanley
expresses no opinion or recommendation as to how the shareholders of the Company should vote at the shareholders' meeting to be held in connection with the Merger.
Based
on and subject to the foregoing, we are of the opinion on the date hereof that the Consideration to be received by the holders of shares of the Company Common Stock (other than
holders of Excluded Shares) pursuant to the Merger Agreement is fair from a financial point of view to such holders of shares of the Company Common Stock.
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Very truly yours,
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MORGAN STANLEY & CO. LLC
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By:
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/s/ CARMEN M. MOLINOS
Carmen M. Molinos
Managing Director
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Annex D
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
§ 262 Appraisal rights
(a) Any
stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a
holder of record of stock in a corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal
rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of
this title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or
§ 264 of this title:
(1) Provided,
however, that, except as expressly provided in § 363(b) of this title, no appraisal rights under this section shall be available for the
shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of
stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in § 251(f) of this title.
(2) Notwithstanding
paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares
of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash
in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing
paragraphs (b)(2)a., b. and c. of this section.
(3) In
the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 251(h), § 253 or
§ 267 of this title is not owned by the parent immediately prior
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to
the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(4) In
the event of an amendment to a corporation's certificate of incorporation contemplated by § 363(a) of this title, appraisal rights shall be
available as contemplated by § 363(b) of this title, and the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as practicable, with the word "amendment" substituted for the words "merger or consolidation," and the word "corporation" substituted for the words "constituent corporation" and/or
"surviving or resulting corporation."
(c) Any
corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its
stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such a provision, the provisions of this section, including those set forth in subsections (d), (e) and
(g) of this section, shall apply as nearly as is practicable.
(d) Appraisal
rights shall be perfected as follows:
(1) If
a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in
accordance with § 255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the
taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective; or
(2) If
the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of
this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each
of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a
merger approved pursuant to § 251(h) of this title, within the later of the consummation of the offer contemplated by § 251(h) of this title and 20 days
after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be
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sufficient
if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation
or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved pursuant to § 251(h) of this title, later than the later of
the consummation of the offer contemplated by § 251(h) of this title and 20 days following the sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date
the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within
120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation,
any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such
person's own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within
20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein
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stated.
Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At
the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The
Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. If immediately
before the merger or consolidation the shares of the class or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange,
the Court shall dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of
the outstanding shares of the class or series eligible for appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds
$1 million, or (3) the merger was approved pursuant to § 253 or § 267 of this title.
(h) After
the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery,
including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court
shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, and except as provided in this subsection, interest from the effective date
of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time
to time during the period between the effective date of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may
pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the
amount so paid and the fair value of the shares as determined by the Court, and (2) interest theretofore accrued, unless paid at that time. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the
stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is
not entitled to appraisal rights under this section.
(i) The
Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any state.
(j) The
costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal
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proceeding,
including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From
and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section
shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e)
of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who
has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or
consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
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ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Staples, Inc. in mailing proxy materials and help the environment by allowing us to print fewer paper copies, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery or access, please follow the instructions below to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Staples, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Your Internet or telephone vote is valid under Delaware law and authorizes the named proxies to vote the shares in the same manner as if you marked, signed and returned your proxy card. ATTN: INVESTOR RELATIONS 500 STAPLES DRIVE FRAMINGHAM, MA 01702 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E31700-S61450 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. STAPLES, INC. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3. For Against Abstain ! ! ! 1. To adopt the Agreement and Plan of Merger, dated as of June 28, 2017, as it may be amended from time to time, by and among Staples, Inc., Arch Parent Inc., and Arch Merger Sub Inc. ! ! ! 2. To approve, on a nonbinding advisory basis, the golden parachute compensation that may be payable to Staples, Inc.s named executive officers in connection with the merger. ! ! ! 3. To approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the Agreement and Plan of Merger. If this proxy is properly executed, the shares represented by this proxy will be voted as directed by the undersigned. If no direction is given with respect to proposals 1, 2 or 3, this proxy will be voted FOR proposals 1, 2 and 3. If your shares are held in the Staples, Inc. Employees' 401(K) Savings Plan and you do not vote those shares, the plan fiduciary will vote those shares in its discretion. ! For address changes and/or comments, please check this box and write them on the back where indicated. ! Yes ! No Please indicate if you plan to attend this meeting. (NOTE: Please sign exactly as your name(s) appear(s) hereon. All holders must sign. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. If a corporation, please sign in full corporate name by authorized officer. If a partnership, please sign in partnership name by authorized person.) Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date V.1.1