Item 1.01.
Entry into a Material Definitive Agreement
.
On June 20, 2017, ARI Network Services, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Expedition Holdings LLC, a Delaware limited liability company (“Parent”), and Expedition Merger Sub, Inc., a Wisconsin corporation and a direct wholly owned subsidiary of Parent (the “MergerSub”). Parent and the MergerSub were formed by affiliates of True Wind Capital, L.P. (“TWC”). Capitalized terms used herein but not otherwise defined have the meaning set forth in the Merger Agreement.
The Merger Agreement contemplates that the MergerSub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation of the Merger, and each outstanding share of common stock of the Company (other than shares held in the treasury of or owned by the Company or owned by Parent, the MergerSub or any other subsidiary of Parent) will cease to be outstanding and will be converted into the right to receive $7.10 in cash without interest thereon (“Per Share Merger Consideration”). Options and Awards will be cancelled and converted into the right to receive the Per Share Merger Consideration, less the exercise price per share und
erlying such Options and Awards
,
if any, unless otherwise mutually agreed between the Company and Parent prior to the Closing.
The Company has made representations, warranties and covenants in the Merger Agreement customary for transactions of this type, including, among others, covenants (i) not to solicit proposals relating to alternative business combination transactions or, subject to certain exceptions, enter into discussions concerning or provide information in connection with alternative business combination transactions, and (ii) subject to certain exceptions, not to change, qualify, withhold, withdraw or modify in a manner adverse to Parent the recommendation of the Company’s Board of Directors to the Company’s shareholders, as described below. The Company has also agreed to convene and hold a meeting of the Company’s shareholders for the purpose of approving the Merger Agreement and the transactions contemplated thereby, including the Merger, and the Company’s Board of Directors has resolved to recommend that the shareholders of the Company vote in favor of adoption and approval of the Merger Agreement.
Consummation of the Merger is subject to various customary conditions, including the adoption and approval of the Merger Agreement by the requisite vote of the Company’s shareholders, expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the absence of any governmental order preventing or prohibiting or restricting the consummation of the transactions contemplated by the Merger Agreement. The Merger Agreement contains certain termination rights, including the right of the Company to terminate the Merger Agreement to accept a “Superior Proposal” as defined in the Merger Agreement, and provides that, upon termination of the Merger Agreement by Parent upon specified conditions, the Company will be required to pay Parent a termination fee of approximately $4.8 million, and upon termination of the Merger Agreement by the Company upon specified conditions, Parent will be required to pay the Company a termination fee equal to approximately $8.3 million, plus, in each case under certain circumstances, specified reimbursable expenses. TWC has guaranteed certain obligations of Parent under the Merger Agreement, including obligations of Parent to pay any termination fee and reimbursable expenses. In addition, subject to certain exceptions and limitations, either party may terminate the Merger Agreement if the Merger is not consummated by December 20, 2017 (the “End Date”).
Parent has obtained equity financing and debt financing commitments for the purposes of financing the transactions contemplated by the Merger Agreement and paying related fees and
expenses. Pursuant to the Equity Commitment Letter, an investment fund affiliated with TWC has committed to capitalize Parent, at or immediately prior to the effective time of the Merger, with an aggregate equity contribution of up to $93.3 million on the terms of and subject to the conditions set forth in an equity commitment letter dated June 20, 2017. The Company is a third party beneficiary of the Equity Commitment Letter. AB Private Credit Investors LLC (“Lender”) has committed to provide Parent with debt financing consisting of a $55 million to $65 million term loan and a $7.5 million revolving credit facility on the terms of and subject to the conditions set forth in a debt commitment letter dated June 20, 2017 (the “Debt Commitment Letter”). The obligations of Lender to provide debt financing under the Debt Commitment Letter are subject to a number of customary conditions. The final termination date for the Debt Commitment Letter is the same as the termination date under the Merger Agreement.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, which is attached hereto as Exhibit 2.1, and is incorporated by reference herein.
The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by
confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of “materiality” applicable to the contracting parties that differ
from “materiality” under applicable securities laws
. Investors are not third
‑party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as ch
aracterizations of the actual state of facts or condition of the Company, Parent or MergerSub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
