Item 1.01.
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Entry into a Material Definitive Agreement.
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On February 25, 2020, Tivity Health, Inc. (the “Company”) entered into a Cooperation Agreement (the “Agreement”) with HG Vora Capital Management, LLC (“HG Vora”).
Pursuant to the Agreement, HG Vora has the right to appoint two individuals (“New Directors”) to be added as directors of the Company with a term expiring at the 2020 annual meeting of stockholders (the “Annual Meeting”). Additionally, except in the event HG Vora (together with any affiliates of HG Vora) ceases to own at least 5% of the Company’s then outstanding common stock, the Board of Directors of the Company (the “Board”) has agreed to nominate the New Directors for election as directors of the Company at the 2020 Annual Meeting (as two of a total of not more than 10 candidates for election to the Board at the 2020 Annual Meeting, unless the Company shall have hired a new chief executive officer by the 2020 Annual Meeting, in which case 11 candidates may be nominated, provided that the new chief executive officer is one of the 11 candidates). During the term of the Agreement, at least one New Director will serve on each of the Audit Committee of the Board, the Strategic Review Committee of the Board and any formal or ad hoc committee of the Board primarily responsible for searching for and selecting a new chief executive officer of the Company. Pursuant to the Agreement, the Board has agreed not to appoint a twelfth director to the Board without the approval of a two-thirds majority of the then-current directors. In the event either of the New Directors (or any replacement director appointed in accordance with the provisions of the Agreement) is unable to serve, resigns or is removed as a director during the term of the Agreement, HG Vora has the ability to recommend a replacement director who meets the conditions set forth in the Agreement, so long as HG Vora (together with any affiliates of HG Vora) beneficially owns in the aggregate at least 5% of the Company’s then outstanding common stock.
The Agreement provides that the New Directors must offer to resign from the Board if (a) HG Vora (together with any affiliates of HG Vora) ceases to beneficially own at least 5% of the Company’s then outstanding common stock, or (b) HG Vora otherwise ceases to comply with or breaches any material provision of the Agreement.
The Agreement terminates on the first date on which stockholders are permitted under the Company’s bylaws to submit director nominations for the 2021 Annual Meeting, but, if HG Vora (together with any affiliate of HG Vora) ceases to own in the aggregate at least 5% of the Company’s then outstanding common stock, the Agreement will immediately terminate.
During the term of the Agreement, HG Vora agrees to vote all of its shares of the Company’s common stock in favor of recommendations of the Board with respect to (i) each election of directors and any removal of directors, (ii) the ratification of the appointment of the Company’s independent registered public accounting firm and (iii) the Company’s “say on pay” proposal. In addition, HG Vora agrees, subject to certain exceptions, to comply with certain customary standstill provisions, including, among other things, that HG Vora will not, and will cause its affiliates and associates not to:
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make, participate in or encourage any solicitation of proxies or consents;
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own in excess of 19.9% of the Company’s outstanding common stock;
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effect, propose, participate in or facilitate any tender or exchange offer, merger, sale or acquisition of material assets or other extraordinary transaction involving the Company or any of its subsidiaries;
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seek representation on the Board or seek or encourage the removal of any member of the Board, in each case except as set forth in the Agreement;
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make or take any action in support of any proposal or request aimed at changing or influencing the Board, management, business strategy, policies or corporate governance of the Company; or
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take any actions which could cause the Company to make a public announcement regarding any of the foregoing, or publicly seek or request permission to do any of the foregoing.
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The standstill provisions in the Agreement do not prevent HG Vora from communicating privately with the Board, and would terminate prior to the end of the term if (i) any person, entity or group acquires a majority of the outstanding voting stock of the Company, (ii) the Company becomes the subject of a tender offer for a majority of the outstanding shares and the Board does not recommend against such offer, or (iii) the Company enters into an agreement with respect to a sale of the Company.
The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.