UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE
14A
(RULE 14a-101)
Proxy Statement Pursuant
to Section 14(a) of the
Securities Exchange
Act of 1934
Filed by the Registrant
x
Filed by a Party other than the Registrant
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Check the appropriate box:
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x
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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WEST MARINE, INC.
(Name of Registrant
as Specified In Its Charter)
N/A
(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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common stock, par value $0.001 per share, of West Marine, Inc.,
a Delaware corporation (the “Company”)
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(2)
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Aggregate number of securities to which transaction applies:
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As of July 14, 2017, (A) 25,279,066 shares of the Company’s
outstanding common stock, (B) 483,694 shares of the Company’s common stock issuable upon the exercise of outstanding
stock options, (C) 494,937 shares of the Company’s common stock underlying outstanding awards of time-released restricted
stock units, and (D) 182,191 shares of the Company’s common stock underlying outstanding awards of performance-based
restricted stock units.
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
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Solely for the purposes of calculating the filing fee, the maximum
aggregate value was determined based upon the sum of: (A) 25,279,066 shares of the Company’s common stock multiplied
by the per share merger consideration of $12.97; (B) 483,694 shares of the Company’s common stock underlying outstanding
stock options multiplied by the difference between the per share merger consideration of $12.97 and $10.95, which is the weighted
average exercise price of such stock options; (C) 494,937 shares of the Company’s common stock underlying outstanding
awards of time-released restricted stock units multiplied by the per share merger consideration of $12.97; and (D) 182,191
shares of the Company’s common stock underlying outstanding award of performance-based restricted stock units multiplied
by the per share merger consideration of $12.97. In accordance with Exchange Act Rule 0-11, as amended, the filing fee was
determined by multiplying the sum calculated in the preceding sentence by 0.0001159.
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(4)
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Proposed maximum aggregate value of transaction:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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PRELIMINARY PROXY STATEMENT
SUBJECT TO COMPLETION, DATED JULY 21, 2017
[ ● ], 2017
Dear West Marine Stockholders:
You are cordially invited to attend a special
meeting of stockholders (the “Special Meeting”) of West Marine, Inc., a Delaware corporation (“West Marine,”
the “Company,” “we,” “us” or “our”), to be held on [ ● ], 2017, at [ ●
] [a.m./p.m.], Pacific Time, at West Marine Support Center located at 500 Westridge Drive, Watsonville, California 95076-4100.
On June 29, 2017, the Company entered into
the Agreement and Plan of Merger (the “Merger Agreement”) with Rising Tide Parent Inc., a Delaware corporation (“Parent”),
and Rising Tide Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Sub”). Parent and
Sub are entities affiliated with Monomoy Capital Partners, a New York-based private equity fund. Under the Merger Agreement, at
the effective time of the merger, Sub will merge with and into the Company, with the Company surviving the merger as a wholly-owned
subsidiary of Parent (the “Merger”). At the Special Meeting, we will ask you to adopt the Merger Agreement.
At the effective time of the Merger, each share
of the Company’s common stock, par value $0.001 per share (“our common stock”), issued and outstanding prior
to the effective time, other than (i) shares held in the treasury of the Company or owned of record by any wholly-owned subsidiary
of the Company, Parent or any of its wholly-owned subsidiaries and (ii) shares of our common stock held by stockholders who have
not voted in favor of the adoption of the Merger Agreement and who have perfected their statutory right of appraisal in respect
of such shares of our common stock in accordance with Section 262 of the Delaware General Corporation Law, will be cancelled and
automatically be converted into the right to receive $12.97 per share in cash, without interest (the “Merger Consideration”),
subject to any withholding taxes.
The Merger Consideration represents a premium
of approximately 34.4% over the closing price of our common stock reported on The NASDAQ Global Select Market (the “NASDAQ”)
on June 29, 2017, the last full trading day before the entering into of the Merger Agreement, and approximately 31.7% over the
average closing price of our common stock reported on the NASDAQ for the trading days during the 30-day period ended on June 29,
2017.
In connection with the process to explore strategic
alternatives available to the Company, the board of directors of the Company (the “Board”) carefully reviewed and
considered the terms and conditions of the Merger Agreement, the Merger and the other transactions contemplated by the Merger
Agreement and unanimously (i) adopted and declared advisable the Merger Agreement and the consummation by the Company of the transactions
contemplated by the Merger Agreement, including the Merger, (ii) approved the execution, delivery and performance of the Merger
Agreement and the consummation by the Company of the transactions contemplated by the Merger Agreement, including the Merger,
(iii) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are
advisable and in the best interests of the Company and its stockholders, and (iv) recommended that the Company stockholders adopt
the Merger Agreement and directed that the Merger Agreement be submitted to the Company stockholders for adoption.
Accordingly,
the Board unanimously recommends a vote “FOR” the proposal to adopt the Merger Agreement (Proposal
1).
In addition, at the Special Meeting,
you
will be asked to consider and vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that may be
paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the Merger (Proposal
2) and a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal
to adopt the Merger Agreement (Proposal 3). You will also at the Special Meeting be asked to transact such other business as may
properly come before the meeting or any adjournment or postponement thereof.
Your vote is very important, regardless of
the number of shares of our common stock that you own
. We cannot consummate the Merger unless the proposal to adopt the Merger
Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of our common stock
entitled to vote at the Special Meeting.
Whether or not you plan to attend the Special Meeting, please complete, date,
sign and return, as promptly as possible, the enclosed proxy card or voting instruction form in the accompanying prepaid reply
envelope, or submit your proxy or voting instructions by telephone or the Internet.
The failure to vote your shares of our
common stock will have the same effect as a vote “AGAINST” approval of the proposal to adopt the Merger Agreement
.
The Board unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, FOR” the
approval, by a non-binding advisory vote, of the compensation that may be paid or become payable to the Company’s named
executive that is based on or otherwise relates to the Merger and “FOR” the proposal to adjourn the Special
Meeting if necessary or appropriate, as determined by the Company, to solicit additional proxies in favor of the proposal to adopt
the Merger Agreement.
The obligations of the Company, Parent and Sub
to consummate the Merger are subject to the satisfaction or waiver of certain conditions. The accompanying proxy statement contains
detailed information about us, the Special Meeting, the Merger Agreement, the Merger and the Merger-related proposals. A copy
of the Merger Agreement is attached as
Annex A
to the proxy statement. We encourage you to read the entire proxy statement
carefully, including its annexes and the documents incorporated by reference. In addition, you may obtain more information about
the Company from documents that it files with the Securities and Exchange Commission. See the section in the proxy statement captioned
“
Where You Can Find Additional Information
.”
If you have any questions or need assistance
voting your shares, please contact our proxy solicitor:
D.F. King & Co.,
Inc.
Stockholders May Call
Toll-Free: (866) 751-6312
Banks & Brokers May
Call Collect: (212) 269-5550
Email:
WMAR@dfking.com
On behalf of the Board, we thank you for
your support and appreciate your consideration of this matter.
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Sincerely,
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Barbara L. Rambo
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Matthew L. Hyde
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Board Chair
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President and Chief Executive Officer
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The accompanying proxy statement is dated [
● ], 2017 and, together with the enclosed form of proxy card, is first being mailed to the Company stockholders on or about
[ ● ], 2017.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved the Merger, passed upon the merits or fairness of the Merger Agreement
or the transactions contemplated thereby, including the proposed Merger, or passed upon the adequacy or accuracy of the information
contained in the accompanying proxy statement. Any representation to the contrary is a criminal offense.
WEST MARINE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[
●
], 2017
Notice is hereby given that a special meeting
of stockholders (the “Special Meeting”) of West Marine, Inc., a Delaware corporation (“West Marine,” the
“Company,” “we,” “us” or “our”), will be held on [ ● ], 2017, at [ ●
] [a.m./p.m.], Pacific Time, at West Marine Support Center located at 500 Westridge Drive, Watsonville, California 95076-4100,
for the following purposes:
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1.
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Adoption of the Merger Agreement.
To adopt the Agreement
and Plan of Merger dated as of June 29, 2017 (the “Merger Agreement”), entered
into by and among the Company, Rising Tide Parent Inc., a Delaware corporation (“Parent”),
and Rising Tide Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent (“Sub”), pursuant to which Sub will be merged with and into the
Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent
(the “Merger”).
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2.
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Advisory Vote Regarding Merger-Related Compensation.
To
approve, on a non-binding, advisory basis, the compensation that may be paid or become
payable to the Company’s named executive officers that is based on or otherwise
relates to the Merger.
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3.
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Adjournment or Postponement of the Special Meeting.
To
approve a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at that time to approve the proposal
to adopt the Merger Agreement.
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4.
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Any Other Business
. To transact such other business
as may properly come before the Special Meeting or any adjournment or postponement thereof.
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All stockholders at the close of business
on [ ● ], 2017, the record date with respect to the Special Meeting, are entitled to notice of and to vote at the Special
Meeting and any adjournment or postponement thereof.
In connection with the process to explore
strategic alternatives available to the Company, the board of directors of the Company (the “Board”) carefully reviewed
and considered the terms and conditions of the Merger Agreement, the Merger and the other transactions contemplated by the Merger
Agreement and unanimously (i) adopted and declared advisable the Merger Agreement and the consummation by the Company of the transactions
contemplated by the Merger Agreement, including the Merger, (ii) approved the execution, delivery and performance of the Merger
Agreement and the consummation by the Company of the transactions contemplated by the Merger Agreement, including the Merger,
(iii) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are
advisable and in the best interests of the Company and its stockholders, and (iv) recommended that the Company stockholders adopt
the Merger Agreement and directed that the Merger Agreement be submitted to the Company stockholders for adoption.
The Board unanimously recommends that
you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the approval, by a non-binding advisory
vote, of the compensation that may be paid or become payable to the Company’s named executive officers that is based on
or otherwise relates to the Merger
and “FOR” the proposal to adjourn the Special Meeting if necessary or appropriate,
as determined by the Company, to solicit additional proxies in favor of the proposal to adopt the Merger Agreement.
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR
(3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ARE A STOCKHOLDER
OF RECORD, YOU MAY REVOKE YOUR PROXY OR CHANGE YOUR VOTE AT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING. IF YOU ARE VOTING
BY TELEPHONE OR THROUGH THE INTERNET, THEN YOUR VOTING INSTRUCTIONS MUST BE RECEIVED BY 11:59 P.M. PACIFIC TIME ON THE DAY BEFORE
THE SPECIAL MEETING. YOUR PROXY IS BEING SOLICITED BY THE BOARD.
If you hold your shares in “street name,”
you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form
that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals,
including the proposal to adopt the Merger Agreement and approve the Merger and the other transactions contemplated thereby, without
your instructions.
If you are a stockholder of record, voting in
person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a
bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.
We encourage you to read the accompanying proxy
statement and its annexes, including all documents incorporated by reference into the accompanying proxy statement, carefully
and in their entirety. If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement,
would like additional copies of the accompanying proxy statement or need help voting your shares of our common stock, please contact
our proxy solicitor:
D.F. King & Co., Inc.
Stockholders May Call Toll-Free: (866) 751-6312
Banks & Brokers May Call Collect: (212)
269-5550
Email:
WMAR@dfking.com
If you fail to
(i) return your proxy card or voting instruction form, (ii) grant your proxy electronically over the Internet or by telephone
or (iii) attend the Special Meeting in person, your shares will not be counted for purposes of determining whether a quorum is
present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal
to adopt the Merger Agreement, but will have no effect on the other two proposals.
For more information concerning the Special
Meeting, the Merger Agreement, the Merger and other transactions contemplated by the Merger Agreement, please review the accompanying
proxy statement and the copy of the Merger Agreement attached as
Annex A
thereto.
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By the Order of the Board,
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Barbara L. Rambo
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Matthew L. Hyde
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Board Chair
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President and Chief Executive Officer
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This proxy statement is dated [ ● ],
2017 and is first being mailed to our stockholders on or about [ ● ], 2017.
TABLE OF CONTENTS
Annexes
SUMMARY
This summary highlights selected information
that is contained elsewhere in this proxy statement. It may not contain all of the information that may be important to you. Accordingly,
you should carefully read this proxy statement in its entirety, including its annexes, as well as the other documents referred
to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement (excluding exhibits)
without charge by following the instructions under “Where You Can Find More Information” on page 99.
Parenthetical page references have been included to direct you to a more complete description of the topics presented in this
summary.
Except as otherwise specifically noted in this
proxy statement, “West Marine,” the “Company,” “we,” “us,” “our” and
similar words refer to West Marine, Inc., a Delaware corporation. Throughout this proxy statement, we refer to Rising Tide Parent
Inc., a Delaware corporation, as “Parent,” and Rising Tide Merger Sub Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent, as “Sub.” In addition, throughout this proxy statement, we refer to the Agreement and Plan of
Merger dated June 29, 2017, by and among the Company, Parent and Sub, as it may be amended from time to time, as the “Merger
Agreement,” and the merger of Sub with and into the Company, with the Company continuing as the surviving corporation and
as a wholly-owned subsidiary of Parent pursuant to the terms and conditions of the Merger Agreement as the “Merger.”
This proxy statement and a proxy card are first
being sent or given on or about [ ● ], 2017 to stockholders as of the close
of business on [ ● ], 2017.
Parties to the Merger (Page 29)
West Marine, Inc.
West Marine is a leading omni-channel specialty
retailer exclusively offering boating gear, apparel, footwear and other waterlife-related products to anyone who enjoys recreational
time on or around the water. Providing great customer experiences and a consistent brand is important to us, regardless of the
sales channel our customer uses. With our numerous stores and our eCommerce websites reaching domestic and international customers,
we are recognized as a dominant waterlife outfitter for cruisers, sailors, anglers and paddlesports enthusiasts.
Our principal executive offices are located
at 500 Westridge Drive, Watsonville, California 95076-4100, and our telephone number is (831) 728-2700. Our common stock is listed
on The NASDAQ Global Select Market (the “NASDAQ”) under the symbol “WMAR.”
Rising Tide Parent Inc.
Parent was formed on June 27, 2017 solely for
the purpose of engaging in the Merger and the other transactions contemplated by the Merger Agreement. Parent has not engaged
in any business activities other than those incidental to its formation and in connection with the transactions contemplated by
the Merger Agreement and arranging the equity financing and debt financing in connection with the Merger.
Parent’s principal executive offices are
located at 142 West 57th Street, 17th Floor, New York, New York 10019, and its telephone number is (212) 699-4000.
Rising Tide Merger Sub Inc.
Sub was formed on June 27, 2017 solely for the
purpose of engaging in the Merger and the other transactions contemplated by the Merger Agreement. Sub has not engaged in any
business activities other than those incidental to its formation and in connection with the transactions contemplated by the Merger
Agreement and arranging the equity financing and debt financing in connection with the Merger. Upon the consummation of the Merger,
Sub will cease to exist as a separate entity.
Sub’s principal executive offices are
located at 142 West 57th Street, 17th Floor, New York, New York 10019, and its telephone number is (212) 699-4000.
Parent and Sub are entities affiliated with
Monomoy Capital Partners (“Monomoy”), a private equity firm with $1.5 billion in committed capital. Through its three
fund vehicles, Monomoy makes controlling investments in middle market businesses in the manufacturing, industrial, distribution
and consumer products sectors. Monomoy’s principal executive offices are located at 142 West 57th Street, 17th Floor, New
York, New York 10019, and its telephone number is (212) 699-4000.
The Merger and the Merger Consideration (Page 29)
Upon the terms and subject to the conditions
of the Merger Agreement, if the Merger is consummated, Sub will merge with and into the Company, and the Company will continue
as the surviving corporation in the Merger and as a wholly-owned subsidiary of Parent (the “Surviving Corporation”).
Upon the consummation of the Merger, the Company
will cease to be a publicly traded company and each outstanding share of our common stock issued and outstanding immediately prior
to the effective time of the Merger (the “Effective Time”), other than (i) shares held in the treasury of the Company
or owned of record by any wholly-owned subsidiary of the Company, Parent or any of its wholly-owned subsidiaries (the “Cancelled
Shares”) and (ii) shares of our common stock held by stockholders who have not voted in favor of the adoption of the Merger
Agreement and who have perfected their statutory right of appraisal in respect of such shares of our common stock (the “Dissenting
Shares”) in accordance with Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”),
will be cancelled and automatically be converted into the right to receive in cash an amount equal to $12.97 per share, without
interest (the “Merger Consideration”), less any applicable withholding taxes. Following the consummation of the Merger,
you will no longer own any shares of the capital stock of the Surviving Corporation.
If the Merger is consummated and your shares
of our common stock are held in book-entry form, the Paying Agent (as defined in the Merger Agreement and described in the section
captioned “
The Merger Agreement — Exchange and Payment Procedures
”) will issue and deliver to you a check
or wire transfer for your shares without any further action on your part. If you are a stockholder of record with your shares
held in certificate form, you will receive a letter of transmittal with instructions on how to send your stock certificate(s)
representing your shares of our common stock to the Paying Agent following consummation of the Merger. The Paying Agent will issue
and deliver to you a check or wire transfer for your shares after you comply with these instructions.
Please do not send your
stock certificates with your proxy card
. See the section captioned “
The Merger Agreement — Exchange and Payment
Procedures
.”
If your shares are held in “street name”
by your broker, bank, or other nominee, you will receive instructions from your broker, bank or other nominee as to how to effect
the surrender of your shares held in “street name.”
Material U.S. Federal Income Tax Consequences of the Merger
(Page 71)
For U.S. federal income tax purposes, the receipt
of cash by a U.S. Holder (as defined in the section captioned “
The Merger — Material U.S. Federal Income Tax Consequences
of the Merger
”) in exchange for such U.S. Holder’s shares of our common stock in the Merger generally will result
in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S.
Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of our common stock surrendered in
the Merger. Gain or loss realized generally must be calculated separately for each block of shares (
i.e.
, shares acquired
at the same cost in a single transaction) surrendered pursuant to the Merger.
A Non-U.S. Holder (as defined in the section
captioned “
The Merger — Material U.S. Federal Income Tax Consequences of the Merger
”) generally will
not be subject to U.S. federal income tax with respect to the exchange of shares of our common stock for cash in the Merger, unless
such Non-U.S. Holder has certain connections to the United States.
The determination of actual tax consequences
of the Merger to a holder of our common stock will depend on the holder’s specific situation. For more information, see
the section captioned “
The Merger — Material U.S. Federal Income Tax Consequences of the Merger
.”
Stockholders
should consult their own tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their
particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or
foreign taxing jurisdiction.
Treatment of Equity Awards (Page 63)
The Merger Agreement provides for the following
treatment as of the Effective Time of the stock options (“Options”) and time-based restricted stock units and performance-based
restricted stock units (collectively, “RSUs”) that are outstanding under the Company’s Amended and Restated
Omnibus Equity Incentive Plan (the “Company Equity Incentive Plan”).
Options
Immediately prior to the Effective Time,
each Option granted under the Company Equity Incentive Plan that is then outstanding, all of which are fully vested, will be cancelled
and, in exchange therefor, each holder of any such Option will be entitled to receive payment of an amount in cash equal to the
product of (i) the total number of shares of our common stock subject to such Option,
multiplied
by (ii) the excess, if
any, of (A) the Merger Consideration over (B) the exercise price per share subject to such Option, without interest;
provided,
however
, that (i) any such Option with respect to which the exercise price per share subject thereto is greater than the Merger
Consideration will be cancelled in exchange for no consideration and (ii) such Option payments may be reduced by the amount of
any required tax withholdings as contemplated by the Merger Agreement.
RSUs
Employee RSUs
Immediately prior to the Effective Time,
each award of unvested RSUs (including performance-based stock units, referred to as “PSUs”) granted under the Company
Equity Incentive Plan that is then outstanding (other than those RSUs held by a non-employee director of the Company) will be
assumed by the Surviving Corporation and will be converted into a right to receive payment of an amount in cash equal to the product
of (i) the Merger Consideration,
multiplied
by (ii) the total number of shares of our common stock subject to such RSUs,
without interest (the “Cash Replacement Company RSUs”), which such Cash Replacement Company RSUs will, subject to
the holder’s continued employment with the Surviving Corporation through the applicable vesting dates, vest and be payable
at the same time as the RSUs for such Cash Replacement Company RSUs were exchanged would have vested pursuant to their terms.
All Cash Replacement Company RSUs will have the same terms and conditions as applied to the RSUs for which they were exchanged,
except for terms rendered inoperative by reason of the transactions contemplated by the Merger Agreement or for administrative
or ministerial changes that are not materially detrimental to the holders and that are necessary for the administration of the
Cash Replacement Company RSUs. With respect to PSUs, the number of PSUs assumed by the Surviving Corporation and converted into
Cash Replacement Company RSUs will be determined (A) for PSUs with a performance period that by its terms has ended prior to the
Effective Time, based on actual performance through the end of such performance period, and (B) for PSUs with a performance period
that by its terms has not ended prior to the Effective Time, assuming performance at 100% of target levels.
Non-Employee Director RSUs
Immediately prior to the Effective Time,
each award of unvested RSUs granted under the Company Equity Incentive Plan that is then outstanding and is held by a non-employee
director of the Company will be fully vested and cancelled and, in exchange therefor, each holder of any such cancelled RSUs will
be entitled to receive payment of an amount in cash equal to the product of (i) the Merger Consideration,
multiplied
by
(ii) the total number of shares of our common stock subject to such RSUs, without interest;
provided
,
however
, that
any such RSU payments may be reduced by the amount of any required tax withholdings as contemplated by the Merger Agreement.
Financing of the Merger (Page 60)
The Company and
Parent estimate that the total amount of funds required to consummate the Merger and related transactions and pay related fees
and expenses will be approximately $354 million. This amount includes funds needed to (i) pay our stockholders the amounts
due to them under the Merger Agreement; (ii) make payments due as of the Effective Time in respect of the Company’s
outstanding equity awards pursuant to the Merger Agreement and (iii) pay all fees and expenses payable by Parent and Sub
in connection with the Merger and related transactions.
Parent expects this
total amount to be funded through a combination of the following:
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debt financing
in an aggregate principal amount of $250 million, consisting of (i) a $225 million
senior secured first-lien credit facility of which $200 million is an asset-based revolving
line of credit and $25 million is a first-in last-out asset-based term loan, and (ii)
a $25 million second lien asset-based term loan; and
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·
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cash equity
investments by Monomoy in an aggregate amount of up to $130 million (the “Equity
Financing”).
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The obligations
of Parent and Sub to consummate the Merger are not subject to any financing condition.
Conditions to the Merger (Page 89)
The respective obligations of the Company, Parent
and Sub to consummate the Merger are subject to the satisfaction or, to the extent permitted by applicable law, waiver of certain
customary conditions, including, among other things, the following:
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adoption of
the Merger Agreement by holders of a majority of the outstanding shares of our common
stock entitled to vote thereon (the “Requisite Stockholder Approval”);
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the absence
of any law, regulation, order, injunction or decree prohibiting, enjoining or rendering
illegal the consummation of the Merger;
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expiration or
termination of any applicable waiting period (or extensions thereof) relating to the
Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR
Act”) or any other applicable competition, merger control or antitrust law, and
obtaining any approval required thereunder;
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·
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the accuracy
of the representations and warranties of the parties, subject to certain materiality
or (with respect to certain capitalization representations and warranties made by the
Company)
de minimus
qualifications and exceptions;
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·
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the compliance
by the parties in all material respects with their respective obligations under the Merger
Agreement;
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with respect
to the obligations of Parent and Sub to consummate the Merger, the absence of any change,
circumstance, development, occurrence, state of facts, event or effect occurring after
June 29, 2017 that has had or would reasonably be expected to have, individually or in
the aggregate, a “Company Material Adverse Effect,” as defined in the Merger
Agreement;
|
|
·
|
with respect
to the obligations of Parent and Sub to consummate the Merger, the receipt by Parent
of a certificate signed by an executive officer of the Company as to the satisfaction
of the conditions set forth in the fourth to sixth bullet points above; and
|
|
·
|
with respect
to the obligations of the Company to consummate the Merger, the receipt by the Company
of a certificate signed by an executive officer of Parent as to the satisfaction of the
condition set forth in the fourth and fifth bullet points above.
|
Regulatory Approvals Required for the
Merger (Page 74)
Parent and the Company have generally agreed
to (and Parent has agreed to cause Sub and each of Parent’s and Sub’s affiliated investment funds to and the Company
has agreed to cause each of its subsidiaries to) use their reasonable best efforts to promptly obtain all necessary actions, nonactions
or approvals from governmental entities to consummate the Merger and the other transactions contemplated by the Merger Agreement.
These actions, nonactions or approvals (i) include expiration or termination of the applicable waiting period under the HSR Act,
and (ii) may include the approval or clearance of the Merger pursuant to antitrust laws of potentially other jurisdictions as
required.
Restriction on Solicitation of
Competing Proposals (Page 83)
Under the Merger Agreement, the Company is
required to and is required to cause each of its subsidiaries to and its and their respective directors, officers, employees,
managers, consultants, accountants, advisors, investment bankers and counsel (collectively, the “representatives”)
to, cease any solicitations, discussions or negotiations with any persons that may have been ongoing with respect to any Competing
Proposal (as defined in the Merger Agreement and described in the section captioned “
The Merger Agreement – Restriction
on Solicitation of Competing Proposals
”) and terminate “data room” access for such persons and their representatives
and request the prompt return or destruction of any non-public information regarding the Company or its subsidiaries furnished
to such persons and their representatives. Except as permitted by the terms of the Merger Agreement, the Company will not, and
will cause each of its subsidiaries and its and their respective representatives not to:
|
·
|
initiate, solicit,
facilitate, or knowingly encourage the submission of any Competing Proposal;
|
|
·
|
furnish any
non-public information regarding the Company or any of its subsidiaries to any third
person in connection with or in response to a Competing Proposal;
|
|
·
|
participate
in any discussions or negotiations with any third person with respect to any Competing
Proposal;
|
|
·
|
terminate, waive,
amend or modify any provision of, or grant permission under, any confidentiality agreement
or standstill agreement to which the Company or any of its subsidiaries is party;
|
|
·
|
waive the applicability
of all or any portion of any takeover statute in respect of any person; or
|
|
·
|
resolve to agree
to take any of the foregoing actions.
|
Under certain circumstances, however, and
in compliance with its obligations contained in the Merger Agreement, the Company may furnish information with respect to the
Company and its subsidiaries to, and participate in discussions or negotiations with, the person making a Competing Proposal if,
in addition to other conditions, the Board determines in good faith, after consultation with its financial advisors and outside
counsel, that such Competing Proposal constitutes or would reasonably be expected to lead to a Superior Proposal (as defined in
the Merger Agreement and described in the section captioned “
The Merger Agreement – Restriction on Solicitation
of Competing Proposals
”). Under certain circumstances, the Company is permitted to terminate the Merger Agreement to
enter into a definitive agreement with respect to a Superior Proposal after or concurrently with the payment by the Company to
Parent of a termination fee of $11 million (the “Company Termination Fee”).
Termination of the Merger Agreement (Page 90)
The Merger Agreement may be terminated under
the following circumstances:
|
·
|
by Parent and
the Company by mutual written consent if the Board has recommended termination;
|
|
·
|
by either Parent
or, if the Board recommended termination, the Company if:
|
|
·
|
the
closing of the Merger has not occurred on or before December 29, 2017 (the “Outside
Date”);
|
|
·
|
the
Requisite Stockholder Approval has not been obtained at a stockholders’ meeting
or any adjournment or postponement thereof; or
|
|
·
|
a
governmental entity of competent jurisdiction has issued a final, non-appealable law,
order, decree or injunction permanently enjoining, restraining or prohibiting the Merger;
|
|
·
|
the
Board has failed to include its recommendation that the Company stockholders adopt
the Merger Agreement in this proxy statement or has effected a Change of Company Recommendation
(as defined in the Merger Agreement and described in the section captioned “
The
Merger Agreement – Obligation of the Board with respect to Its Recommendation
”);
or
|
|
·
|
the
Company has breached any of its representations, warranties or covenants in the Merger
Agreement, and such breach would result in certain conditions to the Merger not being
satisfied and such breach is not curable prior to the Outside Date or has not been cured
within 30 calendar days after delivery of notice thereof by Parent to the Company;
|
|
·
|
prior to the Company
stockholder approval, (i) the Board has
effected
a Change of Company Recommendation, (ii) the Company has complied with the non-solicitation
provisions of the Merger Agreement, (iii) concurrently with, or immediately after, the
termination of the Merger Agreement, the Company enters into a definitive acquisition
agreement with respect to a Superior Proposal and (iv) the Company has previously paid
or substantially concurrently pays the Company Termination Fee to Parent;
|
|
·
|
Parent
or Sub has breached any of its representations, warranties or covenants in the Merger
Agreement, and such breach would result in certain conditions to the Merger not being
satisfied and such breach is not curable prior to the Outside Date or has not been cured
within 30 calendar days after delivery of notice by the Company to Parent; or
|
|
·
|
(i) all conditions
to Parent’s and Sub’s obligations to effect the Merger have been satisfied
or waived (other than those conditions, by their nature, are to be satisfied by actions
taken at the closing, and each of which is capable of being satisfied at the closing
and is reasonably expected to be satisfied as of the closing), (ii) Parent and Sub fail
to consummate the Merger on the date as required by the Merger Agreement, (iii) the Company
has irrevocably confirmed by written notice to Parent that all conditions to the Company’s
obligations to effect the Merger have been satisfied or irrevocably waived (other than
those conditions which, by their nature, are to be satisfied by actions taken at the
closing) and the Company stands ready, willing and able to consummate the Merger and
(iv) Parent and Sub fail to consummate the Merger on the third business day following
delivery of such written notice.
|
Effect of Termination (Page 91)
If the Merger Agreement is terminated, the
Merge Agreement will become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or their
respective subsidiaries, officers or directors or any Affiliate of any of the foregoing, except that certain specified provisions
of the Merger Agreement will survive any such termination and remain in full force and effect. Subject to the termination fees
payable by the Company or Parent described below, the termination of the Merger Agreement will not relieve any party from any
liabilities or damages incurred or suffered by another party as a result of such first party’s intentional fraud or willful
and material breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement.
Company Termination Fee (Page 92)
The Company has agreed to pay Parent the
Company Termination Fee if the Merger Agreement is terminated as described below:
|
·
|
by Parent if
the
Board has failed
to include its recommendation that the Company stockholders adopt the Merger Agreement
in this proxy statement or has effected a Change of Company Recommendation; or
|
|
·
|
by the Company
if (i) the Board has
effected
a Change of Company Recommendation, (ii) the Company complies with the non-solicitation
provisions of the Merger Agreement, and (iii) concurrently with, or immediately after,
the termination of the Merger Agreement, the Company enters into a definitive acquisition
agreement with respect to a Superior Proposal.
|
In addition, the Company has agreed to pay
Parent the Company Termination Fee if the Merger Agreement is terminated as described below:
|
·
|
(i) by the Company
or Parent if the closing has not occurred on or before the Outside Date (
but
only if the terminating party has not materially breached any representation, warranty
or covenant, which has caused the failure of the closing to occur on or before the Outside
Date), (ii) by the Company or Parent if the Requisite Stockholder Approval has not been
obtained at the Special Meeting or any adjournment or postponement thereof,
or
(iii) by Parent if the Company’s failure to perform in any material respect
its obligations, agreements or covenants under the Merger Agreement required to be performed
prior to or at the closing has resulted in the closing condition relating to the Company’s
performance of obligations, agreements or covenants not being satisfied, and such failure
is not curable prior to the Outside Date, or if curable prior to the Outside Date, it
has not been cured within 30 calendar days after delivery of written notice thereof by
Parent to the Company;
|
|
·
|
prior
to the Special Meeting or any adjournment or postponement thereof, a Competing Proposal
has been publicly disclosed;
and
|
|
·
|
within
12 months after the termination of the Merger Agreement, the Company has entered into
a definitive agreement with respect to any Competing Proposal and any Competing Proposal
is subsequently consummated;
provided
that each reference to 20% in the definition
of “Competing Proposal” will be deemed to be a reference to “50%.”
|
Reverse Termination Fee and Other Remedies (Page 92)
Parent has agreed to pay the Company $17
million (the “Reverse Termination Fee”) if the Merger Agreement is terminated as described below:
|
·
|
by the Company
if (i) all conditions to Parent’s and Sub’s obligations to effect the Merger
have been satisfied or waived (other than those conditions, by their nature, are to be
satisfied by actions taken at the closing, and each of which is capable of being satisfied
at the closing and is reasonably expected to be satisfied as of the closing), (ii) Parent
and Sub fail to consummate the Merger on the closing date as required by the Merger Agreement,
(iii) the Company has irrevocably confirmed by written notice to Parent that (A) all
conditions to the Company’s obligations to effect the Merger have been satisfied
or irrevocably waived (other than those conditions which, by their nature, are to be
satisfied by actions taken at the closing) and (B) the Company stands ready, willing
and able to consummate the Merger (and it has not delivered written notice purporting
to revoke such notice) and (iv) Parent and Sub fail to consummate the Merger on the third
business day following delivery of such written notice; or
|
|
·
|
by the Company
or Parent if the closing has not occurred on or before the Outside Date (
but
only if the terminating party has not materially breached any representation, warranty
or covenant, which has caused the failure of the closing to occur on or before the Outside
Date) at a time when the Company had the right to terminate the Merger Agreement under
the circumstance described in the immediately preceding bullet point.
|
Furthermore, Parent has agreed that the Company
has the right to seek damages following a termination of the Merger Agreement by the Company in the instance where Parent or Sub
has intentionally breached its covenants specified in Article V of the Merger Agreement and such breach is not curable prior to
the Outside Date or has not been cured within 30 days after delivery of notice by the Company to Parent;
provided, however
,
that under no circumstance will the Company or any of its affiliates be entitled to receive damages for such alleged intentional
breach in excess of $15 million.
In addition, prior to the termination of
the Merger Agreement by the Company, the Company will be entitled to obtain specific performance to cause Parent and Sub to cause
the Equity Financing to be funded and to consummate the Merger under certain circumstances. If a court of competent jurisdiction
has declined to specifically enforce such obligations of Parent and has instead granted an award of damages for such alleged breach
of Parent’s obligations and Parent does not consummate the Merger within ten business days, the Company may enforce such
award and accept damages for such alleged breach;
provided, however
, that under no circumstances will the Company or any
of its affiliates be entitled to enforce such an award or accept damages for such alleged breach in excess of $25 million.
The Company will not be permitted or entitled
to receive both such grant of specific performance (or damages contemplated pursuant to the immediately preceding paragraph) and
the payment of the Reverse Termination Fee or damages relating to any intentional breach.
Appraisal Rights (Page 67)
Under the DGCL, our stockholders that do not
vote in favor of the adoption of the Merger Agreement have the right to seek appraisal of the fair value of their shares of our
common stock in cash as determined by the Delaware Court of Chancery (the “Court of Chancery”), but only if they comply
fully with all of the applicable requirements of the DGCL for exercise of such appraisal rights, which requirements are summarized
in this proxy statement. Any appraisal amount determined by the Court of Chancery could be more than, the same as, or less than
the value of the Merger Consideration. Any stockholder intending to exercise appraisal rights must, among other things, submit
a written demand for appraisal to us before the vote on the adoption of the Merger Agreement, and must not vote or otherwise submit
a proxy in favor of the adoption of the Merger Agreement. Failure to follow the procedures specified under the DGCL will result
in the loss of appraisal rights. Because of the complexity of the DGCL relating to appraisal rights, if you are considering exercising
your appraisal rights, we encourage you to promptly seek the advice of your own legal and financial advisors. See the section
captioned “
The Merger — Appraisal Rights
,” beginning on page 67, and
Annex C
for additional information about these matters.
Recommendation of the Board and Reasons for the Merger (Page
40)
After careful consideration and consulting
with the legal and financial advisors to the Board, the Board has unanimously (i) adopted and declared advisable the Merger Agreement
and the consummation by the Company of the transactions contemplated by the Merger Agreement, including the Merger, (ii) approved
the execution, delivery and performance of the Merger Agreement and the consummation by the Company of the transactions contemplated
by the Merger Agreement, including the Merger, (iii) determined that the Merger Agreement and the transactions contemplated by
the Merger Agreement, including the Merger, are advisable and in the best interests of the Company and its stockholders, and (iv)
recommended that the Company stockholders adopt the Merger Agreement and directed that the Merger Agreement be submitted to the
Company stockholders for adoption.
Accordingly, the Board unanimously recommends
that you vote:
|
·
|
“FOR”
the proposal to adopt the Merger Agreement;
|
|
·
|
“FOR”
the proposal to approve, on a non-binding, advisory basis, the compensation that
may be paid or become payable to the Company’s named executive officers that is
based on or otherwise relates to the Merger; and
|
|
·
|
“FOR”
the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at that time to approve the proposal
to adopt the Merger Agreement.
|
Interests of the Company’s Directors and Executive Officers
in the Merger (Page 62)
In considering the recommendation of the Board
that you vote “
FOR
” the proposal to adopt the Merger Agreement, you should be aware that some of our directors
and executive officers have interests that may be different from, or in addition to, the interests of the Company stockholders
generally. You should keep this in mind when considering the recommendation of the Board in favor of the adoption of the Merger
Agreement. The Board was aware of these interests and considered them at the time the Board approved the Merger Agreement and
made its recommendation to the Company stockholders. For more information, see the section captioned “
The Merger —
Interests of the Company’s Directors and Executive Officers in the Merger
.”
Voting Agreement (Page 94)
Concurrently with the execution of the Merger
Agreement, Randolph K. Repass, his spouse and certain of the Repass family trusts, which beneficially owned, in the aggregate,
approximately 20% of the issued and outstanding shares of our common stock as of that date, entered into a voting and support
agreement (the “Voting Agreement”) with Parent and Sub. Certain other Repass family trusts, which beneficially owned
shares of our common stock but were not able to deliver their signature pages concurrently with the execution of the Merger Agreement,
signed the Voting Agreement on the following day, June 30, 2017, which increased the total issued and outstanding shares of our
common stock subject to the Voting Agreement to approximately 24% as of June 30, 2017 and [ ● ] as of the Record Date. Pursuant
to the Voting Agreement, they agreed, among other things, during the period beginning on the date of the Voting Agreement and
ending on its termination date set forth therein, (i) to vote in favor of the Merger and the other transactions contemplated by
the Merger Agreement, (ii) to certain restrictions in the transfer of their shares of our common stock, (iii) to vote against
any action or agreement which could reasonably be expected to impede, interfere with, prevent, delay or adversely affect the Merger
Agreement or the Merger and (iv) to not take and to cause his or her representatives to not take any actions, directly or indirectly,
any actions that the Company is prohibited from taking under the Merger Agreement as they relate to the restriction on the solicitation
of competing proposals. Mr. Repass executed the Voting Agreement as a Company stockholder, and therefore it does not limit or
restrict him from acting in his capacity as a director of the Company, in his discretion on any matter. The foregoing summary
of the Voting Agreement is subject to, and qualified in its entirety by reference to, the full text of the Voting Agreement. A
copy of the Voting Agreement is attached as
Annex D
to this proxy statement and is incorporated herein by reference.
Opinion of Guggenheim Securities, LLC
(Page 45)
The Board retained Guggenheim Securities,
LLC (“Guggenheim”) as its financial advisor in connection with the potential sale of the Company. Guggenheim delivered
an opinion to the Board to the effect that, as of June 29, 2017 and based on and subject to the matters considered, the procedures
followed, the assumptions made and various limitations of and qualifications to the review undertaken, the Merger Consideration
was fair, from a financial point of view, to holders of shares of our common stock (excluding the Company or any of its wholly
owned subsidiaries or Parent or any of its wholly owned subsidiaries). The full text of Guggenheim’s written opinion, which
is attached as
Annex B
to this proxy statement and which you should read carefully and in its entirety, is subject to the
assumptions, limitations, qualifications and other conditions contained in such opinion and is necessarily based on economic,
capital markets and other conditions and the information made available to Guggenheim, as of the date of such opinion.
Guggenheim’s opinion was provided to
the Board (in its capacity as such) for its information and assistance in connection with its evaluation of the Merger Consideration.
Guggenheim’s opinion and any materials provided in connection therewith did not constitute a recommendation to the Board
with respect to the Merger, nor does Guggenheim’s opinion and any materials provided in connection therewith constitute
advice or a recommendation to any holder of shares of our common stock as to how to vote or act in connection with the Merger
or otherwise. Guggenheim’s opinion addresses only the fairness, from a financial point of view and as of the date of such
opinion, of the Merger Consideration to be paid to holders of our common stock (excluding the Company or any of its wholly owned
subsidiaries or Parent or any of its wholly owned subsidiaries) to the extent expressly specified in such opinion and does not
address any other term, aspect or implication of the Merger, the Merger Agreement (including, without limitation, the form or
structure of the Merger) or any other agreement, transaction document or instrument contemplated by the Merger Agreement or to
be entered into or amended in connection with the Merger or any financing or other transactions related thereto.
For a description of the opinion that the
Board received from Guggenheim, see the section captioned “
The Merger—Opinion of Guggenheim Securities, LLC
.”
beginning on page 45.
Market Price and Dividend Data (Page
96)
Our common stock is traded on the NASDAQ under
the symbol “WMAR.” On June 29, 2017, the last full trading day prior to the public announcement of the Merger, the
closing price for our common stock was $9.65 per share. On July 14, 2017, the latest practicable date before the printing of this
proxy statement, the closing price for our common stock was $12.86 per share.
Certain Effects of the Merger (Page
29)
Upon consummation of the Merger, Sub will
be merged with and into the Company upon the terms set forth in the Merger Agreement. As the Surviving Corporation in the Merger,
the Company will continue to exist following the Merger as a wholly-owned subsidiary of Parent.
Following the consummation of the Merger,
shares of our common stock will no longer be traded on the NASDAQ or any other public market. In addition, the registration of
shares of our common stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated.
Effect on the Company if the Merger is Not Consummated (Page
30)
If the Merger Agreement is not adopted by stockholders
or if the Merger is not consummated for any other reason, the Company stockholders will not receive any payment for their shares
of our common stock. Instead, the Company will remain an independent public company, our common stock will continue to be listed
and traded on the NASDAQ and registered under the Exchange Act, and we will continue to file periodic and current reports with
the Securities and Exchange Commission (the “SEC”).
The Special Meeting (Page 21)
Date, Time and Place
A special meeting of the Company stockholders
(the “Special Meeting”) will be held on [
●
], 2017, at [
●
] [a.m./p.m.], Pacific Time,
at West Marine Support Center located at 500 Westridge Drive, Watsonville, California 95076-4100.
Record Date; Shares Entitled to Vote
You are entitled to vote at the Special Meeting
if you owned shares of our common stock at the close of business on [
●
], 2017 (the “Record Date”).
You will have one vote at the Special Meeting for each share of our common stock that you owned at the close of business on the
Record Date.
Purpose
At the Special Meeting, we will ask our stockholders
to vote on proposals to: (1) adopt the Merger Agreement; (2) approve, by non-binding, advisory vote, certain compensation that
may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the Merger
and (3) adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to
adopt the Merger Agreement at the time of the Special Meeting. You will also at the Special Meeting be asked to transact such
other business as may properly come before the Special Meeting or any adjournment or postponement thereof.
Quorum
The presence at the Special Meeting, in person
or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the
Special Meeting constitutes a quorum for the purpose of considering the proposals. As of the close of business on the Record Date,
there were [ ● ] shares of our common stock outstanding. If you are a Company stockholder of record as of the close of business
on the Record Date and you vote by mail, by telephone, through the Internet or in person at the Special Meeting, you will be considered
part of the quorum. If you are a “street name” holder of shares of our common stock and you provide your bank, broker,
trust or other nominee with voting instructions, then your shares will be counted in determining the presence of a quorum. If
you are a “street name” holder of shares and you do not provide your bank, broker or other nominee with voting instructions,
then your shares will not be counted as present in determining the presence of a quorum.
Required Vote
If a quorum is present, the affirmative vote
of a majority of the issued and outstanding shares of our common stock is required to adopt the Merger Agreement. A failure to
vote your shares of our common stock or an abstention from voting will have the same effect as a vote against the proposal to
adopt the Merger Agreement.
Approval of each of the non-binding, advisory
vote, of certain compensation that may be paid or become payable to the Company’s named executive officers that is based
on or otherwise relates to the Merger, if a quorum is present and the proposal to adjourn the Special Meeting, whether or not
a quorum is present at the Special Meeting, requires the affirmative vote of the majority of the votes cast for either proposal.
Abstentions and failure to vote your shares will have no effect on these proposals.
As described above, concurrently with the
execution of the Merger Agreement, Randolph K. Repass, his spouse and certain of the Repass family trusts, which beneficially
owned, in the aggregate, approximately 20% of the issued and outstanding shares of our common stock as of that date, entered into
the Voting Agreement with Parent and Sub. Certain other Repass family trusts, which beneficially owned shares of our common stock
but were not able to deliver their signature pages concurrently with the execution of the Merger Agreement, signed the Voting
Agreement on the following day, June 30, 2017, which increased the total issued and outstanding shares of our common stock subject
to the Voting Agreement to approximately 24% as of June 30, 2017 and [ ● ] as of the Record Date. Pursuant to the Voting
Agreement, they agreed, among other things, during the period beginning on the date of the Voting Agreement and ending on its
termination date set forth therein, to vote in favor of the Merger and the other transactions contemplated by the Merger Agreement.
How to Vote
If your shares are registered in your name
with our transfer agent, Computershare Investor Services, LLC, you may cause your shares to be voted by returning a signed and
dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may
grant a proxy electronically over the Internet or by telephone by following the instructions on your proxy card.
If you plan to attend the Special Meeting
and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you
are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and
vote in person by ballot, your vote will revoke any previously submitted proxy.
If your shares are held in “street name”
through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the
voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal
proxy” from your bank, broker or other nominee. Unless you give your bank, broker, trust or other nominee instructions on
how to vote your shares of our common stock, your bank, broker or other nominee will not be able to vote your shares at the Special
Meeting.
YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATE(S)
WITH YOUR PROXY CARD.
A letter of transmittal with instructions for the surrender of certificates representing shares of our
common stock will be mailed to stockholders if the Merger is consummated.
For additional information regarding the procedure
for delivering your proxy, see the sections captioned “
The Special Meeting—Voting of Proxies
” beginning
on page 22. If you have any 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 contact our Corporate Secretary at 500
Westridge Drive, Watsonville, California 95076-4100.
QUESTIONS AND ANSWERS
The following questions and answers address
some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers
may not address all questions that are important to you. We encourage you to read carefully the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement.
You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions
in the section captioned “
Where You Can Find More Information
.”
|
Q:
|
Why am I receiving
these materials?
|
|
A:
|
The Board is
furnishing this proxy statement and form of proxy card to the holders of shares of our
common stock, as of the Record Date, in connection with the solicitation of proxies to
be voted at the Special Meeting.
|
|
Q:
|
What am I
being asked to vote on at the Special Meeting?
|
|
A:
|
You are being
asked to vote on the following proposals:
|
|
1)
|
To adopt the Merger
Agreement pursuant to which Sub will merge with and into the Company, and the Company
will become a wholly-owned subsidiary of Parent (Proposal 1);
|
|
2)
|
To approve, by
non-binding, advisory vote, certain compensation that may be paid or become payable to
the Company’s named executive officers that is based on or otherwise relates to
the Merger (Proposal 2); and
|
|
3)
|
To
approve the adjournment of the Special Meeting to a later date or dates, if necessary
or appropriate, to solicit additional proxies if there are insufficient votes to adopt
the Merger Agreement at the time of the Special Meeting (Proposal 3).
|
|
Q:
|
When
and where is the Special Meeting?
|
|
A:
|
The Special Meeting
will take place on [
●
], 2017, at [
●
]:00
[a.m./p.m.], Pacific Time, at West Marine Support Center located at 500 Westridge Drive,
Watsonville, California 95076-4100.
|
|
Q:
|
Who is
entitled to vote at the Special Meeting?
|
|
A:
|
Stockholders
as of the close of business on the Record Date are entitled to notice of the Special
Meeting and to vote at the Special Meeting. Each holder of shares of our common stock
is entitled to cast one vote on each matter properly brought before the Special Meeting
for each share of our common stock owned as of the Record Date.
|
|
Q:
|
May I attend
the Special Meeting and vote in person?
|
A:
|
Yes. All stockholders as of the close of business on the
Record Date may attend the Special Meeting and vote in person. Seating will be limited. Stockholders will need to present
proof of ownership of shares of our common stock, such as a bank or brokerage account statement, and a form of personal
identification to be admitted to the Special Meeting. No cameras, recording equipment, electronic devices, large bags,
briefcases or packages will be permitted in the Special Meeting.
Even if you plan to attend the Special Meeting in person,
to ensure that your shares of our common stock will be represented at the Special Meeting we encourage you to sign, date
and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over
the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any
proxy previously submitted by you with respect to the shares so voted in person.
If you hold your shares in “street name,” you
should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form
that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals,
including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street
name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy”
from your bank, broker or other nominee.
|
Q:
|
What is the proposed Merger and what effects will it have on the Company?
|
A:
|
The proposed Merger is the acquisition of the Company by Parent. If the proposal to adopt the
Merger Agreement is approved by stockholders and the other closing conditions under the Merger Agreement have been satisfied
or waived, Sub will merge with and into the Company, with the Company continuing as the Surviving Corporation. As a result
of the Merger, the Company will become a wholly-owned subsidiary of Parent and an affiliate of Monomoy Capital Partners, and
our common stock will no longer be publicly traded and will be delisted from the NASDAQ. In addition, our common stock will
be deregistered under the Exchange Act, and we will no longer file periodic or current reports with the SEC.
|
Q:
|
What will I receive if the Merger is consummated?
|
A:
|
As a result of the Merger, each issued and outstanding share of our common stock prior to the
Effective Time, other than the Cancelled Shares and Dissenting Shares, will be cancelled and cease to exist and will automatically
be converted into the right to receive the Merger Consideration, equal to $12.97 per share in cash, without interest, subject
to any withholding taxes. For example, if you own 100 shares of our common stock, you will receive $1,297.00 in cash in exchange
for your shares of our common stock, without interest and less any applicable withholding taxes.
|
Q:
|
How does the Merger Consideration compare to the market price of the common stock?
|
A:
|
The Merger Consideration represents a premium of approximately 34.4% over the closing price of
our common stock $9.65, as reported on the NASDAQ on June 29, 2017, the last full trading day before the entering into of
the Merger Agreement, and approximately 31.7% over the average closing price of our common stock reported on the NASDAQ for
the trading days during the 30-day period ended on June 29, 2017.
|
Q:
|
Why am I being asked to consider and cast a non-binding advisory vote to approve certain compensation
that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to
the Merger?
|
A:
|
In July 2010, the SEC adopted rules that require companies to seek a non-binding advisory vote
to approve certain compensation that may be paid or become payable to their named executive officers that is based on or otherwise
relates to corporate transactions such as the Merger. In accordance with the rules promulgated under Section 14A of the Exchange
Act, the Company is providing its stockholders with the opportunity to cast a non-binding advisory vote on compensation that
may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the
Merger. For additional information, see the section captioned “
The Special Meeting — Proposal 2: Advisory,
Non-Binding Vote to Approve Certain Merger-Related Executive Compensation Arrangements
.”
|
|
|
Q:
|
What will happen if the Company stockholders do not approve the non-binding compensation advisory
proposal?
|
A:
|
The vote to approve the non-binding compensation advisory proposal is a vote separate and apart
from the vote to adopt the Merger Agreement. Approval of the non-binding compensation advisory proposal is not a condition
to consummation of the Merger, and it is advisory in nature only, meaning that it will not be binding on the Company or Parent
or any of their respective subsidiaries. Accordingly, if the Merger Agreement is adopted by the Company stockholders and the
Merger is consummated, the compensation that is based on or otherwise relates to the Merger will be payable to our named executive
officers even if this proposal is not approved.
|
Q:
|
What do I need to do now?
|
A:
|
We encourage you to (i) read this proxy statement, the annexes to this proxy statement and the
documents that we refer to in this proxy statement carefully and consider how the Merger affects you, and (ii) then sign,
date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy
electronically over the Internet or by telephone, so that your shares can be voted at the Special Meeting. If you hold your
shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee
to vote your shares.
|
Q:
|
Should I send in my stock certificates now?
|
A:
|
No. After the Merger is consummated, you will receive a
letter of transmittal containing instructions for how to send your stock certificates to the Paying Agent in order to
receive the appropriate cash payment for the shares of our common stock represented by your stock certificates, as described
in the section captioned “
The Merger Agreement — Exchange and Payment Procedures
.” You should
use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled.
Please
do not send your stock certificates with your proxy card
.
If your shares are held in “street name” by
your broker, bank, or other nominee, you will receive instructions from your broker, bank or other nominee as to how to
effect the surrender of your shares held in “street name.”
|
Q:
|
What happens if I sell or otherwise transfer my shares of common stock after the Record Date
but before the Special Meeting?
|
A:
|
The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the
date the Merger is expected to be completed. If you sell or transfer your shares of our common stock after the Record Date
but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person
to whom you sell or otherwise transfer your shares and each of you notifies the Company in writing of such special arrangements,
you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell
or transfer your shares, but you will retain your right to vote those shares at the Special Meeting.
Even if you sell or
otherwise transfer your shares of our common stock after the Record Date, we encourage you to sign, date and return the enclosed
proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone
.
|
Q:
|
How does the Board recommend that I vote?
|
A:
|
The Board, after considering the various factors described
in the section captioned “
The Merger — Recommendation of the Board and Reasons for the Merger
,”
has unanimously (i) adopted and declared advisable the Merger Agreement and the consummation by the Company of the transactions
contemplated by the Merger Agreement, including the Merger, (ii) approved the execution, delivery and performance of the
Merger Agreement and the consummation by the Company of the transactions contemplated by the Merger Agreement, including
the Merger, (iii) determined that the Merger Agreement, and the transactions contemplated by the Merger Agreement, including
the Merger, are advisable and in the best interests of the Company and its stockholders, and (iv) recommended that the
Company stockholders adopt the Merger Agreement and directed that the Merger Agreement be submitted to the Company stockholders
for adoption.
Accordingly, the Board recommends that you vote (i) “
FOR
”
the adoption of the Merger Agreement; (ii) “
FOR
” the proposal to approve, by non-binding, advisory
vote, certain compensation that may be paid or become payable to the Company’s named executive officers that is
based on or otherwise relates to the Merger and (iii) “
FOR
” the adjournment of the Special Meeting,
if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement.
|
Q:
|
What happens if the Merger is not consummated?
|
A:
|
If the Merger Agreement is not adopted by stockholders
or if the Merger is not consummated for any other reason, stockholders will not receive any payment for their shares of
our common stock. Instead, the Company will remain an independent public company, our common stock will continue to be
listed and traded on the NASDAQ and registered under the Exchange Act, and we will continue to file periodic and current
reports with the SEC. See the section captioned “
The Merger — Effect on the Company if the Merger is Not
Consummated
.”
Under specified circumstances, the Company will be required
to pay Parent the Company Termination Fee upon the termination of the Merger Agreement, as described in the section captioned
“
The Merger Agreement — Company Termination Fee
.”
|
Q:
|
What constitutes a quorum?
|
|
|
A:
|
The presence at the Special Meeting, in person or by proxy,
of the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the Special
Meeting constitutes a quorum for the purpose of considering the proposals. As of the close of business on the Record Date,
there were [ ● ] shares of our common stock outstanding. If you are a Company stockholder of record (
i.e.
,
your shares of our common stock are registered in your name with the Company’s transfer agent) as of the close of
business on the Record Date and you vote by mail, by telephone, through the Internet or in person at the Special Meeting,
you will be considered part of the quorum. If you are a “street name” holder of shares of our common stock
(
i.e.
, you hold your shares in the name of a bank, broker or other nominee and these proxy materials are being
forwarded to you by that entity) and you provide your bank, broker, trust or other nominee with voting instructions, then
your shares will be counted in determining the presence of a quorum. If you are a “street name” holder of
shares and you do not provide your bank, broker or other nominee with voting instructions, then your shares will not be
counted as present in determining the presence of a quorum.
All shares of our common stock held by stockholders that
are present in person, or represented by proxy, and entitled to vote at the Special Meeting, regardless of how such shares
are voted or whether such stockholders have indicated on their proxy that they are abstaining from voting, will be counted
in determining the presence of a quorum. In the absence of a quorum, the Special Meeting may be adjourned.
|
Q:
|
What vote is required to approve the Adoption of the Merger Agreement (Proposal 1)?
|
A:
|
Adoption of the Merger Agreement (Proposal 1)
. The
adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares
of our common stock entitled to vote on such proposal.
If a quorum is present at the Special Meeting, the failure
of any stockholder of record to (i) submit a signed proxy card, (ii) grant a proxy over the Internet or by telephone or
(iii) vote in person by ballot at the Special Meeting will have the same effect as a vote “
AGAINST
”
the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present
at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the
same effect as a vote “
AGAINST
” the proposal to adopt the Merger Agreement. If a quorum is present
at the Special Meeting, abstentions will have the same effect as a vote “
AGAINST
” the proposal to adopt
the Merger Agreement.
|
|
|
Q:
|
What vote is required to approve the Advisory Vote regarding Merger-Related Compensation (Proposal
2) and the Adjournment or Postponement of the Special Meeting (Proposal 3)?
|
A:
|
Advisory Vote regarding Merger-Related Compensation
(Proposal 2).
Approval, by non-binding, advisory vote, of certain compensation that may be paid or become payable
to the Company’s named executive officers that is based on or otherwise relates to the Merger requires the affirmative
vote of the majority of the votes cast for the proposal.
Adjournment or Postponement of the Special Meeting (Proposal
3).
Approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies
if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting, whether or not a quorum
is present, requires the affirmative vote of the majority of the votes cast for the proposal.
The failure of any stockholder of record to (i) submit
a signed proxy card, (ii) grant a proxy over the Internet or by telephone or (iii) vote in person by ballot at the Special
Meeting will not have any effect on either of Proposal 2 or Proposal 3. If you hold your shares in “street name,”
the failure to instruct your bank, broker or other nominee how to vote your shares will not have any effect on either
of these proposals. Similarly, abstentions will have no effect on these proposals.
|
Q:
|
What is the difference between holding shares as a stockholder of record and as a beneficial
owner?
|
A:
|
If your shares are registered directly in your name with
our transfer agent, Computershare Investor Services, LLC, you are considered, with respect to those shares, to be the
“stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to
you by the Company.
If your shares are held through a bank, broker or other
nominee, you are considered the “beneficial owner” of shares of our common stock held in “street name.”
In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered,
with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your
bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited
to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in
person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
|
Q:
|
Will my shares held in “street name” or another form of record ownership be combined
for voting purposes with shares I hold of record?
|
A:
|
No. For voting purposes, any shares you may hold in “street name” will be deemed to
be held by a different stockholder than any shares you hold of record, and as a result, any shares held in “street name”
will not be combined for voting purposes with shares that you hold of record. Similarly, if you own shares in various registered
forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need
to sign and return, a separate proxy card for the shares held in each such form, because they are held in a different form
of record ownership. Shares held by a corporation or business entity must be voted by an authorized officer of the entity.
Shares held in an individual retirement account must be voted under the rules governing such account.
|
|
A:
|
If you are a
stockholder of record (that is, if your shares of our common stock are registered in
your name with Computershare Investor Services, LLC, our transfer agent), there are four
ways to vote:
|
|
·
|
by
signing, dating and returning the enclosed proxy card in the accompanying prepaid reply
envelope;
|
|
·
|
by
visiting the Internet at the address on your proxy card;
|
|
·
|
by
calling toll-free (within the U.S. or Canada) the phone number on your proxy card; or
|
|
·
|
by
attending the Special Meeting and voting in person by ballot;
|
A control number, located on your proxy card, is designed
to verify your identity and allow you to vote your shares of our common stock, and to confirm that your voting instructions have
been properly recorded when voting electronically over the Internet or by telephone. Please be aware that, although there is no
charge for voting your shares, if you vote electronically over the Internet or by telephone, you may incur costs such as Internet
access and telephone charges for which you will be responsible.
Even if you plan to attend the Special Meeting in person,
you are strongly encouraged to vote your shares of our common stock by proxy. If you are a record holder or if you obtain a “legal
proxy” to vote shares that you beneficially own, you may still vote your shares of our common stock in person by ballot
at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person
by ballot, your previous vote by proxy will not be counted.
If your shares are held in “street name”
through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the
voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee,
electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other
nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.
Q:
|
If my broker holds my shares in “street name,” will my broker vote my shares for
me?
|
A:
|
No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently
scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You
should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your
shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger
Agreement, but will have no effect on the proposal to approve, by non-binding, advisory vote, certain compensation that may
be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the Merger
or the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient
votes to adopt the Merger Agreement at the time of the Special Meeting.
|
Q:
|
May I change my vote after I have mailed my signed proxy card?
|
|
A:
|
Yes. If you are
a stockholder of record, you may change your vote or revoke your proxy at any time before
it is voted at the Special Meeting by:
|
|
·
|
signing
another proxy card with a later date and returning it to us in accordance with the instructions
therein prior to the Special Meeting;
|
|
·
|
submitting
a new proxy electronically over the Internet or by telephone after the date of the earlier
submitted proxy;
|
|
·
|
delivering
a written notice of revocation to the Corporate Secretary; or
|
|
·
|
attending
the Special Meeting and voting in person by ballot.
|
If you hold your shares of our common stock in “street
name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may
also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
Q:
|
If a stockholder gives a proxy, how are the shares voted?
|
A:
|
Regardless of the method you choose to vote, the proxy
holders will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy
card, you may specify whether your shares 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 should be voted on a matter, the shares represented by your properly signed proxy will be
voted: (i) “
FOR
” the adoption of the Merger Agreement; (ii) “
FOR
” the proposal to
approve, by non-binding, advisory vote, certain compensation that may be paid or become payable to the Company’s
named executive officers that is based on or otherwise relates to the Merger; and (iii) “
FOR
” the adjournment
of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to
adopt the Merger Agreement at the time of the Special Meeting.
|
Q:
|
What should I do if I receive more than one set of voting materials?
|
A:
|
Please sign, date and return (or grant your proxy electronically over the Internet or by telephone)
each proxy card and voting instruction card that you receive. You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your
shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account
in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will
receive more than one proxy card.
|
Q:
|
Where can I find the voting results of the Special Meeting?
|
A:
|
The Company intends to publish final voting results in a Current Report on Form 8-K to be filed
with the SEC within four business days following the Special Meeting. All reports that the Company files with the SEC are
publicly available when filed. See the section captioned “
Where You Can Find More Information
.”
|
|
|
Q:
|
Will I be subject to U.S. federal income tax upon the exchange of common stock for cash pursuant
to the Merger?
|
|
|
A:
|
If you are a U.S. Holder (as defined under the section
captioned “
The Merger — Material U.S. Federal Income Tax Consequences of the Merger
”), the exchange
of our common stock for cash pursuant to the Merger generally will require you to recognize gain or loss for U.S. federal
income tax purposes in an amount equal to the difference, if any, between the amount of cash you received pursuant to
the Merger and your adjusted tax basis in the shares of our common stock surrendered pursuant to the Merger.
A Non-U.S. Holder (as defined under the section captioned
“
The Merger — Material U.S. Federal Income Tax Consequences of the Merger
”) generally will not
be subject to U.S. federal income tax with respect to the exchange of our common stock for cash in the Merger unless such
Non-U.S. Holder has certain connections to the United States.
You should consult your own tax advisor to determine
the U.S. federal income tax consequences of the Merger to you in light of your own particular circumstances and any consequences
arising under the laws of any state, local or foreign taxing jurisdiction.
A more complete description of certain
U.S. federal income tax consequences of the Merger is provided under the section captioned “
The Merger —
Material U.S. Federal Income Tax Consequences of the Merger
.”
|
Q:
|
What will happen to outstanding West Marine equity-based awards in the Merger?
|
A:
|
For information regarding the treatment of outstanding West Marine equity-based awards, see the
section captioned “
The Merger — Interests of the Company’s Directors and Executive Officers in the Merger
—Treatment of Equity-Based Awards
.”
|
Q:
|
What will happen to the Company’s Amended and Restated Associates Stock Buying Plan?
|
A:
|
For information regarding the treatment of Company’s Amended and Restated Associates Stock
Buying Plan (the “SPP”), see the section captioned “
The Merger — Interests of the Company’s
Directors and Executive Officers in the Merger —Treatment of Purchase Rights under the SPP
.”
|
Q:
|
When do you expect the Merger to be Consummated?
|
A:
|
We are working toward consummating the Merger as quickly as possible and currently expect to consummate
the Merger in the third quarter of fiscal year 2017. However, the exact timing of consummation of the Merger cannot be predicted
because the Merger is subject to the closing conditions described in the section captioned “
The Merger Agreement
— Conditions to the Merger
,” many of which are outside of our control.
|
Q:
|
If the Merger is consummated, how will I receive the cash for my shares?
|
A:
|
If the Merger is consummated and your shares of our common
stock are held in book-entry, the Paying Agent (as defined in the Merger Agreement and described in the section captioned
“
The Merger Agreement — Exchange and Payment Procedures
”) will issue and deliver to you a check
or wire transfer for your shares without any further action on your part. If you are a stockholder of record with your
shares held in certificate form, you will receive a letter of transmittal with instructions on how to send your shares
of our common stock to the Paying Agent in connection with the Merger. The Paying Agent will issue and deliver to you
a check or wire transfer for your shares after you comply with these instructions.
Please do not send your stock certificates
with your
proxy card.
See the section captioned “
The Merger Agreement — Exchange and Payment
Procedures
.”
If your shares are held in “street name” by
your broker, bank, or other nominee, you will receive instructions from your broker, bank or other nominee as to how to
effect the surrender of your shares held in “street name.”
|
Q:
|
Am I entitled to appraisal rights under Delaware law?
|
A:
|
If the Merger is consummated, stockholders who do not vote in favor of the adoption of the Merger
Agreement and approval of the Merger and the other transactions contemplated thereby and who properly demand, and perfect,
appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the General
Corporation Law of the State of Delaware (the “DGCL”). This means that holders of shares of our common stock are
entitled to have their shares appraised by the Court of Chancery and to receive payment in cash of the “fair value”
of the shares of our common stock, exclusive of any elements of value arising from the accomplishment or expectation of the
Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. Stockholders
who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to
the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal
rights are described in additional detail in this proxy statement in the section captioned “
The Merger — Appraisal
Rights
,” and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy
statement.
|
Q:
|
Do any of the Company’s directors or officers have interests in the Merger that may differ
from those of the Company stockholders generally?
|
A:
|
In considering the recommendation of the Board with respect to the proposal to adopt the Merger
Agreement and approve the Merger and the other transactions contemplated thereby, you should be aware that our directors and
executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders
generally. The Board was aware of these interests and considered them at the time the Board approved the Merger Agreement
and made its recommendation to the Company stockholders. For more information, see the section captioned “
The Merger
— Interests of the Company’s Directors and Executive Officers in the Merger
.”
|
Q:
|
What will happen to the Company directors following the Merger?
|
A:
|
If the Merger is consummated, all members of our Board will cease to be members of the Board at
the effective time of the Merger. The Merger Agreement provides that, at the effective time of the Merger, the directors of
Sub immediately prior to Effective Time will become the directors of the Surviving Corporation.
|
Q:
|
Who can help answer my questions?
|
A:
|
If you have any questions concerning the Merger, the Special Meeting or this proxy statement,
would like additional copies of this proxy statement or need help voting your shares of our common stock, please contact our
Proxy Solicitor (as defined in the section captioned “
The Special Meeting — Solicitation of Proxies
”):
|
D.F. King & Co., Inc.
Stockholders May Call Toll-Free: (866) 751-6312
Banks & Brokers May Call Collect: (212)
269-5550
Email:
WMAR@dfking.com
FORWARD-LOOKING STATEMENTS
This proxy statement may include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder and Section 21E of the Exchange Act. All statements included or incorporated by reference in this proxy statement,
other than statements of historical fact, are forward-looking statements. Stockholders can identify forward-looking statements
by the use of words such as “estimate,” “may,” “will,” “could,” “anticipate,”
“expect,” “intend,” “believe,” “continue” or the negative of such terms, or other
similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. Actual results may be materially different from any future results expressed
or implied by such forward-looking statements. Among other risks and uncertainties, there can be no guarantee that the Merger
will be consummated, or if it is consummated, that it will close within the anticipated time frame. Additional risks and uncertainties
relating to the acquisition include: (i) the Company may be unable to obtain the approval of the Company stockholders as required
for the proposed transaction; (ii) other conditions to the closing of the proposed transaction may not be satisfied or waived;
(iii) the proposed transaction may involve unexpected costs, liabilities or delays; (iv) the Company’s business may suffer
as a result of uncertainty surrounding the proposed Merger, including due to disruption of current plans and operations and the
potential difficulties in employee retention as a result of the proposed transaction; (v) the outcome of any legal proceedings
related to the proposed transaction; (vi) the ability and timing to obtain required regulatory approvals; and (vii) the occurrence
of any event, change or other circumstances that could give rise to the termination of the Merger Agreement. For a discussion
of relevant factors, risks and uncertainties that could materially affect the Company’s future results, attention is directed
to the “Risk Factors” section in this proxy statement and “Item 1A. Risk Factors” and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in its Annual Report on Form 10-K for the year
ended December 31, 2016, filed with the SEC on February 28, 2017 and incorporated herein by reference. The Company undertakes
no obligation to publicly release any revisions to any forward-looking statements contained in this filing to reflect events or
circumstances occurring after the date of this filing or to reflect the occurrence of unanticipated events.
RISK FACTORS
Risks Relating to the Pending Merger
If the proposed Merger is not consummated, our business could
be harmed and our stock price could decline.
The consummation of the Merger is conditioned
upon, among other things, the adoption of the Merger Agreement by our stockholders and other customary closing conditions. Therefore,
the Merger may not be consummated or may not be consummated in a timely manner. If the Merger Agreement is terminated, the market
price of our common stock will likely decline. In addition, our stock price may decline as a result of the fact that we have incurred
and will continue to incur significant expenses related to the Merger prior to its closing that will not be recovered if the Merger
is not consummated. If the Merger Agreement is terminated under certain circumstances as described below under “
The Merger
Agreement — Company Termination Fee
” we may be obligated to pay Parent the Company Termination Fee of $11 million.
As a consequence of the failure of the Merger to be consummated, as well as of some or all of these potential effects of the termination
of the Merger Agreement, our business could be harmed in that concerns about our viability are likely to increase, making it more
difficult to retain employees and existing customers and to generate new business.
The fact that there is a Merger pending could harm our business,
revenue and results of operations.
While the Merger is pending, it creates uncertainty
about our future. As a result of this uncertainty, customers may decide to delay, defer, or cancel purchases of our products pending
consummation of the Merger or termination of the Merger Agreement. If these decisions represent a significant portion of our anticipated
revenue, our results of operations and quarterly revenues could be substantially below the expectations of investors.
In addition, while the Merger is pending, we are subject to
a number of risks that may harm our business, revenue and results of operations, including:
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the
diversion of management and employee attention and the unavoidable disruption to our
relationships with customers and vendors may detract from our ability to grow revenues
and minimize costs;
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we
have and will continue to incur significant expenses related to the Merger prior to its
closing;
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it
may be difficult for us to retain employees due to the announcement and pendency of the
Merger; and
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we
may be unable to respond effectively to competitive pressures, industry developments
and future opportunities.
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Our executive officers may have interests in the Merger other
than, or in addition to, the interests of our stockholders generally.
Members of our Board and our executive officers
may have interests in the Merger that are different from, or are in addition to, the interests of our stockholders generally.
Our Board was aware of these interests and considered them, among other matters, in approving the Merger Agreement. You should
keep this in mind when considering the recommendation of the Board in favor of the adoption of the Merger Agreement. These interests
include the treatment of outstanding equity awards upon consummation of the Merger pursuant to the Merger Agreement, the vesting
or delivery of outstanding equity awards and payments that may come due in connection with a change of control , which will occur
upon the consummation of the Merger, under the Company’s
Amended
and Restated Executive Officer Severance Plan
, and the continuation of indemnification obligations and directors’
and officers’ insurance for former and continuing officers and directors.
THE SPECIAL MEETING
The enclosed proxy is solicited on behalf
of the Board for use at the Special Meeting.
Date, Time and Place
We will hold the Special Meeting on [ ●
], 2017, at [ ● ] [a.m./p.m.], Pacific Time, at West Marine Support Center located at 500 Westridge Drive, Watsonville,
California 95076-4100.
Purpose of the Special Meeting
At the Special Meeting, we will ask stockholders
to vote on proposals to: (i) adopt the Merger Agreement (Proposal 1); (ii) consider a non-binding, advisory proposal to approve
certain compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise
relates to the Merger (Proposal 2); and (iii) adjourn the Special Meeting, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes to adopt the Merger Agreement (Proposal 3). You will also at the Special Meeting be asked
to transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof.
Record Date; Shares Entitled to Vote; Quorum
Only stockholders of record as of the close
of business on the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A list of stockholders
entitled to vote at the Special Meeting will be available at West Marine Support Center located at 500 Westridge Drive, Watsonville,
California 95076-4100, during regular business hours for a period of no less than ten days before the Special Meeting and at the
place of the Special Meeting during the meeting.
As of the Record Date, there were [ ●
] shares of our common stock issued and outstanding and entitled to vote at the Special Meeting. The presence at the Special Meeting,
in person or by proxy, of the holders of [ ● ] shares of our common stock, representing a majority of the shares of our
common stock issued and outstanding and entitled to vote at the Special Meeting, constitutes a quorum for the Special Meeting.
If you are a Company stockholder of record
and you vote by mail, by telephone or through the Internet or in person at the Special Meeting, then your shares of our common
stock will be counted as part of the quorum. If you are a “street name” holder of shares of our common stock and you
provide your bank, broker or other nominee with voting instructions, then your shares will be counted in determining the presence
of a quorum. If you are a “street name” holder of shares and you do not provide your bank, broker or other nominee
with voting instructions, then your shares will not be counted as present in determining the presence of a quorum.
All shares of our common stock held by stockholders
of record that are present in person or represented by proxy and entitled to vote at the Special Meeting, regardless of how such
shares are voted or whether such stockholders abstain from voting, will be counted in determining the presence of a quorum. In
the absence of a quorum, the Special Meeting may be adjourned.
Vote Required for Approval
Adoption of the Merger Agreement (Proposal
1)
. If a quorum is present, the adoption of the Merger Agreement (Proposal 1) requires the affirmative vote of the holders
of a majority of the outstanding shares of our common stock entitled to vote on such matter.
Advisory Vote regarding Merger-Related
Compensation (Proposal 2).
If a quorum is present, approval, by non-binding, advisory vote, of certain compensation that may
be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the Merger
requires the affirmative vote of the majority of the votes casts on such proposal at the Special Meeting.
Adjournment or Postponement of the Special
Meeting (Proposal 3).
Approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting, whether or not a quorum
is present, requires the affirmative vote of the majority of the votes casts on such proposal at the Special Meeting.
Concurrently with the execution of the Merger
Agreement, Randolph K. Repass, his spouse and certain of the Repass family trusts, which beneficially owned, in the aggregate,
approximately 20% of the issued and outstanding shares of our common stock as of that date, entered into the Voting Agreement
with Parent and Sub. Certain other Repass family trusts, which beneficially owned shares of our common stock but were not able
to deliver their signature pages concurrently with the execution of the Merger Agreement, signed the Voting Agreement on the following
day, June 30, 2017, which increased the total issued and outstanding shares of our common stock subject to the Voting Agreement
to approximately 24% as of June 30, 2017 and [ ● ] as of the Record Date. Pursuant to the Voting Agreement, they agreed,
among other things, during the period beginning on the date of the Voting Agreement and ending on its termination date set forth
therein, to vote in favor of the Merger and the other transactions contemplated by the Merger Agreement.
Abstentions and Broker Non-Votes
The proposal to adopt the Merger Agreement (Proposal
1) requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote on
such matter. Therefore, the failure to vote or the abstention from voting will have the same effect as a vote “
AGAINST
”
the proposal to adopt the Merger Agreement.
The proposal to approve, by non-binding, advisory
vote, of certain compensation that may be paid or become payable to the Company’s named executive officers that is based
on or otherwise relates to the Merger (Proposal 2), requires the affirmative vote of the majority of the votes cast on such proposal
at the Special Meeting. Consequently, abstentions and failure to vote your shares will have no effect on this proposal.
The proposal to adjourn the Special Meeting,
if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the
time of the Special Meeting, whether or not a quorum is present (Proposal 3), requires the affirmative vote of the majority of
the votes cast on such proposal at the Special Meeting. Consequently, abstentions and failure to vote your shares will have no
effect on this proposal.
All of the proposals in this proxy statement
are non-routine matters, so there can be no broker non-votes at the Special Meeting. A broker non-vote occurs when shares held
by a bank, broker or other nominee are represented at a meeting, but the bank, broker or other nominee has not received voting
instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular proposal.
Accordingly, if your shares are held in “street name,” your bank, broker or other nominee will
NOT
be able
to vote your shares of our common stock on any of the proposals, and your shares will not be counted as present in determining
the presence of a quorum, unless you have properly instructed your bank, broker or other nominee on how to vote. Because Proposal
1 requires the affirmative vote of a majority of the outstanding shares of our common stock, the failure to provide your bank,
broker or other nominee with voting instructions will have the same effect as a vote “
AGAINST
” Proposal 1.
Because the approval of each of Proposal 2 and Proposal 3 requires the affirmative vote of the majority of the votes cast on such
proposal at the Special Meeting, and because your bank, broker or other nominee does not have discretionary authority to vote
on either proposal, the failure to provide your bank, broker or other nominee with voting instructions will have no effect on
each such proposal.
Shares Held by the Company’s Directors and Executive
Officers
As of the Record Date, our directors and
executive officers beneficially owned and were entitled to vote, in the aggregate, [ ● ] shares of our common stock, representing
approximately [ ● ]% of the total shares of our common stock outstanding on the Record Date. Concurrently with the execution
of the Merger Agreement, Randolph K. Repass, his spouse and certain of the Repass family trusts, which beneficially owned, in
the aggregate, approximately 20% of the issued and outstanding shares of our common stock as of that date, entered into the Voting
Agreement with Parent and Sub. Certain other Repass family trusts, which beneficially owned shares of our common stock but were
not able to deliver their signature pages concurrently with the execution of the Merger Agreement, signed the Voting Agreement
on the following day, June 30, 2017, which increased the total issued and outstanding shares of our common stock subject to the
Voting Agreement to approximately 24% as of June 30, 2017 and [ ● ] as of the Record Date. Pursuant to the Voting Agreement
they agreed, among other things, during the period beginning on the date of the Voting Agreement and ending on the termination
date set forth therein, (i) to vote in favor of the Merger and the other transactions contemplated by the Merger Agreement, (ii)
on certain restrictions in the transfer of their shares of our common stock, and (iii) to vote against any or agreement which
could reasonably be expected to impede, interfere with, prevent, delay or adversely affect the Merger Agreement or the Merger.
Voting of Proxies
If your shares are registered in your name
with our transfer agent, Computershare Investor Services, LLC, you may cause your shares to be voted by returning a signed and
dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may
grant a proxy electronically over the Internet or by telephone by following the instructions on your proxy card. You must have
the enclosed proxy card available, and follow the instructions on the proxy card, in order to grant a proxy electronically over
the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares
according to your directions.
If you plan to attend the Special Meeting
and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you
are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and
vote in person by ballot, your vote will revoke any previously submitted proxy.
Voting instructions are included on your
proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted
at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain
voting instructions will be voted (i) “
FOR
” the Adoption of the Merger Agreement (Proposal 1); (ii) “
FOR
”
the Advisory Vote regarding Merger-Related Compensation (Proposal 2); and (iii) “
FOR
” the Adjournment or Postponement
of the Special Meeting (Proposal 3).
If your shares are held in “street
name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and
returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person
with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the
Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by
your bank, broker or other nominee. If you do not return the voting form provided by your bank, broker or other nominee, do not
vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting
and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if
you voted “
AGAINST
” Proposal 1, but will have no effect on Proposal 2 or Proposal 3.
Revocability of Proxies
If you are a stockholder of record on the
Record Date, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:
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signing
another proxy card with a later date and returning it to us prior to the Special Meeting;
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submitting
a new proxy electronically over the Internet or by telephone after the date of the earlier
submitted proxy;
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delivering
a written notice of revocation to our Corporate Secretary; or
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attending
the Special Meeting and voting in person by ballot.
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If you have submitted a proxy, your appearance
at the Special Meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the
effect of revoking your prior proxy.
If you hold your shares of our common stock
in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your
vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other
nominee.
Any adjournment, postponement or other delay
of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent
in their proxies to revoke them at any time prior to their use at the Special Meeting, as adjourned, postponed or delayed.
The Board’ Recommendation
The Board, after considering the various
factors described in the section captioned “
The Merger — Recommendation of the Board and Reasons for the Merger
,”
has unanimously (i) adopted and declared advisable the Merger Agreement and the consummation by the Company of the transactions
contemplated by the Merger Agreement, including the Merger, (ii) approved the execution, delivery and performance of the Merger
Agreement and the consummation by the Company of the transactions contemplated by the Merger Agreement, including the Merger,
(iii) determined that the Merger Agreement, and the transactions contemplated by the Merger Agreement, including the Merger, are
advisable and in the best interests of the Company and its stockholders, and (iv) recommended that the Company stockholders of
the Company adopt the Merger Agreement and directed that the Merger Agreement be submitted to the Company stockholders for adoption.
The Board unanimously recommends that
you vote “FOR” the proposal to adopt the Merger Agreement (Proposal 1), “FOR” the
approval, by a non-binding advisory vote, of the compensation that may be paid or become payable to the Company’s named
executive officers that is based on or otherwise relates to the Merger (Proposal 2) and “FOR” the proposal
to adjourn the Special Meeting if necessary or appropriate, as determined by the Company, to solicit additional proxies in favor
of the proposal to adopt the Merger Agreement (Proposal 3).
Solicitation of Proxies
The expense of soliciting proxies will be
borne by the Company. We have retained D.F. King & Co., Inc., a proxy solicitation firm (the “Proxy Solicitor”)
to solicit proxies in connection with the Special Meeting at a cost of $11,500, plus expenses. We will also indemnify the Proxy
Solicitor against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers
and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial
owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the
Internet or other means of communication. No additional compensation will be paid for such services.
Anticipated Date of Consummation of the Merger
Assuming timely satisfaction of necessary
closing conditions, including the approval by stockholders of the proposal to adopt the Merger Agreement, we anticipate that the
Merger will be consummated in the third quarter of fiscal year 2017.
Appraisal Rights
If the Merger is consummated, stockholders
who do not vote in favor of the adoption of the Merger Agreement, who continuously hold their shares of our common stock through
the Effective Time, and who properly demand appraisal of their shares of our common stock in compliance with the requirements
of Section 262 of the DGCL are entitled to exercise appraisal rights in connection with the Merger under Section 262. This means
that holders of shares of our common stock who may exercise appraisal rights and who also have properly exercised, perfected and
not lost such appraisal rights are entitled to have their shares appraised by the Court of Chancery and to receive payment in
cash of the “fair value” of their shares of our common stock, exclusive of any elements of value arising from the
accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any,
as determined by the Court of Chancery, so long as such holders comply exactly with the procedures established by Section 262.
Due to the complexity of the appraisal
process, stockholders who wish to seek appraisal of their shares of our common stock are encouraged to seek the advice of legal
counsel with respect to the exercise of appraisal rights. Stockholders considering seeking appraisal should be aware that the
fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the value of the
Merger Consideration.
To exercise your appraisal rights, you must
follow exactly the procedures specified under the DGCL, including (i) delivering a written demand for appraisal to the Company
before the vote is taken on the proposal to adopt the Merger Agreement and approve the Merger and the other transactions contemplated
thereby; (ii) not submitting a proxy or otherwise voting in favor of the proposal to adopt the Merger Agreement and approve the
Merger and the other transactions contemplated thereby; and (iii) continuing to hold your shares of our common stock of record
through the Effective Time. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of
your appraisal rights. If you hold your shares of our common stock through a bank, brokerage firm or other nominee and you wish
to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate
procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee. The DGCL requirements for exercising
appraisal rights are described in further detail in this proxy statement in the section captioned “
The Merger —
Appraisal Rights
,” and Section 262 regarding appraisal rights is reproduced and attached as
Annex C
to this proxy
statement.
Other Matters
At this time, we know of no other matters
to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of our common
stock will be voted in accordance with the discretion of the appointed proxy holders.
Householding of Special Meeting Materials
Unless we have received contrary instructions,
we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the
stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card.
This process, known as “householding,” reduces the volume of duplicate information received at your household and
helps to reduce our expenses.
If you would like to receive your own set
of our disclosure documents this year or in future years, follow the instructions described below. Similarly, if you share an
address with another stockholder and together both of you would like to receive only a single set of our disclosure documents,
follow these instructions.
If you are a stockholder of record, you may
contact us by writing to West Marine, Inc., Attention: Investor Relations, 500 Westridge Drive, Watsonville, California 95076-4100
or calling (831) 728-2700. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding
by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or
other nominee directly.
Questions and Additional Information
If you have any questions concerning the
Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting
your shares of our common stock, please contact our Proxy Solicitor:
D.F. King & Co., Inc.
Stockholders May Call Toll-Free: (866) 751-6312
Banks & Brokers May Call Collect: (212)
269-5550
Email:
WMAR@dfking.com
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
We are asking you to adopt the Merger Agreement.
For a summary of and detailed information
regarding this proposal, see the information about the Merger Agreement throughout this proxy statement, including the information
set forth in the sections captioned “
The Merger
” and “
The Merger Agreement
.” A copy of the
Merger Agreement is attached to this proxy statement as
Annex A
. You are urged to read the Merger Agreement carefully in
its entirety.
Under applicable law, we cannot consummate
the Merger without the affirmative vote of the holders of a majority of the outstanding shares of our common stock voting in favor
of the proposal to adopt the Merger Agreement. If you abstain from voting, fail to cast your vote, in person or by proxy, or fail
to give voting instructions to your brokerage firm, bank, or other nominee, it will have the same effect as a vote against the
proposal to adopt the Merger Agreement.
The Board unanimously recommends that
you vote “FOR” this proposal.
PROPOSAL 2: ADVISORY, NON-BINDING VOTE
TO APPROVE
CERTAIN MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS
Section 14A of the Exchange Act, which was
enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that we provide stockholders
with the opportunity to vote to approve, on an advisory, non-binding basis, the payment of certain compensation that may be paid
or become payable to the Company’s named executive officers that is based on or otherwise relates to the Merger, as disclosed
in the section captioned “
The Merger — Interests of the Company’s Directors and Executive Officers in the
Merger — Golden Parachute Compensation
.”
We are asking stockholders to indicate their
approval of the various compensation that may be paid or become payable to the Company’s named executive officers that is
based on or otherwise relates to the Merger. These payments are set forth in the section captioned “
The Merger —
Interests of the Company’s Directors and Executive Officers in the Merger — Golden Parachute Compensation
”
and the accompanying footnotes. In general, the various plans and arrangements pursuant to which these compensation payments may
be made have previously formed part of the Company’s overall compensation program for our named executive officers and previously
have been disclosed to stockholders as part of the Compensation Discussion and Analysis and related sections of our annual proxy
statements. These historical arrangements were adopted and approved by the Compensation and Leadership Development Committee of
the Board, which is composed solely of non-management directors, and are believed to be reasonable and in line with marketplace
norms.
Accordingly, we are seeking approval of the
following resolution at the Special Meeting:
“RESOLVED, that the stockholders of
West Marine, Inc. approve, on a nonbinding, advisory basis, the compensation that may be paid or become payable to the Company’s
named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation
S-K in the section captioned “
The Merger —Interests of the Company’s Directors and Executive Officers in
the Merger — Golden Parachute Compensation”
in the Company’s proxy statement for the Special Meeting.”
Stockholders should note that this proposal
is not a condition to consummation of the Merger, and as an advisory vote, the result will not be binding on the Company, the
Board or 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 is consummated, our named executive
officers will be eligible to receive the compensation that is based on or otherwise relates to the Merger in accordance with the
terms and conditions applicable to those payments.
The Board unanimously recommends that
you vote “FOR” this proposal.
PROPOSAL 3: ADJOURNMENT OF THE SPECIAL
MEETING
We are asking you to approve a proposal to
adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient
votes to adopt the Merger at the time of the Special Meeting. If stockholders approve the adjournment proposal, we could adjourn
the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies,
including proxies from stockholders that have previously returned properly executed proxies voting against adoption of the Merger
Agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing
a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would
be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince
the holders of those shares to change their votes to vote in favor of adoption of the Merger Agreement. Additionally, we may seek
to adjourn the Special Meeting if a quorum is not present or otherwise at the discretion of the chairman of the Special Meeting.
The Board unanimously recommends that
you vote “FOR” this proposal.
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
and incorporated
into this proxy statement by reference. You should read the entire Merger Agreement carefully as it is the legal document that
governs the Merger.
Parties to the Merger
West Marine, Inc.
West Marine is a leading omni-channel specialty
retailer exclusively offering boating gear, apparel, footwear and other waterlife-related products to anyone who enjoys recreational
time on or around the water. Providing great customer experiences and a consistent brand is important to us, regardless of the
sales channel our customer uses. With our numerous stores and our eCommerce websites reaching domestic and international customers,
we are recognized as a dominant waterlife outfitter for cruisers, sailors, anglers and paddlesports enthusiasts.
Our principal executive offices are located
at 500 Westridge Drive, Watsonville, California 95076-4100, and our telephone number is (831) 728-2700. Our common stock is listed
on the NASDAQ under the symbol “WMAR.”
Rising Tide Parent Inc.
Parent is a Delaware corporation formed on June
27, 2017, solely for the purpose of engaging in the Merger and the other transactions contemplated by the Merger Agreement. Parent
has not engaged in any business activities other than those incidental to its formation and in connection with the transactions
contemplated by the Merger Agreement and arranging the equity financing and debt financing in connection with the Merger.
Parent’s principal executive offices are
located at 142 West 57th Street, 17th Floor, New York, New York 10019, and its telephone number is (212) 699-4000.
Rising Tide Merger Sub Inc.
Sub is a wholly-owned subsidiary of Parent and
was formed on June 27, 2017, solely for the purpose of engaging in the Merger and the other transactions contemplated by the Merger
Agreement. Sub has not engaged in any business activities other than those incidental to its formation and in connection with
the transactions contemplated by the Merger Agreement and arranging the equity financing and debt financing in connection with
the Merger. Upon the consummation of the Merger, Sub will cease to exist as a separate entity.
Sub’s principal executive offices are
located at 142 West 57th Street, 17th Floor, New York, New York 10019, and its telephone number is (212) 699-4000.
Parent and Sub are entities affiliated with
Monomoy, a
private equity firm with $1.5 billion in committed capital. Through its three fund vehicles,
Monomoy makes controlling investments in lower middle market businesses in the manufacturing, industrial, distribution and consumer
products sectors.
Monomoy’s principal executive offices are located at 142 West 57th Street, 17th Floor, New York,
New York 10019, and its telephone number is (212) 699-4000.
Effect of the Merger
Upon the terms and subject to the conditions
of the Merger Agreement, if the Merger is consummated, Sub will merge with and into the Company, and the Company will continue
as the Surviving Corporation. As a result of the Merger, the Company will become a wholly-owned subsidiary of Parent, and our
common stock will no longer be publicly traded and will be delisted from the NASDAQ. In addition, our common stock will be deregistered
under the Exchange Act, and we will no longer file periodic or current reports with the SEC. If the Merger is consummated, you
will not own any shares of the capital stock of the Surviving Corporation.
The Effective Time will occur upon the filing
of a certificate of merger with the Secretary of State of the State of Delaware, or at such other time as is agreed upon in writing
by Parent and the Company and specified in the certificate of merger in accordance with the DGCL.
Effect on the Company if the Merger is Not Consummated
If the Merger Agreement is not adopted by
stockholders or if the Merger is not consummated for any other reason, the Company stockholders will not receive any payment for
their shares of our common stock. Instead, the Company will remain an independent public company, our common stock will continue
to be listed and traded on the NASDAQ and registered under the Exchange Act, and we will continue to file periodic and current
reports with the SEC. In addition, if the Merger is not consummated, we expect that management will operate the business in a
manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks
and opportunities to which they are currently subject, including risks related to the highly competitive industry in which the
Company operates and risks related to adverse economic conditions.
Furthermore, if the Merger is not consummated,
and depending on the circumstances that caused the Merger not to be consummated, the price of our common stock may decline significantly.
If that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades
as of the date of this proxy statement.
Accordingly, if the Merger is not consummated,
there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock.
If the Merger is not consummated, the Board will continue to evaluate and review the Company’s business operations, strategic
direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement
is not adopted by stockholders or if the Merger is not consummated for any other reason, there can be no assurance that any other
transaction acceptable to the Board will be offered or that the Company’s business, prospects or results of operation will
not be adversely impacted.
In addition, the Company may be required
to pay to Parent the Company Termination Fee of $11 million if the Merger Agreement is terminated under specified circumstances.
For more information, please see the section of this proxy statement captioned “
The Merger Agreement — Company
Termination Fee
.”
Merger Consideration
At the Effective Time, each share of our
common stock issued and outstanding immediately prior to the Effective Time (including any shares resulting from the exercise
of Options or settlement of RSUs which become vested as of the consummation of the Merger, but excluding the Cancelled Shares
and the Dissenting Shares) will be cancelled and automatically converted into the right to receive the Merger Consideration of
$12.97 in cash, without interest, and subject to deduction for any required withholding tax. At the Effective Time, each Cancelled
Share will be automatically canceled without payment of any consideration. Each Dissenting Share will not be converted into the
right to receive Merger Consideration, unless and until such stockholder fails to perfect or effectively withdraws or loses such
stockholder’s right to appraisal under Section 262 of the DGCL, at which time each such share of our common stock will be
converted into and will be exchangeable only for the right to receive, as of the later of the Effective Time and the time that
such right to appraisal is irrevocably lost, the Merger Consideration. The Dissenting Shares shall be treated in accordance with
Section 262, as more fully described in the section captioned “
The Merger — Appraisal Rights
.”
Background of the Merger
The Board and management regularly review
and evaluate our results of operations, financial position, business strategy and growth opportunities, as well as the trends
and conditions affecting our industry and business generally. As part of its evaluation, the Board has, from time to time, considered
a variety of strategic alternatives to the Company’s business strategies as an independent company, including consideration
of potential strategic and financial alternatives to maximize stockholder value, such as business combinations, acquisitions and
financing transactions.
On May 26, 2016, the Board received an
unsolicited, non-binding proposal letter from Monomoy, offering to acquire 100% of the Company’s issued and outstanding
shares for a price per share in cash of $10.25. On May 26, 2016, the closing price of our common stock was $9.01.
On June 3, 2016, the Company sent a letter
to Monomoy confirming receipt of the proposal, noting that the Board would review it and the Company would get back to Monomoy
with the outcome of that review.
On June 7, 2016, the Board held a meeting
to consider, among other things, Monomoy’s proposal. Members of the Company’s management as well as representatives
of Sidley Austin LLP (“Sidley”), the Company’s outside counsel, participated in the meeting. At the meeting,
representatives of Sidley outlined the fiduciary duties of the Board in considering an offer such as Monomoy’s proposal
and generally in connection with engaging in a process that might result in a change of control of the Company. Following the
discussion, the Board unanimously determined that the price per share included in Monomoy’s proposal did not provide meaningful
incremental value relative to the Company’s stock price and the Company’s standalone prospects that would justify
pursuing the proposal at that time. The Board also instructed management to work with Sidley to prepare a response letter to Monomoy
on behalf of the Board.
On June 14, 2016, the Company sent a
letter to Monomoy indicating that the Board had carefully considered Monomoy’s proposal and unanimously agreed that it was
not one that the Company should explore.
On July 7, 2016, the Board received a
second non-binding proposal letter from Monomoy, offering to acquire 100% of the Company’s issued and outstanding shares
for a price per share in cash of $10.50.
On July 8, 2016, Matthew Hyde, Chief
Executive Officer of the Company, Jeffrey Lasher, its Chief Financial Officer, and Pamela Fields, its General
Counsel, Barbara L. Rambo, the chair of the Board, and representatives of Sidley held a meeting, during which the parties
present discussed Monomoy’s revised offer. In light of the Board’s views as discussed at the June 7, 2016
meeting, it was the consensus of the group that while the Board was unlikely to be interested in pursuing Monomoy’s
revised proposal, it would nonetheless be worthwhile to provide Monomoy with an opportunity to elaborate on its proposal.
However, given that management was busy with closing the quarter and preparing for the earnings release and Form 10-Q filing,
and also was deep in the process of completing its annual strategic plan for the Board’s review at the upcoming Board
meeting, the best course of action at that time was to defer any formal response to Monomoy regarding its proposal until
after the Board had an opportunity to review in detail the Company’s annual strategic plan at the upcoming Board
meeting, but to continue engagement with Monomoy. It was agreed that Ms. Rambo should confirm the proposed approach with the other
members of the Board.
Ms. Rambo subsequently confirmed with
the other members of the Board that they agreed with that approach. Management then sent a letter to Monomoy stating that the
Company would arrange a meeting, to occur after the Company issued its earnings release for the second quarter of fiscal year
2016, between representatives of Monomoy and Messrs. Hyde and Lasher for the purpose of enabling Monomoy to further elaborate
on and discuss its proposal.
On August 16, 2016, Messrs. Hyde and
Lasher met with representatives of Monomoy. During that meeting, Monomoy expressed its continued interest in acquiring the Company
and suggested that the parties could enter into a non-disclosure agreement and engage in a due diligence review of the Company
in furtherance of acquisition discussions. Mr. Hyde responded that he would discuss that with the Board at its next meeting.
Beginning on August 30 through September
1, 2016, the Board held its regularly scheduled three-day meeting at which members of management of the Company were in attendance.
Management presented and discussed with the Board the Company’s annual strategic plan. Representatives of Sidley participated
in a portion of the meeting on September 1, 2016, during which they made a presentation to the Board regarding certain legal considerations
relevant to the Company remaining as a standalone public company versus exploring a potential business combination transaction,
in light of Monomoy’s proposals received by the Board, and also discussed the fiduciary duties of the Board under Delaware
law in the context of a potential business combination transaction. The Board then discussed Monomoy’s revised proposal
and the Company’s possible responses. Following the discussion, the Board unanimously resolved to reject Monomoy’s
revised proposal as inadequate, determined that entry into a non-disclosure agreement and conducting due diligence was not advisable
at the time and instructed management to work with Ms. Rambo to develop a response to Monomoy. While the Board decided to reject
Monomoy’s proposal as inadequate, the Board also decided that it should select a financial advisor to help it consider whether
it might be an opportune time for the Company to explore various strategic options, including a sale of the Company.
On September 12, 2016, Monomoy sent a
third unsolicited, non-binding proposal letter to the Board, offering to acquire 100% of the Company’s issued and outstanding
shares for a price per share in cash of $10.75.
On September 13, 2016, the Company sent
a letter to Monomoy stating that the Board had considered Monomoy’s July 7 proposal at a recent meeting and had unanimously
determined that the July 7 proposal did not present an opportunity that was in the best interest of the Company to explore. The
letter also noted that the Company had received the September 12 proposal, which would be forwarded to the Board and considered
by the Board at its next Board meeting. The Company’s letter also stated that the Board had considered Monomoy’s request
to enter into a non-disclosure agreement, but the Board was in the process of reviewing the management’s long-term strategic
plans and, as such, the Board had determined that entering into a non-disclosure agreement with Monomoy would be premature. The
letter further stated that if, in the context of its review, the Board decided to pursue strategic alternatives, the Board would
revisit Monomoy’s request.
On September 15, 2016, the Board held
a meeting during which Mr. Hyde provided an update on Monomoy’s latest proposal. The Board discussed and approved the formation
of a new subcommittee of the Board that would be administratively easier to convene, to pursue the evaluation of strategic alternatives,
subject to approving a charter for the subcommittee by written consent to be circulated to the Board members. The Board decided
to defer the review of Monomoy’s third proposal letter until the Board engaged a financial advisor.
On September 19, 2016, the Board approved,
by unanimous written consent, the formation of a subcommittee of the Board (the “Strategic Committee”), consisting
of Ms. Rambo (chair), Robert D. Olsen, Alice M. Richter and Christiana Shi, each an independent director and member of the Company’s
audit and finance committee of the Board. The Strategic Committee was authorized to, among other things, establish and direct
the process of reviewing and evaluating strategic alternatives, solicit proposals, review and negotiate the terms and conditions
of strategic alternatives.
On September 23, 2016, the Strategic
Committee held a meeting, in which Ms. Fields and a representative of Sidley participated. The Strategic Committee discussed the
process with Monomoy, including their third proposal letter received on September 12, 2016 and the Company’s letter sent
to Monomoy on September 13, 2016 in response to the July 7 proposal. Following the discussion, the Strategic Committee determined
that the committee and the Board should defer any action in response to Monomoy’s proposal until after engagement of a financial
advisor and further review and consideration of the strategic and financial plans to be prepared by management.
On September 27, 2016, Monomoy reached
out via email to Mr. Repass requesting a brief phone call. Mr. Repass responded on September 30, 2016 declining to take such a
call and noting that the Company would be in touch with Monomoy after the Board had an opportunity to consider whether to pursue
strategic alternatives.
On October 7, 2016, the Strategic Committee
held a meeting that was also attended by members of the Company’s senior management. At the invitation of the committee,
two financial advisory firms, including Guggenheim, participated in a portion of the meeting and each made a presentation to the
Strategic Committee regarding their capabilities and relevant experience. Following the presentations, the Strategic Committee
discussed each financial advisory firm’s experience in the retail industry and relevant transactions, approaches to strategic
alternatives, geographic location and other considerations. Following the discussion, and with input from management, the Strategic
Committee selected Guggenheim as the financial advisor to the Board and recommended the engagement to the Board for approval.
On October 10, 2016, the Board held a
meeting, in which members of the senior management of the Company and a representative of Sidley participated. The Board reviewed
the recommendation of the Strategic Committee to engage Guggenheim as its financial advisor, discussed and approved the engagement
and delegated to the Strategic Committee the authority to negotiate and finalize the engagement letter with Guggenheim. The Strategic
Committee subsequently finalized the engagement letter, and the Company and Guggenheim entered into the engagement letter with
Guggenheim.
On November 4, 2016, the Strategic Committee
held a meeting, in which members of the senior management of the Company and representatives of Guggenheim and Sidley participated.
The committee, management of the Company and Guggenheim discussed the initial steps to be taken in the Board’s review of
potential strategic alternatives, including a review of the business and management’s strategic and financial plans, the
development of a list of potentially interested parties to be contacted in connection with a potential strategic transaction and
the development of a financial model with management that would include detailed assumptions and forecasts typically expected
from potential buyers. The participants in the meeting discussed the next steps in considering the exploration of the strategic
transaction and an engagement strategy with Monomoy.
Following the November 4 meeting and
continuing through February 2017, management and Guggenheim worked together on the matters as directed by the Strategic Committee,
including the review of the management’s strategic and financial plans, development of a financial model, creation of an
online data room and development of a list of potentially interested parties to be contacted.
On November 29 and 30, 2016, the Board
held its regularly scheduled meeting. Representatives of Guggenheim and Sidley participated in the meeting on November 30, 2016.
Representatives of Guggenheim gave a presentation on the status of its preliminary review of the strategic options and valuation
of the Company, including actions that might be taken by the Company if it decided to remain as a standalone public company in
order to increase value to its stockholders. The Board and Guggenheim discussed the next steps in potentially pursuing a sale
process, including assessing the level of interest in the Company from potential buyers and management’s continued development
of a financial model to be used in further consideration of strategic alternatives and that would be provided to potential counterparties.
The Board authorized Guggenheim to reach out to a limited number of parties that would be most interested in pursuing a potential
acquisition of the Company to make an initial assessment of the level of interest that might exist for the potential acquisition
of the Company to assist the Board in its evaluation of whether to launch a full bidding process.
Beginning in early December 2016 and
continuing through mid-January 2017, at the direction of the Board, Guggenheim and members of the Company’s management engaged
in a limited outreach to potentially interested parties, including both strategic and financial buyers, and, in some cases, held
initial meetings, to gauge market interest in, and perceived obstacles to, an acquisition of the Company.
On December 9, 2016, the Company received
a proposal letter from a strategic party (“Party A”), offering to acquire all of the Company’s issued and outstanding
shares for a price per share in cash of $11.50. Following that submission and prior to December 20, 2016, Guggenheim engaged in
a series of discussions with Party A regarding the proposal and informed Party A that the Company was considering a sale process.
Party A indicated that it was not interested in participating in a process.
On December 16, 2016, the Strategic Committee
held a meeting, in which members of the Company’s management and representatives of Guggenheim and Sidley participated.
Representatives of Guggenheim updated the Strategic Committee on the status of communications with Party A and Monomoy. The Strategic
Committee discussed the proposal from Party A, noting that it was not at a preemptive value that would justify pursuing a negotiated
transaction with Party A given the value that Guggenheim believed could be achieved through a broader bidding process. Guggenheim
was directed to explore with Party A whether they would increase their offer and to keep Monomoy interested in engaging in a sale
process.
Between the Strategic Committee meeting
and December 20, 2016, Guggenheim had a series of discussions with Party A, in which Guggenheim informed Party A that a proposal
of $11.50 per share was not at a level that would dissuade the Company from pursuing a process. Party A submitted a revised proposal
letter on December 20, 2016, offering to acquire all of the Company’s issued and outstanding shares for a price per share
in cash of $14.00.
On December 21, 2016, the Strategic Committee
held a meeting, in which members of the senior management and representatives of Guggenheim and Sidley participated. A representative
of Guggenheim discussed the conversations he had had with the Chief Executive Officer of Party A regarding its revised proposal.
After discussion, the Strategic Committee determined that the Company should enter into a non-disclosure agreement with Party
A, respond to Party A’s request for diligence information and agree to a meeting between Party A and the Company’s
management. The committee then discussed the next course of action in the coming weeks, including continuing exploration of potential
interest in an acquisition of the Company and finalizing management’s financial model for review by the Strategic Committee
and the Board.
Following the Strategic Committee meeting,
the Company and Party A entered into a non-disclosure agreement and Party A engaged in initial diligence activities, including
meeting with the Company’s management and founder, and reviewing confidential diligence materials, regarding the business.
On January 13, 2017, the Strategic Committee
held a meeting, in which members of the senior management and representatives of Guggenheim and Sidley participated. Representatives
of Guggenheim and Mr. Hyde updated the committee on the status of the initial sales process outreach as well as the status of
activities with Party A, including an upcoming in-person meeting with certain executive officers of Party A to discuss an overview
of the business and opportunities and possible synergies from a business combination.
Following that in-person meeting,
Party A informed Guggenheim on January 17, 2017 that Party A would not continue to pursue its non-binding proposal to acquire
the Company at a price per share of $14, but remained interested at a price closer to its initial $11.50 offer and still did
not wish to participate in a sale process. Party A and Guggenheim noted that they should stay in contact.
On January 27, 2017, the Strategic Committee
held a meeting, in which members of the senior management and representatives of Guggenheim and Sidley participated. Representatives
of Guggenheim presented the Strategic Committee with a summary status report, noting that of the 22 parties contacted to date,
six parties had declined to engage in discussions and, of the remaining parties, nine had engaged in initial meetings (including
Party A). Guggenheim and Mr. Hyde reported differing levels of interest and perspectives on the Company’s strategies from
the contacted parties and discussed the in-person meeting with Party A and their subsequent communication on price and process.
Guggenheim proposed a list of additional parties to contact. The Strategic Committee reviewed and discussed the additional parties,
including potential strategic and financial buyers that the Strategic Committee and Guggenheim believed would be most interested
in pursuing an acquisition of the Company, and decided that the financial model should be finalized before seeking additional
proposals from potential interested parties.
On February 10, 2017, the Strategic Committee
held a meeting, in which members of the senior management and representatives of Guggenheim and Sidley participated. Members of
the Company’s management team presented the five-year financial model they had been working on developing over the last
several months for use in connection with the sale process. Management and the committee discussed, among other things, the key
assumptions underlying the model, various risks that could impact achievement of the results set forth in the model and different
components of the model. Representatives of Guggenheim provided a process update and discussed proposed next steps, including
reaching out to additional parties as discussed at the January 27 meeting, entering into non-disclosure agreements, providing
access to diligence materials, including the model, and distributing first round bid procedure letters. After further discussing
the financial model and proposed next steps, the committee approved the model as presented for use in the sale process and directed
Guggenheim to proceed with the proposed next steps in the process as outlined at the meeting, including reaching out to the remaining
potential parties as discussed.
Following that meeting, Guggenheim began
contacting additional parties providing a form of non-disclosure agreement to parties who had expressed interest but had not already
entered into a non-disclosure agreement with the Company.
Since the formation of the Strategic
Committee, Ms. Rambo frequently updated other members of the Board as to developments in the strategic alternatives evaluation
process and the Board was updated on the Strategic Committee’s work at each meeting of the Board. In light of the increased
momentum in the process, the Strategic Committee determined that all members of the Board would be invited to attend and participate
in the Strategic Committee meetings beginning with the February 24, 2017 meeting of the Strategic Committee. Ms. Rambo continued
to update other members of the Board who did not attend the Strategic Committee meetings and the Board continued to be updated
on the Strategic Committee’s work at each meeting of the Board.
On February 24, 2017, the Strategic Committee
held a meeting, in which Mr. Randolph K. Repass, founder of the Company and one of the Board members, Ms. Fields, and representatives
of Guggenheim and Sidley participated. Representatives of Guggenheim reported that a total of 49 potential interested parties
had been contacted to date, three of which had executed non-disclosure agreements and ten of which had passed on the opportunity.
Guggenheim and the committee discussed the list of parties who remained interested and proposed next steps of contacting those
parties as well as continued efforts to reach out to the remaining parties as discussed at the February 10, 2017 meeting. The
Strategic Committee then reviewed a proposed confidential information memorandum and bid instruction letter prepared by Guggenheim
and, following discussion, authorized Guggenheim to share the confidential information memorandum with parties who executed a
non-disclosure agreement and to proceed with the distribution of bid instruction letters.
On March 2, 2017, representatives of
Party A and Guggenheim had a conversation in which Party A stated that it did not want to participate in a process or receive
the confidential information memorandum.
Between March 9 and 16, 2017, Guggenheim
sent process letters to 20 potential buyers, including Monomoy, instructing each buyer to submit its proposal no later than March
28, 2017.
On March 10, 2017, the Strategic Committee
held a meeting, in which Mr. Repass, members of the senior management and representatives of Guggenheim and Sidley participated.
Representatives of Guggenheim provided an update on the potential bidders and the process timeline, noting that a total of 78
potential interested parties had been contacted to date, 32 of which had passed on the opportunity.
On March 22 and 23, 2017, the Board held
its regularly-scheduled meeting. Representatives of Guggenheim and Sidley participated in a portion of the meeting on March 23,
2017. Representatives of Guggenheim provided an update on the potential sale of the Company and the bidding process, including
a market update, a discussion of the financial model prepared by management and provided to potential bidders following the Strategic
Committee’s review, a preliminary financial analysis, an analysis on the impact of a potential dividend payment by the Company
on the process and a review of the proposed overall timeline of the process going forward. Guggenheim reported that a total of
79 parties had been contacted to date (including 16 strategic parties (including Party A, which Guggenheim noted continued to
seem to be interested in talking with Guggenheim regarding the opportunity notwithstanding their prior statements) and 63 financial
parties), 22 of which had executed a non-disclosure agreement, with three of those having passed on the opportunity. It was noted
that more information on the status of the process would be known on March 28, 2017 when bids were due. Following discussion regarding
various considerations relating to declaring a cash dividend, the Board approved the Company declaring a cash dividend of $0.05
per share on issued and outstanding shares of our common stock.
On March 24, 2017, the Company announced
that the Board declared a cash dividend of $0.05 per share, which was paid on May 25, 2017 to the Company stockholders of record
as of the close of business on May 11, 2017.
Throughout the process,
Guggenheim contacted a total of 79 parties and the Company entered into non-disclosure agreements with a total of 22
counterparties (including Monomoy and Parties A through F below), who were provided access to an online
data room containing information related to the Company and its business. All of the executed non-disclosure agreements
contained a standstill provision, which ceased to apply to these counterparties upon the Company’s entering into the
Merger Agreement.
On March 28, 2017, six potential financial
buyers, including Monomoy, submitted non-binding initial indications of interest. Each potential buyer submitted a non-binding
all-cash offer to acquire the outstanding shares of our common stock. The table below presents the ranges of per share prices
reflected by the indications of interest received:
Bidder
|
|
Price Per Share Range
|
|
Monomoy
|
|
$11.50 - $13.50
|
|
Party B
|
|
$11.80 - $12.30
|
|
Party C
|
|
$12.00
|
|
Party D
|
|
$11.50 - $12.50*
|
|
Party E
|
|
$11.00 - $12.00
|
|
Party F
|
|
$12.00
|
|
*
Party D offered to
acquire 85% of the Company’s shares in cash for $11.50 to $12.50 per share in cash, with the remaining 15% of the
Company’s shares held by management and Mr. Repass to be rolled over.
On March 31, 2017, the Strategic Committee
and the rest of the Board members met to review the preliminary indications of interest. Mr. Hyde and Ms. Fields were in attendance
as well as representatives of Guggenheim and Sidley. Guggenheim presented the six bids received. After discussing the bids and
potential responses to these bidders, the Board instructed Guggenheim to provide feedback to each bidder, noting that the Company
would continue the process with each bidder, but in order for an offer to be considered by the Board, the proposed per share price
would need to be above $12.
Following the meeting, Guggenheim contacted
each bidder on March 31, 2017, noting that each would be invited to a management presentation with the Company, the Company had
received a number of bids with a price per share at or above $12 and the Company was not inviting bidders to continue in the process
unless they understood that the per share price proposed by their bids would need to be above $12.
Over the course of April, management
of the Company held in-person management presentations with five of the six bidders and a telephonic presentation with the sixth
bidder, with representatives of Guggenheim in attendance at each meeting and in the case of Monomoy, with its financial advisor
in attendance or on the phone. Through their submission of bids, or, if earlier, their withdrawal from the process, the bidders
continued to conduct due diligence of the Company and its business, including through diligence meetings with the Company’s
management team and Mr. Repass, at which representatives of Guggenheim were present, and to discuss their participation in the
process with Guggenheim.
On April 20, 2017, Guggenheim had calls
with the Chief Executive Officer of Party A and subsequently with the financial advisor to Party A, advising Party A that the
Company had received multiple indications of interest with proposed purchase prices higher than Party A’s last proposed
price of $11.50. Party A expressed an interest in entering the process, noting that it would consider a transaction structure
of a combination of cash and stock valued at $12 per share. Guggenheim informed Party A that Party A should engage in due diligence.
On April 21, 2017, the Strategic Committee
held a meeting, in which Mr. Repass, members of senior management and representatives of Guggenheim and Sidley participated. The
Strategic Committee received an update from management and Guggenheim regarding the sale process. Representatives of Guggenheim
also reported on their discussion with Party A on the preceding day. Guggenheim noted that it would be following up with each
bidder directly on whether they were still interested in pursuing and to discuss next steps.
On May 8, 2017, representatives of Party
A informed representatives of Guggenheim that Party A was not able to proceed in the process at that time.
On May 15, 2017, Party E notified
Guggenheim of its decision to withdraw from the process, indicating that it would not be able to complete a transaction at
this point given its internal resource constraints.
On May 17, 2017, Guggenheim sent the
second round bid letters to the remaining five bidders, instructing each bidder to provide a revised indication of interest by
June 13, 2017.
On May 19, 2017, the Strategic Committee
held a meeting, in which Mr. Repass and Dennis Madsen, two members of the Board, members of senior management and representatives
of Guggenheim and Sidley participated. The Strategic Committee received an update from management and Guggenheim regarding the
bidding process and the meetings management of the Company had with the potential bidders. Guggenheim also reported that the second-round
bid letters had been distributed requesting updated proposals by June 13, 2017. A representative of Sidley reviewed a summary
of the key terms of the proposed bid draft merger agreement, previously circulated to the Strategic Committee, including transaction
structure, conditions, non-solicitation restrictions, representations and warranties, covenants, termination rights and termination
fees.
On May 22, 2017, the Strategic Committee,
with representatives of Sidley and members of management present, met to further discuss the draft merger agreement and provide
guidance to management and Sidley on the proposed terms. The Strategic Committee instructed the Company and Sidley to finalize
the proposed bid draft merger agreement and provide it to the bidders.
On May 25, 2017, the Company posted the
bid draft merger agreement in the online data room, making it available to the bidders remaining in the process.
On May 26, 2017, Party A’s financial
advisor contacted Guggenheim, indicating that Party A was interested in re-engaging with the Company to pursue a transaction in
which Mr. Repass would receive Party A equity in exchange for his stock in the Company, while the other Company stockholders would
receive cash consideration. Guggenheim provided Party A with details on the timing process, including the June 13, 2017 deadline
for all bidders to submit their bids.
On May 31, 2017, Guggenheim sent the
second-round bid instruction letter to Party A.
On May 31 and June 1, 2017, the Board
held its regularly-scheduled meeting. Representatives of Guggenheim and Sidley participated in a portion of the meeting on June
1, 2017. Guggenheim updated the Board on the latest discussions with Party A and the cash and stock transaction structure proposed
by Party A. Guggenheim then provided an overview of the remaining bidders still engaged in the process. The Board discussed Party
A’s proposed structure and instructed Guggenheim to inform Party A that the Board strongly preferred a transaction in which
all stockholders received the same consideration. The Board also discussed, with input from a representative of Sidley, the preparation
of internal and external communications as well as SEC filing requirements in connection with a sale transaction.
Shortly after the June 1, 2017 Board
meeting and in the following several days, Guggenheim conveyed the Board’s feedback to Party A and continued the discussions
with the representative of Party A.
On June 3, 2017, Party D notified
Guggenheim of its decision to withdraw from the process, citing Amazon as a threat to the brick-and-mortar retail business
and indicating concerns over the Company’s performance trends.
On June 8, 2017, Party B notified
Guggenheim of its decision to withdraw from the process, citing Amazon as a threat to the brick-and-mortar retail
business.
On June 9, 2017, Party F notified
Guggenheim of its decision to withdraw from the process, noting that it would not be in a position to submit a bid by the
June 13, 2017 deadline but would revisit a transaction later if the Company was not able to complete a transaction within its
proposed timeline.
On June 11, 2017, at the request of Party
A, representatives of Party A’s outside counsel had a call with representatives of Sidley and Guggenheim and Ms. Fields
in which Party A’s counsel informed them that Party A’s bid would contemplate that Mr. Repass would receive equity
in Party A and that all other Company stockholders would receive cash, and explained the reasons for that structure. The Sidley
representative responded that the Company could not provide a response to this proposed structure until Party A submitted a bid
that included an offer price and further details of the proposed transaction and the Board had an opportunity to review and consider
such proposal.
On June 12, 2017, Guggenheim spoke with
Monomoy’s financial advisor, which requested guidance on the Company’s valuation. Guggenheim further indicated that,
while it did not have specific guidance on value, it believed that, based on the feedback it had received from the Board to date,
a deal would likely not be done below the midpoint of initial range of per share prices included in Monomoy’s March 28 proposal.
Also on June 12, 2017, Guggenheim spoke
with Party A’s financial advisor, who asked whether the bid price of $12 orally proposed by Party A in April would be competitive.
Guggenheim responded that, while it did not have definitive proposals in advance of the June 13, 2017 deadline, a bid price of
$12 would likely not be high enough to be competitive based on the feedback it had received from the Board to date.
On June 13, 2017, Party A advised Guggenheim
that Party A was no longer interested in submitting a bid as its proposed $12 price was unlikely to be competitive on valuation
and it was not prepared to offer more than $12.
Also on June 13, 2017, Monomoy and Party
C each submitted a revised non-binding letter of intent.
Monomoy’s bid contemplated a per
share purchase price of $12.21 in cash. The letter of intent indicated that Monomoy would finance the acquisition with a combination
of equity and debt but the transaction would not be subject to any financing contingency. Monomoy submitted drafts of debt commitment
letters and a mark-up of the bid draft merger agreement. Party C’s bid proposed a per share purchase price of $11.50. The
letter of intent indicated that, while Party C would seek to obtain debt financing from third party lenders, Party C intended
to provide an equity commitment for the full purchase price in order to enhance the certainty of the consummation of a transaction
and that Party C’s transaction would not be subject to any financing contingency. Party C also submitted a mark-up of the
bid draft merger agreement.
On June 15, 2017, Guggenheim contacted
Monomoy and Party C to obtain additional insight as to the parties’ proposals, noting that Guggenheim would provide specific
feedback following the review of the bids by the Board.
On June 16, 2017, the Board held a telephonic
meeting, in which Mr. Repass and Mr. Madsen, as well as members of the senior management of the Company and representatives of
Guggenheim and Sidley participated. Representatives of Guggenheim summarized the sale process to date, including the bids received,
and reviewed and discussed its preliminary financial analysis with respect to the Company and the two revised bids. Representative
of Sidley provided the directors with a refresher overview of their fiduciary duties under Delaware law with respect to a potential
transaction, as previously presented to the Board. A representative of Sidley also reviewed the key issues contained in the two
mark-ups of the bid draft merger agreement provided by Monomoy and Party C. The Board discussed the strategic alternatives available
to the Company, including the bids presented as well as continuing as a standalone company. Following discussion, the Board decided
that the Company should continue to engage in discussions with the two remaining bidders with an aim of trying to maximize the
value offered to stockholders in a potential transaction, taking into consideration the certainty of the consummation of a transaction
proposed by the two bids, and directed Guggenheim to continue to do so.
Following the meeting on June 16, 2017,
a representative of Guggenheim contacted Party C, noting that, while the Board valued that the bid was not dependent on obtaining
debt financing, the bid price of $11.50 was not at a level at which the Board would approve a transaction, and was not competitive
with other interest in the Company. Guggenheim also advised Party C that the Board had authorized Guggenheim to keep the process
open for a limited period of time with an understanding that any transaction price would be well above $12 and that, while the
Company was not asking for a re-bid at this time, Party C should only proceed with an acknowledgement of that understanding. After
discussion, Party C agreed that it would continue in the process with that understanding.
Later on June 16, 2017, a representative
of Guggenheim contacted Monomoy, noting that in evaluating Monomoy’s mark-up of the bid draft merger agreement, the Board
had expressed concerns regarding the debt financing structure as well as the mark-up of other terms reflected in the merger agreement.
Guggenheim also reiterated that the offer price was disappointing to the Board relative to the initial range and unlikely to be
high enough to complete a transaction. Subsequently, Monomoy’s outside counsel, Kirkland & Ellis (“
K&E
”),
had a preliminary discussion regarding the merger agreement with Sidley, and delivered a revised draft merger agreement on June
19.
During the period from June 16 through
June 23, 2017, Monomoy and Party C continued to conduct their confirmatory due diligence, and Sidley engaged in discussions with
K&E, counsel to Monomoy, and counsel to Party C, regarding the merger agreement mark-ups and exchanged drafts of the merger
agreement, the equity commitment letter, the limited guarantee, voting and support agreement and other ancillary agreements. Guggenheim
also held calls with Monomoy to discuss Monomoy’s proposed financing arrangements.
On June 23, 2017, the Strategic Committee
held a meeting, in which Mr. Repass, members of the senior management of the Company and representatives of Guggenheim and Sidley
participated. Guggenheim provided an update on the process and its discussions with Monomoy and Party C, noting that both bidders
were prepared to make their best and final bids. Guggenheim then reviewed its preliminary valuation analysis of the Company, a
transaction analysis for each bidder and a retail market update, discussed the proposed debt and equity financing requirements
of Monomoy and the “all-equity” bid by Party C, and recommended distributing the bid instruction letter to each bidder
to submit its best and final offer. A representative of Sidley then reviewed the open items in the draft merger agreements and
possible resolutions of those issues. Following the discussion, the committee approved the Company to proceed with the proposed
bidding process and instruct the two remaining bidders to submit their best and final offers by June 27, 2017.
Later on June 23, 2017, Guggenheim sent
the best and final bid instruction letters to Monomoy and Party C.
On the next day, June 24, 2017, the Board
held a meeting, in which members of management of the Company and representatives of Guggenheim and Sidley participated. Management
provided an update on the Company’s operation and business. A representative of Guggenheim reviewed its preliminary valuation
analysis, the status of the process and next steps planned based on the discussions at the Strategic Committee meeting on the
previous date, noting that instruction letters had been distributed requesting each bidder to submit its best and final bid by
June 27, 2017. The Board discussed Guggenheim’s valuation analysis and observed that the value likely to be reflected in
the best and final bids would likely exceed the value expected to be achieved if the Company were to remain an standalone public
company. Following the discussion, the Board determined to convene their next meeting on June 28 to review the final bids.
On June 25, 2017, Guggenheim informed
Monomoy that given an “all-equity” bid submitted by a competing bidder that the Board valued from a deal certainty
perspective, Monomoy should seek to improve terms to increase deal certainty and to distinguish itself on price.
On June 26 and 27, 2017, Guggenheim held
calls with the financial advisor to Monomoy and with Party C, during which Guggenheim responded to each party regarding the bidding
status.
Late in the day on June 27, 2017, Party C submitted its final proposal to acquire all of the issued and outstanding shares of our common stock for cash at a purchase
price $12.03 per share, on an all-equity commitment basis. Party C also submitted its revised draft of the merger agreement.
Also on June 27, 2017, Monomoy submitted
its final proposal to acquire all of the issued and outstanding shares of our common stock for cash at a purchase price $13.01
per share. Monomoy also submitted its revised draft of the merger agreement, the equity commitment letter and the fully-executed
debt commitment letters.
In the morning of June 28, 2017,
Guggenheim discussed with Monomoy the Company’s final capitalization details that would be included in the execution version
of a merger agreement, which figures differed from the estimates provided earlier in the process and upon which both Monomoy and
Party C’s per share bid prices were based. After reviewing the Company’s updated capitalization numbers and discussing
with Guggenheim, Monomoy adjusted its final bid per share price to $12.97, which represented a total equity value of $337.7 million,
consistent with the total equity value implied in its proposal submitted on the previous day.
Later in the morning on June 28, 2017,
the Board met via telephone to discuss the final bids submitted by Monomoy and Party C, in which members of senior management
of the Company and representatives of Guggenheim and of Sidley participated. At that meeting, a representative of Guggenheim reviewed
and discussed the final bids from Monomoy and Party C, including the adjustments associated with the Company’s final capitalization
figures. Following the discussion, the Board determined that the Monomoy offer was superior to the other proposal, instructed
management and its advisors to finalize the transaction with Monomoy and directed Guggenheim to notify each bidder of the Board’s
decision. The Board also instructed Guggenheim to further review and discuss with Monomoy the terms of the debt and equity financings
included in Monomoy’s bid, with an aim to improve the deal certainty.
Following such instructions, on June
28, 2017, Guggenheim notified Monomoy that the Board had instructed Guggenheim and Sidley to finalize the transaction with Monomoy,
subject to the continuing review of the debt and equity commitment letters included in Monomoy’s final bid. During July
28 and 29, 2017, Guggenheim had a series of discussions with Monomoy to clarify and negotiate the terms of the debt and equity
financings and Sidley finalized the terms of the merger agreement and other ancillary agreements and documents with K&E.
Also on June 28, 2017, Guggenheim notified
Party C that its final bid was lower than the other bid and that the Company was moving forward to execute a transaction with
the other bidder. Party C requested additional information later in the day and was informed by Guggenheim that its proposed price
fell far short of the other bid. Late in the afternoon, Party C submitted a revised offer to Guggenheim, increasing the purchase
price per share from $12.03 in the offer submitted the day before to $12.50.
Shortly after receipt of Party C’s
revised offer, Ms. Rambo, members of management and representatives of Guggenheim and Sidley held a call, during which they reviewed
and discussed Party C’s revised offer and how to determine whether Party C would further increase its price. Given how late
in the day this latest development was occurring, the participants believed that, based on the Board’s discussion at its
meeting earlier that day, the Board would likely still view Monomoy’s bid as being superior notwithstanding the greater
financing certainty associated with Party C’s bid. Ms. Rambo contacted Mr. Repass, who confirmed his agreement with this
assessment. Ms. Rambo then instructed Guggenheim to seek to determine whether Party C could further increase its price, noting
that, based on Party C’s current price, the Company would still proceed towards finalizing the transaction with the other
bidder. Ms. Rambo immediately contacted the other members of the Board, each of whom also confirmed his or her agreement with
this assessment.
Following the call, in the evening of
June 28, 2017, a representative of Guggenheim contacted a representative of Party C to inform Party C of the reaction to their
revised bid. Party C stated that they could not increase their bid above $12.50.
On June 29, 2017, the Board held a meeting
in which members of management and representatives of Guggenheim and Sidley participated. At the meeting, a representative of
Guggenheim updated the Board on the revised offer submitted by Party C. A representative of Sidley then reviewed with the Board
its fiduciary duties in the context of the proposed Merger and summarized the material terms of the proposed form of the merger
agreement. At the request of the Board, Guggenheim then reviewed and discussed its financial analysis with respect to the Company
and the final bids from Monomoy and Party C, as well as the terms of the debt and equity financing involved in Monomoy’s
bid and the negotiations over the past few days. Thereafter, at the request of the Board, Guggenheim verbally rendered its opinion
to the Board, which was subsequently confirmed in writing by delivery of Guggenheim’s written opinion addressed to the Board
dated June 29, 2017, as to, as of such date and based on and subject to the matters considered, the procedures followed, the assumptions
made and various limitations of and qualifications to the review undertaken, the fairness, from a financial point of view, to
holders of our common stock (excluding the Company or any of its wholly owned subsidiaries or Parent or any of its wholly owned
subsidiaries), of the merger consideration to be received by such holders from Monomoy in the merger pursuant to the terms of
the Merger Agreement. The Board then unanimously approved the Merger Agreement with Monomoy, the voting and support agreements,
the merger and the other transactions contemplated by the Merger Agreement, and resolved to recommend to the Company stockholders
that they adopt the Merger Agreement.
Shortly after the June 29 meeting, the
Company and Monomoy executed the Merger Agreement and received the executed final copies of the limited guarantee, the equity
commitment letter, the debt commitment letters and the voting and support agreements. The Company and Monomoy issued a joint press
release announcing the execution of the Merger Agreement.
Recommendation of the Board and Reasons for the Merger
Recommendation of the Board
After careful consideration and consulting
with the legal and financial advisors to the Board, the Board unanimously (i) adopted and declared advisable the Merger Agreement
and the consummation by the Company of the transactions contemplated by the Merger Agreement, including the Merger, (ii) approved
the execution, delivery and performance of the Merger Agreement and the consummation by the Company of the transactions contemplated
by the Merger Agreement, including the Merger, (iii) determined that the Merger Agreement and the transactions contemplated by
the Merger Agreement, including the Merger, are advisable and in the best interests of the Company and its stockholders, and (iv)
recommended that the Company stockholders adopt the Merger Agreement and directed that the Merger Agreement be submitted to the
Company stockholders for adoption.
Accordingly, the Board unanimously recommends
that you vote: (1) “
FOR
” the adoption the Merger Agreement; (2) “
FOR
” the non-binding, advisory
proposal to approve certain compensation that may be paid or become payable to the Company’s named executive officers that
is based on or otherwise relates to the Merger; and (3) “
FOR
” the proposal to adjourn the Special Meeting,
if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement.
Reasons for the Merger
In evaluating the Merger Agreement and
the transactions contemplated thereby, including the Merger, the Board and the Strategic Committee consulted with the Company’s
senior management team and outside legal and financial advisors and, in reaching its decision to recommend that the Company stockholders
approve the Merger Agreement, the Board considered and evaluated numerous factors, including the following material factors, each
of which the Board believes supported their determinations (which factors are not presented in order of relative importance):
Company’s Operating and Financial Condition;
Prospects of the Company.
The Board considered that the Merger Consideration of $12.97 per share to be received by our stockholders
provides greater certainty of value (and less risk) to our stockholders relative to the potential trading price of our common
stock over a longer period after accounting for the long-term risks to our business resulting from operational execution risk
and evolving industry dynamics. The Board considered the possibility of continuing to operate the Company as a standalone public
company, including the related risks and uncertainties and the prospects for the Company going forward as a standalone entity.
In doing so, the Board considered the following:
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the current
and historical financial condition, results of operations and business of the Company
and the Company’s historical performance relative to other companies in the sector,
the Company’s stock price performance over an extended period of time relative
to the Merger Consideration, the risks associated with achieving and executing upon the
Company’s financial plan and the other risks disclosed under “Risk Factors”
in the Company’s most recent annual report on Form 10-K;
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overall sector
conditions and changes in the nature of the retail business, including:
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increasing competition
in the sector;
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challenges posed
by the continuing shift of sales from brick-and-mortar stores to the internet, as well
as overall conditions in the financial services sector; and
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the general downward
trend in the trading prices of retail companies with a significant brick-and-mortar presence.
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the current
state of the economy and uncertainty surrounding projected macroeconomic and consumer
sentiment conditions both in the near term and the long term; and
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in light
of the foregoing, the Company’s near-term and longer-term prospects as a standalone
company.
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Merger Consideration.
The Board considered
the fact that the Merger Consideration of $12.97 represents:
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a premium of approximately
34.4% to the closing price of our common stock of $9.65 on June 29, 2017, the date before
the Board approved the Merger Agreement; and
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Parent’s
best and final offer and, as of the date of the Merger Agreement, the highest per share
consideration that the Board believed was reasonably obtainable.
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Strategic Review and Broad and Competitive Process.
The Board believed that the value offered to our stockholders in the Merger was more favorable to our stockholders than the
potential value of remaining a standalone company and that the Merger Consideration obtained was the highest that was reasonably
attainable. As part of the Board’s and the Strategic Committee’s exploration of strategic alternatives, the Company
and, on behalf of the Board, its financial advisor had contact with a wide variety of potential parties interested in an acquisition
of the Company over the course of approximately six months, including by approaching 79 parties, executing non-disclosure agreements
with 22 of them, receiving initial indications of interest from seven of them. The Board also considered the revised and final
bids submitted by the two finalists, of which Parent’s bid was the higher, at $12.97.
Increase in Proposed Price.
The Board and
the Strategic Committee considered that the Merger Consideration of $12.97 per share was significantly higher than the price per
share of $10.25 in the initial indication of interest provided by Monomoy on May 26, 2016.
Cash Consideration; Certainty of Value.
The
Board and the Strategic Committee considered the fact that the Merger Consideration will be paid in cash, providing certainty,
immediate value and liquidity to our stockholders, in comparison to the risks and uncertainty that would be inherent in remaining
a standalone company.
No Financing Condition; Reverse Termination Fee.
The Board and the Strategic Committee considered the fact that the Merger is not subject to a financing condition, Parent
has obtained committed debt financing for the transaction from reputable financial institutions and Monomoy has committed the
Equity Financing of up to $130 million. The Board and the Strategic Committee also considered (i) the limited number and nature
of the conditions to the Debt Financing and Equity Financing, (ii) the obligation of Parent to use reasonable best efforts to
consummate the Debt Financing, and (iii) the Company’s ability, under circumstances specified in the Merger Agreement, including
all conditions to Parent’s and Sub’s obligations to consummate the Merger having been satisfied, the Company confirming
the satisfaction (or waiver) of all conditions to the Company’s obligation to consummate the Merger and that it stands ready,
willing and able to close and Parent’s Debt Financing having been funded or being available to be funded, to seek specific
performance of Parent’s obligation to cause, and pursuant to the Equity Commitment Letter, under certain circumstances to
seek specific performance to directly cause, Monomoy to fund the Equity Financing as contemplated by the Merger Agreement and
the Equity Commitment Letter, as described in further detail in the section captioned “
The Merger Agreement — Specific
Performance.
” The Board and the Strategic Committee also considered the Company’s right that, in the event of
a failure of the Merger to be consummated under specified circumstances, including all conditions Parent’s and Sub’s
obligations to consummate the Merger having been satisfied and the Company confirming the satisfaction (or waiver) of all conditions
to the Company’s obligation to consummate the Merger and that it stands ready, willing and able to close, to require Parent
to pay the Company the Reverse Termination Fee of $17 million, or approximately 5% of the equity value of the Merger, as described
in further detail in the section captioned “
The Merger Agreement — Reverse Termination Fee and Other Remedies.
”
Financial Analysis of the Company’s Financial
Advisor and Related Opinion.
The Board and the Strategic Committee considered the financial analysis reviewed by Guggenheim
with the Board, the oral opinion of Guggenheim rendered to the Board on June 29, 2017, and Guggenheim’s written opinion
addressed to the Board dated June 29, 2017, as to the fairness, as of such date, from a financial point of view, to our stockholders
(excluding the Company or any of its wholly owned subsidiaries or Parent or any of its wholly owned subsidiaries), of the Merger
Consideration to be received by such holders in the Merger pursuant to the Merger Agreement, which opinion was based on and subject
to the matters considered, the procedures followed, the assumptions made and various limitations and qualifications to the review
undertaken as more fully described under the section captioned “
Opinion of Guggenheim Securities, LLC
.”
Negotiations with Parent.
The Board and the
Strategic Committee considered the benefits that we and our advisors were able to obtain during our negotiations with Parent and
that the Merger Agreement was the product of arm’s-length negotiations, and contained terms and conditions that were, in
the Board’s view, advisable and favorable to us and our stockholders.
Merger Agreement.
The Board and the Strategic
Committee considered the provisions of the Merger Agreement, including:
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our ability
under certain circumstances to entertain unsolicited proposals for an acquisition that
would reasonably be expected to lead to a Superior proposal;
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the ability
of the Board under certain circumstances to withdraw or modify its recommendation that
our stockholders adopt the Merger Agreement, including in connection with a Superior
Proposal;
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our right to
terminate the Merger Agreement under certain circumstances in order to accept a Superior
Proposal and enter into a definitive agreement with respect to such Superior Proposal,
subject to paying the Company Termination Fee;
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our and Parent’s
respective termination rights;
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the representations
and warranties of the Company, which the Board and the Strategic Committee considered
reasonable for a transaction of this nature, and which were in several cases qualified
by “Company Material Adverse Effect” and by disclosures made in our SEC filings,
and in other cases by knowledge or materiality, or by reference to certain limited time
periods;
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the representations
and warranties of Parent and Sub;
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the covenants
and agreements of the parties; and
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the conditions
to closing of the Merger.
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Timing of Consummation.
The Board and the
Strategic Committee considered the anticipated timing of the consummation of the transactions contemplated by the Merger Agreement.
Appraisal Rights.
The Board and the Strategic
Committee considered the availability of statutory appraisal rights to our stockholders who do not vote in favor of the adoption
of the Merger Agreement and otherwise comply with all required procedures under the DGCL.
Stockholders’ Ability to Reject the Merger.
The Board and the Strategic Committee considered the fact that the Merger is subject to the adoption of the Merger Agreement
by the affirmative vote of holders of a majority of the shares of our common stock outstanding and entitled to vote thereon as
of the close of business on the Record Date.
Voting Agreement.
The Board and the Strategic
Committee considered the fact that the Voting Agreement with Randolph K. Repass, his spouse and a number of the Repass family
trusts terminates in the event that the Merger Agreement is terminated, which would permit such stockholders to support a transaction
involving a Superior Proposal.
The Board and the Strategic Committee
also considered a variety of risks and uncertainties and other potentially negative factors in its evaluation of the Merger and
the Merger Agreement, including, but not limited to, the following:
Potential Payment of a Termination Fee.
The
requirement, under certain circumstances, to pay the Company Termination Fee of $11 million, though the Board believed that the
amount of such fee was reasonable relative to similar transactions.
Delays in or Failure to Consummate Merger
.
The Merger may be delayed or not be consummated, resulting in loss of value to our stockholders and negative impact on our financial
position, operations and prospects.
Lack of Ongoing Equity Participation for Our Stockholders
.
Our stockholders will have no ongoing equity participation in the Company or Parent following the Merger, and our stockholders
will cease to participate in our future earnings or growth, if any, and will not benefit from increases, if any, in the value
of our common stock following the Merger.
Substantial Costs of Merger
. There have been
and will continue to be significant costs involved in connection with negotiating the Merger Agreement and consummating the Merger
(certain of which we will be required to bear), including in connection with the pursuit of regulatory approval and in connection
with litigation that could arise in the future in connection with the Merger. In addition, substantial management time and effort
have been and will continue to be required to effectuate the Merger, which could result in disruption of our day-to-day operations
during the pendency of the Merger.
Disruption of Business and Other Relationships
.
If the Merger is not consummated, the pendency of the Merger could adversely affect our and our subsidiaries’ relationships
with our and their respective customers, suppliers, associates and others with whom we and they have business dealings.
Restrictions on Our Operations
. The terms
of the Merger Agreement place restrictions on the conduct of our business prior to consummation of the Merger, which may delay
or prevent us from undertaking business opportunities that may arise prior to consummation of the Merger.
Taxable Transaction for Stockholders
. The
receipt of cash in exchange for shares of our common stock pursuant to the Merger will be a taxable transaction for U.S. federal
income tax purposes for many of our stockholders.
Interest of Our Directors and Executive Officers
.
Our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests
of our stockholders, including (i) the expectation that certain of our executive officers may enter into agreements with
Parent or Sub regarding employment with the Surviving Corporation, (ii) the cash-out of the Options, all of which are vested,
held by executive officers and directors and the accelerated vesting and cash-out of RSUs held by non-employee directors, (iii)
the assumption of the RSUs held by our executive officers by the Surviving Corporation and the right to receive cash payment based
on each holder’s continued employment with the Surviving Corporation through the applicable vesting dates, (iv) the acceleration
of RSUs and certain severance benefits to the executive officers under the Top Hat Severance Plan if his or her employment is
terminated without cause or if such executive officer resigns for good reason, and (v) continued indemnification and insurance
coverage for our directors and executive officers from the Surviving Corporation and Parent under the terms of the Merger Agreement.
After taking into account all of the
factors set forth above, as well as others, the Board concluded that the risks, uncertainties, and potentially negative factors
associated with the Merger were outweighed by the potential benefits of the Merger to the Company and our stockholders. Accordingly,
the Board determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are advisable and in
the best interests of the Company and our stockholders.
THE FOREGOING DISCUSSION IS NOT INTENDED TO BE AN EXHAUSTIVE
LIST OF THE INFORMATION AND FACTORS CONSIDERED BY THE BOARD IN ITS CONSIDERATION OF THE MERGER, BUT IS MERELY A SUMMARY OF THE
MATERIAL POSITIVE FACTORS AND MATERIAL NEGATIVE FACTORS CONSIDERED BY THE BOARD IN THAT REGARD. IN VIEW OF THE NUMBER AND VARIETY
OF FACTORS AND THE AMOUNT OF INFORMATION CONSIDERED, THE BOARD DID NOT FIND IT PRACTICABLE TO MAKE SPECIFIC ASSESSMENTS OF, QUANTIFY,
OR OTHERWISE ASSIGN RELATIVE WEIGHTS TO THE SPECIFIC FACTORS CONSIDERED IN REACHING ITS DETERMINATION. IN ADDITION, THE BOARD
DID NOT UNDERTAKE TO MAKE ANY SPECIFIC DETERMINATION AS TO WHETHER ANY PARTICULAR FACTOR, OR ANY ASPECT OF ANY PARTICULAR FACTOR,
WAS FAVORABLE OR UNFAVORABLE TO THEIR ULTIMATE DETERMINATION, AND INDIVIDUAL MEMBERS OF THE BOARD MAY HAVE GIVEN DIFFERENT WEIGHTS
TO DIFFERENT FACTORS. BASED ON THE TOTALITY OF THE INFORMATION PRESENTED, THE BOARD COLLECTIVELY REACHED THE UNANIMOUS DECISION
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER IN LIGHT OF THE FACTORS DESCRIBED ABOVE AND OTHER FACTORS THAT THE BOARD
FELT WERE APPROPRIATE. THE ABOVE EXPLANATION OF THE REASONS FOR THE MERGER AND OTHER INFORMATION PRESENTED IN THIS SECTION IS
FORWARD-LOOKING IN NATURE AND, THEREFORE, SHOULD BE READ IN LIGHT OF THE SECTION CAPTIONED “FORWARD-LOOKING STATEMENTS,”
BEGINNING ON PAGE 19.
Opinion of Guggenheim Securities, LLC
Overview
Pursuant to an engagement letter dated
November 29, 2016, the Board retained Guggenheim to act as its financial advisor with respect to the potential sale of the Company.
In selecting Guggenheim as the Board’s financial advisor, the Board considered that, among other things, Guggenheim is an
internationally recognized investment management, investment banking and financial advisory firm whose senior professionals have
substantial experience advising companies in the retail industry as well as significant experience providing strategic and financial
advisory services. Guggenheim, as part of its investment banking, financial advisory and capital markets businesses, is regularly
engaged in the valuation and financial assessment of businesses and securities in connection with mergers and acquisitions, restructurings
and recapitalizations, spin-offs/split-offs, securities offerings in both the private and public capital markets and valuations
for corporate and other purposes.
At the June 29, 2017 meeting of the Board,
Guggenheim rendered an oral opinion, which was confirmed by delivery of a written opinion, to the Board to the effect that, as
of June 29, 2017 and based on and subject to the matters considered, the procedures followed, the assumptions made and various
limitations of and qualifications to the review undertaken, the Merger Consideration was fair, from a financial point of view,
to holders of shares of our common stock (excluding the Company or any of its wholly owned subsidiaries or Parent or any of its
wholly owned subsidiaries).
This description of Guggenheim’s
opinion is qualified in its entirety by the full text of the written opinion, which is attached as
Annex B
to this proxy
statement and which you should read carefully and in its entirety. Guggenheim’s written opinion sets forth the matters considered,
the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken by Guggenheim.
Guggenheim’s written opinion, which was authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim,
is necessarily based on economic, capital markets and other conditions, and the information made available to Guggenheim, as of
the date of such opinion. Guggenheim has no responsibility for updating or revising its opinion based on facts, circumstances
or events occurring after the date of the rendering of the opinion.
In reading the discussion of the opinion
set forth below, you should be aware that Guggenheim’s opinion (and, as applicable, any materials provided in connection
therewith):
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was provided
to the Board (in its capacity as such) for its information and assistance in connection
with its evaluation of the Merger Consideration;
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did not constitute
a recommendation to the Board with respect to the Merger;
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does not constitute
advice or a recommendation to any holder of shares of our common stock as to how to vote
or act in connection with the Merger or otherwise;
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did not address
the Company’s underlying business or financial decision to pursue the Merger, the
relative merits of the Merger as compared to any alternative business or financial strategies
that might exist for the Company, the financing of the Merger or the effects of any other
transaction in which the Company might engage;
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addressed only
the fairness, from a financial point of view as of June 29, 2017, of the Merger Consideration
to the holders of shares of our common stock (excluding the Company or any of its wholly
owned subsidiaries or Parent or any of its wholly owned subsidiaries);
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expressed no
view or opinion as to (i) any other term, aspect or implication of (a) the Merger or
the Merger Agreement (including, without limitation, the form or structure of the Merger)
or (b) any other agreement, transaction document or instrument contemplated by the Merger
Agreement or to be entered into or amended in connection with the Merger or (ii) the
fairness, financial or otherwise, of the Merger to, or of any consideration to be paid
to or received by, the holders of any class of securities, creditors or other constituencies
of the Company; and
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expressed no
view or opinion as to the fairness, financial or otherwise, of the amount or nature of
any compensation payable to or to be received by any of the Company’s directors,
officers or employees, or any class of such persons, in connection with the Merger relative
to the Merger Consideration or otherwise.
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In the course of performing its reviews
and analyses for rendering its opinion, Guggenheim:
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reviewed the
draft of the Merger Agreement dated as of June 29, 2017;
|
|
·
|
reviewed a draft
of the Limited Guarantee dated as of June 29, 2017 made by Monomoy Capital Partners III,
L.P. in favor of the Company;
|
|
·
|
reviewed copies
dated as of June 27, 2017, of the debt commitment letters and the equity commitment letter
with respect to Monomoy’s contemplated financing of the Merger;
|
|
·
|
reviewed certain
publicly available business and financial information regarding the Company;
|
|
·
|
reviewed certain
non-public business and financial information regarding the Company’s business
and prospects, including certain financial projections for the Company for the fiscal
years ended January 2018 through January 2022 (the “Projections”), all as
prepared and provided to Guggenheim by the Company’s senior management;
|
|
·
|
discussed with
the Company’s senior management their views of the Company’s business, operations,
historical and projected financial results and future prospects, including the commercial
and competitive dynamics in the retail industry;
|
|
·
|
reviewed the
historical prices, trading multiples and trading activity of shares of our common stock;
|
|
·
|
compared the
financial performance of the Company and the trading multiples and trading activity of
shares of our common stock with corresponding data for certain other publicly traded
companies that Guggenheim deemed relevant in evaluating the Company;
|
|
·
|
reviewed the
valuation and financial metrics of certain mergers and acquisitions that Guggenheim deemed
relevant in evaluating the Merger;
|
|
·
|
performed discounted
cash flow analyses based on the Projections;
|
|
·
|
performed illustrative
sensitivity analyses to the foregoing discounted cash flow analysis based on a range
of growth and margin variables Guggenheim identified in consultation with the Company’s
senior management;
|
|
·
|
performed illustrative
leveraged buyout analyses based on the Projections; and
|
|
·
|
conducted such
other studies, analyses, inquiries and investigations as Guggenheim deemed appropriate.
|
With respect to the information used
in arriving at Guggenheim’s opinion:
|
·
|
Guggenheim relied
upon and assumed the accuracy, completeness and reasonableness of all industry, business,
financial, legal, regulatory, tax, accounting, actuarial and other information (including,
without limitation, the Projections, other estimates and other forward-looking information)
furnished by or discussed with the Company or obtained from public sources, data suppliers
and other third parties.
|
|
·
|
Guggenheim (i)
did not assume any responsibility, obligation or liability for the accuracy, completeness,
reasonableness, achievability or independent verification of, and Guggenheim did not
independently verify, any such information (including, without limitation, the Projections,
any other estimates and any other forward-looking information), (ii) expressed no view,
opinion, representation, guaranty or warranty (in each case, express or implied) regarding
the reasonableness or achievability of the Projections, any other estimates and any other
forward-looking information or the assumptions upon which they are based and (iii) relied
upon the assurances of the Company’s senior management that they are unaware of
any facts or circumstances that would make such information (including, without limitation,
the Projections, any other estimates and any other forward-looking information) incomplete,
inaccurate or misleading.
|
|
·
|
Specifically,
with respect to (i) the Projections, any other estimates and any other forward-looking
information furnished by or discussed with the Company, (a) Guggenheim was advised by
the Company’s senior management and Guggenheim assumed, that the Projections, other
estimates and other forward-looking information utilized in its analyses had been reasonably
prepared on bases reflecting the best currently available estimates and judgments of
the Company’s senior management as to the expected future performance of the Company
and the corporate income tax rates applicable to the Projections and (b) Guggenheim assumed
that such Projections, other estimates and such other forward-looking information were
reviewed by the Board with the understanding that such information would be used and
relied upon by Guggenheim in connection with rendering its opinion and (ii) any projections,
any other estimates and/or any other forward-looking information obtained by Guggenheim
from public sources, data suppliers and other third parties, Guggenheim assumed that
such information was reasonable and reliable.
|
|
·
|
During the course
of its engagement, the Board asked Guggenheim to solicit indications of interest from
various potential strategic and private equity acquirors regarding a potential transaction
with the Company, and Guggenheim considered the results of such solicitation process
in rendering its opinion.
|
Guggenheim also noted certain other considerations
with respect to its engagement and the rendering of its opinion:
|
·
|
Guggenheim did
not perform or obtain any independent appraisal of the assets or liabilities (including
any contingent, derivative or off-balance sheet assets and liabilities) of the Company
or any other entity or the solvency or fair value of the Company or any other entity,
nor was Guggenheim furnished with any such appraisals.
|
|
·
|
Guggenheim’s
professionals are not legal, regulatory, tax, consulting, accounting, appraisal or actuarial
experts and Guggenheim’s opinion should not be construed as constituting advice
with respect to such matters; accordingly, Guggenheim relied on the assessments of the
Company and its other advisors with respect to such matters. The Company’s senior
management advised Guggenheim that the Projections, all other estimates and all other
forward-looking information reflect the current U.S. federal corporate income tax regime
pursuant to the Internal Revenue Code of 1986, as amended; at the direction of the Board
and the Company’s senior management, Guggenheim did not consider or analyze the
impacts of any potential or proposed reform thereof in connection with its opinion and
analyses. Guggenheim did not express any view or render any opinion regarding the tax
consequences of the Merger to the Company or its stockholders.
|
|
·
|
Guggenheim further
assumed that:
|
|
·
|
In all respects
meaningful to its analyses, (i) the final executed form of the Merger Agreement would
not differ from the draft that Guggenheim reviewed, (ii) the Company, Parent and Sub
would comply with all terms of the Merger Agreement and (iii) the representations and
warranties of the Company, Parent and Sub contained in the Merger Agreement were true
and correct and all conditions to the obligations of each party to the Merger Agreement
to consummate the Merger would be satisfied without any waiver, amendment or modification
thereof.
|
|
·
|
The Merger
would be consummated in a timely manner in accordance with the terms of the Merger Agreement
and in compliance with all applicable laws, documents and other requirements, without
any delays, limitations, restrictions, conditions, waivers, amendments or modifications
(regulatory, tax-related or otherwise) that would have an effect on the Company or the
Merger in any way meaningful to Guggenheim’s analyses or opinion.
|
|
·
|
Guggenheim
did not express any view or opinion as to the price or range of prices at which shares
of our common stock or other securities of the Company may trade or otherwise be transferable
at any time, including subsequent to the announcement or consummation of the Merger.
|
Summary of Financial Analyses
Overview of Financial Analyses
This “Summary of Financial Analyses”
presents a summary of the principal financial analyses performed by Guggenheim and presented to the Board in connection with Guggenheim’s
rendering of its opinion. Such presentation to the Board was supplemented by Guggenheim’s oral discussion, the nature and
substance of which may not be fully described herein.
Some of the financial analyses summarized
below include summary data and information presented in tabular format. In order to understand fully such financial analyses,
the summary data and tables must be read together with the full text of the summary. Considering the summary data and tables alone
could create a misleading or incomplete view of Guggenheim’s financial analyses.
The preparation of a fairness opinion
is a complex process and involves various judgments and determinations as to the most appropriate and relevant financial analyses
and the application of those methods to the particular circumstances involved. A fairness opinion therefore is not readily susceptible
to partial analysis or summary description, and taking portions of the financial analyses set forth below, without considering
such analyses as a whole, would in Guggenheim’s view create an incomplete and misleading picture of the processes underlying
the financial analyses considered in rendering Guggenheim’s opinion.
In arriving at its opinion, Guggenheim:
|
·
|
based its financial
analyses on various assumptions, including assumptions concerning general business and
economic conditions, capital markets considerations and industry-specific and company-specific
factors, all of which are beyond the control of the Company, Monomoy and Guggenheim;
|
|
·
|
did not form
a view or opinion as to whether any individual analysis or factor, whether positive or
negative, considered in isolation, supported or failed to support its opinion;
|
|
·
|
considered the
results of all of its financial analyses and did not attribute any particular weight
to any one analysis or factor; and
|
|
·
|
ultimately arrived
at its opinion based on the results of all of its financial analyses assessed as a whole
and believed that the totality of the factors considered and the various financial analyses
performed by Guggenheim in connection with its opinion operated collectively to support
its determination as to the fairness, from a financial point of view and as of the date
of such opinion, of the Merger Consideration to be paid to holders of shares of our common
stock (excluding the Company or any of its wholly owned subsidiaries or Parent or any
of its wholly owned subsidiaries) to the extent expressly specified in such opinion.
|
With respect to the financial analyses
performed by Guggenheim in connection with rendering its opinion:
|
·
|
Such financial
analyses, particularly those based on estimates and projections, are not necessarily
indicative of actual values or actual future results, which may be significantly more
or less favorable than suggested by these analyses.
|
|
·
|
None of the
selected publicly traded companies used in the selected publicly traded companies analysis
described below is identical or directly comparable to the Company, and none of the selected
precedent merger and acquisition transactions used in the selected precedent merger and
acquisition transactions analysis described below is identical or directly comparable
to the Merger; however, such companies and transactions were selected by Guggenheim,
among other reasons, because they represented or involved target companies which may
be considered broadly similar, for purposes of Guggenheim’s financial analyses,
to the Company based on Guggenheim’s familiarity with the retail industry.
|
|
·
|
Selected publicly
traded companies analysis and selected precedent merger and acquisition transactions
analysis are not mathematical; rather, such analyses involve complex considerations and
judgments concerning the differences in business, financial, operating and capital markets-related
characteristics and other factors regarding the selected publicly traded companies and
selected precedent merger and acquisition transactions to which the Company and the Merger
were compared.
|
|
·
|
Such financial
analyses do not purport to be appraisals or to reflect the prices at which any securities
may trade at the present time or at any time in the future.
|
Certain Definitions
Throughout this “Summary of Financial
Analyses,” the following financial terms are used in connection with Guggenheim’s various financial analyses:
|
·
|
CapEx: means
capital expenditures.
|
|
·
|
Cash-adjusted:
means the relevant company’s share price calculated as (i) market capitalization
minus net cash (ii) divided by diluted shares outstanding.
|
|
·
|
CY: means calendar
year
|
|
·
|
EBIT: means
the relevant company’s operating earnings (including the impact of stock-based
compensation expenses (treated as a cash expense)) before interest and taxes.
|
|
·
|
EBITDA: means
the relevant company’s operating earnings (including the impact of stock-based
compensation expenses (treated as a cash expense)), before interest, taxes, depreciation
and amortization.
|
|
·
|
EBITDAR: means
the relevant company’s operating earnings (including the impact of stock-based
compensation expenses (treated as a cash expense)), before interest, taxes, depreciation,
amortization and rent expense.
|
|
·
|
Enterprise value:
represents the relevant company’s equity value plus (i) the principal or face amount
of total debt and preferred stock plus (ii) the book value of any non-controlling/minority
interests less (iii) cash, cash equivalents, short- and long-term marketable investments
and certain other cash-like items.
|
|
·
|
Equity value:
represents the relevant company’s (i) gross equity value as calculated (a) based
on outstanding common shares plus shares issuable upon the conversion or exercise of
all in-the-money convertible securities, stock options and/or stock warrants times (b)
the relevant company’s stock price less (ii) the cash proceeds from the assumed
exercise of all in-the-money stock options and stock warrants.
|
|
·
|
LTM: means last
twelve months as of April 1, 2017.
|
|
·
|
NA: means not
applicable.
|
|
·
|
NM: means not
meaningful.
|
|
·
|
P/E: means the
relevant company’s stock price divided by its historical or projected earnings.
|
|
·
|
Unlevered free
cash flows: means the relevant company’s after-tax unlevered operating cash flow
minus capital expenditures and changes in working capital.
|
|
·
|
WACC: means
weighted average cost of capital.
|
Recap of Implied Merger Financial Metrics
Based on the Merger Consideration of
$12.97 per share in cash for each share of our common stock, Guggenheim calculated various implied merger-related premia and multiples
as outlined in the table below:
Merger Premia and Implied Merger Multiples
|
|
|
|
|
Market(1)
|
|
|
Merger
|
|
Price per Share (2)
|
|
|
|
|
|
$
|
9.70
|
|
|
$
|
12.97
|
|
% Premium
|
|
|
|
|
|
|
0.0
|
%
|
|
|
33.7
|
%
|
% Cash-Adjusted Premium
|
|
|
|
|
|
|
0.0
|
%
|
|
|
54.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Value/EBITDA Multiples:
|
|
|
Metric
|
|
|
|
|
|
|
|
|
|
LTM:
|
|
$
|
38
|
|
|
|
4.1
|
x
|
|
|
6.4
|
x
|
2017E:
|
|
$
|
41
|
|
|
|
3.8
|
x
|
|
|
5.9
|
x
|
2018E:
|
|
$
|
47
|
|
|
|
3.3
|
x
|
|
|
5.1
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Value/EBIT Multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM:
|
|
$
|
15
|
|
|
|
10.2
|
x
|
|
|
15.9
|
x
|
2017E:
|
|
$
|
16
|
|
|
|
9.6
|
x
|
|
|
14.9
|
x
|
2018E:
|
|
$
|
21
|
|
|
|
7.3
|
x
|
|
|
11.3
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash-Adjusted P/E Multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM:
|
|
$
|
0.34
|
|
|
|
17.4
|
x
|
|
|
26.9
|
x
|
2017E:
|
|
$
|
0.39
|
|
|
|
15.3
|
x
|
|
|
23.7
|
x
|
2018E:
|
|
$
|
0.52
|
|
|
|
11.6
|
x
|
|
|
17.9
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/E Multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM:
|
|
$
|
0.34
|
|
|
|
28.2
|
x
|
|
|
37.7
|
x
|
2017E:
|
|
$
|
0.39
|
|
|
|
24.9
|
x
|
|
|
33.2
|
x
|
2018E:
|
|
$
|
0.52
|
|
|
|
18.8
|
x
|
|
|
25.1
|
x
|
(1) As
of June 28, 2017, the day prior to the announcement of the Merger.
(2) Dollars
in millions, except per share data.
West Marine Financial Analyses
Recap of Financial Analyses
.
In evaluating the Company in connection
with rendering its opinion, Guggenheim performed various financial analyses which are summarized in the table below and described
in more detail elsewhere herein, including selected publicly traded companies analysis, selected precedent merger and acquisition
transactions analysis and discounted cash flow analyses. Solely for informational reference purposes, Guggenheim also performed
a discounted cash flow sensitivity analysis, a leveraged buyout valuation analysis and a premia paid analysis and reviewed the
historical trading price range for our common stock and Wall Street equity research analysts’ price targets for our common
stock.
Recap of West
Marine Change-of-Control Financial Analyses
Merger Price Per Share
|
|
$
|
12.97
|
|
|
|
Reference
Range for
West
Marine
|
|
|
|
Low
|
|
|
High
|
|
Financial Analyses
|
|
|
|
|
|
|
|
|
Selected Publicly Traded Companies Analysis
|
|
|
|
|
|
|
|
|
Enterprise Value/2017E EBITDA Multiples
|
|
$
|
9.54
|
|
|
$
|
12.51
|
|
Enterprise Value/2017E EBIT Multiples
|
|
$
|
6.84
|
|
|
$
|
9.72
|
|
2017E Cash-Adjusted P/E Multiples
|
|
$
|
6.54
|
|
|
$
|
9.10
|
|
|
|
|
|
|
|
|
|
|
Selected Precedent M&A Transactions Analyses
|
|
|
|
|
|
|
|
|
Enterprise Value/CY (EBITDA – CapEx) Multiples
|
|
$
|
11.18
|
|
|
$
|
16.49
|
|
Enterprise Value/CY EBIT Multiples
|
|
$
|
9.72
|
|
|
$
|
12.81
|
|
CY Cash-Adjusted P/E Multiples
|
|
$
|
9.70
|
|
|
$
|
12.68
|
|
|
|
|
|
|
|
|
|
|
Discounted Cash Flow Analysis
|
|
$
|
11.72
|
|
|
$
|
14.88
|
|
|
|
|
|
|
|
|
|
|
For Informational Reference Purposes
|
|
|
|
|
|
|
|
|
Discounted Cash Flow Sensitivity Analysis
|
|
$
|
7.65
|
|
|
$
|
14.88
|
|
Leveraged Buyout Valuation Analysis
|
|
$
|
11.69
|
|
|
$
|
14.50
|
|
52 Week Low/High
|
|
$
|
7.77
|
|
|
$
|
11.72
|
|
Premia Paid Analysis
|
|
$
|
10.99
|
|
|
$
|
12.83
|
|
Research Analyst Price Targets
|
|
$
|
11.00
|
|
|
$
|
12.00
|
|
Selected Publicly Traded Companies Analysis
.
Guggenheim reviewed and analyzed the
Company’s historical stock price performance, projected/forecasted financial performance and trading valuation metrics compared
to corresponding data for certain publicly traded companies in the boat sales, sporting goods retail and small cap specialty retail
sectors that Guggenheim deemed relevant for purposes of its valuation analysis. The following eighteen publicly traded companies
were selected by Guggenheim for purposes of this analysis:
Selected Publicly
Traded Companies
·
|
MarineMax, Inc.
|
|
·
|
Francesca’s Holdings Corp.
|
·
|
Big 5 Sporting Goods Corp.
|
|
·
|
Genesco Inc.
|
·
|
Dick’s Sporting Goods, Inc.
|
|
·
|
Guess?, Inc.
|
·
|
Hibbett Sports, Inc.
|
|
·
|
Shoe Carnival, Inc.
|
·
|
Sportsman’s Warehouse Holdings, Inc.
|
|
·
|
Tailored Brands, Inc.
|
·
|
Abercrombie & Fitch Co.
|
|
·
|
Tilly’s, Inc.
|
·
|
Ascena Retail Group, Inc.
|
|
·
|
Vera Bradley, Inc.
|
·
|
The Buckle, Inc.
|
|
·
|
Zumiez Inc.
|
·
|
Express, Inc.
|
|
|
|
·
|
The Finish Line, Inc.
|
|
|
|
Guggenheim calculated, among other things,
various trading multiples for the Company and the selected publicly traded companies (in the case of the selected publicly traded
companies, based on Wall Street equity research consensus estimates and each company’s most recent publicly available financial
filings), which are summarized in the table below:
Selected Publicly Traded Company Multiples
|
|
2017E
Enterprise Value
/EBITDA
|
|
2017E
Enterprise Value
/EBIT
|
|
2017E
Cash-Adjusted
P/E
|
Boat Sales
|
|
|
|
|
|
|
MarineMax, Inc.
|
|
11.5x
|
|
13.3x
|
|
16.1x
|
Sporting Goods Retailers
|
|
|
|
|
|
|
Big 5 Sporting Goods Corp.
|
|
5.1x
|
|
7.2x
|
|
10.8x
|
Dick
’
s
Sporting Goods, Inc.
|
|
5.0x
|
|
6.9x
|
|
10.9x
|
Hibbett Sports, Inc.
|
|
3.5x
|
|
4.4x
|
|
7.0x
|
Sportsman
’
s
Warehouse Holdings, Inc.
|
|
5.8x
|
|
7.9x
|
|
8.8x
|
Small Cap Specialty Retail
|
|
|
|
|
|
|
Abercrombie & Fitch Co.
|
|
4.1x
|
|
NM
|
|
NM
|
Ascena Retail Group, Inc.
|
|
3.5x
|
|
12.4x
|
|
17.3x
|
The Buckle, Inc.
|
|
3.8x
|
|
4.8x
|
|
7.1x
|
Express, Inc.
|
|
2.7x
|
|
6.7x
|
|
11.7x
|
The Finish Line, Inc.
|
|
4.0x
|
|
6.8x
|
|
10.6x
|
Francesca
’
s
Holdings Corp.
|
|
4.3x
|
|
5.7x
|
|
9.0x
|
Genesco Inc.
|
|
4.1x
|
|
6.7x
|
|
8.6x
|
Guess?, Inc.
|
|
6.4x
|
|
14.1x
|
|
22.7x
|
Shoe Carnival, Inc.
|
|
5.9x
|
|
9.5x
|
|
13.9x
|
Tailored Brands, Inc.
|
|
6.1x
|
|
9.2x
|
|
5.9x
|
Tilly
’
s,
Inc.
|
|
4.1x
|
|
8.0x
|
|
12.9x
|
Vera Bradley, Inc.
|
|
5.4x
|
|
9.6x
|
|
14.4x
|
Zumiez Inc.
|
|
3.6x
|
|
6.3x
|
|
9.9x
|
|
|
|
|
|
|
|
Statistical Recap –
Sporting Goods
|
|
|
|
|
|
|
75th Percentile
|
|
5.6x
|
|
7.7x
|
|
10.8x
|
Mean
|
|
4.8x
|
|
6.6x
|
|
9.4x
|
Median
|
|
5.1x
|
|
7.1x
|
|
9.8x
|
25th Percentile
|
|
3.9x
|
|
5.0x
|
|
7.5x
|
|
|
|
|
|
|
|
Statistical Recap –
Small Cap Specialty Retail
|
|
|
|
|
|
|
75th Percentile
|
|
5.6x
|
|
9.6x
|
|
14.3x
|
Mean
|
|
4.5x
|
|
8.3x
|
|
12.0x
|
Median
|
|
4.1x
|
|
7.4x
|
|
11.2x
|
25th Percentile
|
|
3.7x
|
|
6.4x
|
|
8.7x
|
In performing its selected
publicly traded companies analysis:
|
·
|
Guggenheim selected
(i) a trading enterprise value/2017E EBITDA multiple reference range of 3.7x-5.6x, which
resulted in a reference range of $9.54 to $12.51 per share of our common stock, (ii)
a trading enterprise value/2017E EBIT multiple reference range of 5.0x-9.6x, which resulted
in a reference range of $6.84 to $9.72 per share of our common stock and (iii) a trading
2017E cash-adjusted P/E multiple reference range of 7.5x-14.3x, which resulted in a reference
range of $6.54 to $9.10 per share of our common stock, in each case, for purposes of
evaluating our common stock on a stand-alone public market trading basis.
|
|
·
|
Guggenheim noted
that the Merger Consideration of $12.97 was above the high end of the foregoing public
market trading reference range based on the selected publicly traded companies analysis.
|
Selected Precedent Merger and Acquisition Transaction Analysis.
Guggenheim reviewed and analyzed certain
financial metrics associated with precedent merger and acquisition transactions announced since 2013 involving a U.S.-target company
in the specialty retail sector with target values over $250 million. The following twelve precedent merger and acquisition transactions
were selected by Guggenheim for purposes of this analysis:
Selected Precedent Merger and Acquisition
(M&A) Transactions
Date
Announced
|
|
Acquirer
|
|
Target
|
10/03/2016
|
|
Bass Pro Group, LLC
|
|
Cabela’s Inc.
|
08/07/2016
|
|
Steinhoff International Holdings N.V.
|
|
Mattress Firm Holding Corp.
|
12/20/2016
|
|
Orchestra-Premaman S.A.
|
|
Destination Maternity Corp.
|
11/23/2015
|
|
CVC Capital Partners Limited & Canada Pension Plan Investment Board
|
|
PETCO Animal Supplies, Inc.
|
05/18/2015
|
|
Ascena Retail Group, Inc.
|
|
ANN Inc.
|
02/04/2015
|
|
Staples, Inc.
|
|
Office Depot, Inc.
|
12/14/2014
|
|
BC Partners, Inc.
|
|
PetSmart, Inc.
|
12/19/2013
|
|
Sycamore Partners, L.P.
|
|
The Jones Group Inc.
|
11/26/2013
|
|
The Men’s Wearhouse, Inc.
|
|
Jos. A. Bank Clothiers, Inc.
|
05/23/2013
|
|
Apax Partners, L.P.
|
|
rue21, Inc.
|
05/10/2013
|
|
TowerBrook Capital Partners L.P.
|
|
True Religion Apparel, Inc.
|
03/07/2013
|
|
Sycamore Partners Management, L.L.C.
|
|
Hot Topic, Inc.
|
Guggenheim calculated, among other things
and to the extent publicly available, certain implied change-of-control transaction multiples for the selected precedent merger
and acquisition transactions (based on Wall Street equity research consensus estimates, each company’s most recent publicly
available financial filings and certain other publicly available information), which are summarized in the table below:
Selected Precedent M&A Transaction
Multiples
Precedent M&A Transactions
|
|
Enterprise
Value/CY
(EBITDA
–
CapEx)
|
|
Enterprise Value
/CY EBIT
|
|
CY
Cash-Adjusted
P/E
|
Cabela’s Inc.
|
|
15.9x
|
|
15.1x
|
|
18.3x
|
Mattress Firm Holding Corp.
|
|
15.2x
|
|
15.9x
|
|
27.8x
|
Destination Maternity Corp.
|
|
NA
|
|
NA
|
|
NA
|
PETCO Animal Supplies, Inc.
|
|
NA
|
|
NA
|
|
NA
|
ANN Inc.
|
|
10.7x
|
|
13.6x
|
|
22.8x
|
Office Depot, Inc.
|
|
11.7x
|
|
14.4x
|
|
24.4x
|
PetSmart, Inc.
|
|
10.7x
|
|
10.8x
|
|
18.8x
|
The Jones Group Inc.
|
|
8.1x
|
|
9.6x
|
|
14.5x
|
Jos. A. Bank Clothiers, Inc.
|
|
NA
|
|
9.3x
|
|
16.4x
|
rue21, Inc.
|
|
16.5x
|
|
13.1x
|
|
21.0x
|
True Religion Apparel, Inc.
|
|
7.7x
|
|
7.5x
|
|
12.8x
|
Hot Topic, Inc.
|
|
18.1x
|
|
13.0x
|
|
23.7x
|
|
|
|
|
|
|
|
Statistical Recap
|
|
|
|
|
|
|
75th Percentile
|
|
16.2x
|
|
14.6x
|
|
23.9x
|
Mean
|
|
12.7x
|
|
12.2x
|
|
20.0x
|
Median
|
|
11.7x
|
|
13.0x
|
|
19.9x
|
25th Percentile
|
|
9.4x
|
|
9.6x
|
|
15.9x
|
|
|
|
|
|
|
|
Parent/West Marine Merger
|
|
11.7x
|
|
14.9x
|
|
23.7x
|
In performing its selected precedent
merger and acquisition transactions analysis:
|
·
|
Guggenheim selected
a reference range of transaction multiples for purposes of evaluating West Marine on
a change-of-control basis as follows: (i) transaction enterprise value/CY (EBITDA –
CapEx) multiple range of 9.4x-16.2x, which resulted in a reference range of $11.18 to
$16.49 per share for purposes of evaluating our common stock on a change-of-control basis;
(ii) transaction enterprise value/CY EBIT multiple range of 9.6x-14.6x, which resulted
in a reference range of $9.72 to $12.81 per share for purposes of evaluating our common
stock on a change-of-control basis; and (iii) transaction CY cash-adjusted P/E multiple
range of 15.9x-23.9x, which resulted in a reference range of $9.70 to $12.68 per share
for purposes of evaluating our common stock on a change-of-control basis.
|
|
·
|
Guggenheim noted
that the Merger Consideration of $12.97 was above the foregoing change-of-control transaction
reference ranges based on transaction enterprise value/CY EBIT multiples and transaction
CY cash-adjusted P/E multiples and was in line with reference range based on transaction
enterprise value/CY (EBITDA – CapEx) multiples.
|
Discounted Cash Flow Analyses.
Guggenheim performed illustrative stand-alone
discounted cash flow analyses of the Company based on management’s projected unlevered free cash flows for the Company (treating
the impact of stock-based compensation as a cash expense) and an estimate of its terminal/continuing value at the end of the projection
horizon. In performing its illustrative discounted cash flow analyses:
|
·
|
Guggenheim based
its discounted cash flow analyses on the Projections as provided by the Company’s
senior management.
|
|
·
|
Guggenheim estimated
the Company’s weighted average cost of capital to be within a range of 11.25%-14.25%
based on, among other factors, (i) Guggenheim’s then-current estimate of the prospective
U.S. equity risk premium range of 5.5%-6.5%, (ii) a review of the Company’s historical
five-year adjusted beta as reported by Bloomberg, its historical two-year adjusted beta
as reported by Bloomberg and its Barra predicted beta as well as similar beta information
for the Company’s selected peer group companies, resulting in an estimated levered
beta range of 1.000-1.350, (iii) the prevailing interpolated yield on the 20-year U.S.
Treasury bond of 2.60% as of June 28, 2017 as a proxy for the risk-free rate of return,
(iv) a size/liquidity premium of 3.10% applicable to companies of a comparable size to
the Company as reported by Duff and Phelps 2017 Valuation Handbook, (v) the Company’s
target capital structure on a prospective basis which was assumed not to include any
debt and (vi) Guggenheim’s investment banking and capital markets judgment and
experience in valuing companies similar to the Company.
|
|
·
|
Guggenheim applied
the mid-year convention when discounting future cash flows.
|
|
·
|
In calculating
the Company’s terminal/continuing value for purposes of its discounted cash flow
analyses, Guggenheim used an illustrative range of perpetuity growth rates of the Company’s
terminal year normalized unlevered free cash flow of (2.0%)-0.0%.
|
|
·
|
Guggenheim illustrative
discounted cash flow analyses resulted in an overall reference range of implied values
of $11.72 to $14.88 per share of our common stock for purposes of evaluating our common
stock on a stand-alone intrinsic-value basis.
|
|
·
|
Guggenheim noted
that the Merger Consideration of $12.97 per share of our common stock was in line with
the aforementioned reference range based on the illustrative discounted cash flow analyses.
|
Other Financial Reviews and Analyses for Informational Reference
Purposes
In order to provide certain context for
the financial analyses in connection with its opinion as described above, Guggenheim undertook various additional financial reviews
and analyses as summarized below for informational reference purposes. As a general matter, Guggenheim did not consider such additional
financial reviews and analyses to be determinative methodologies for purposes of its opinion.
Discounted Cash Flow Sensitivity Analysis.
Guggenheim repeated the discounted cash
flow analyses described above after sensitizing certain of the Company’s EBITDA margins and the Company’s average
comparable sales during the Projections period. These variables were selected, in consultation with the Company’s management
and the Board, because of the potential volatility in operating performance in the current retail environment. The sensitized
discounted cash flow analyses applied the same WACC and perpetuity growth rates as the illustrative discounted cash flow analyses
described above. Guggenheim illustrative discounted cash flow sensitivity analyses resulted in an overall reference range of implied
values of $7.65 to $14.88 per share of our common stock.
The results of the illustrative discounted
cash flow sensitivity analysis based on variations in the Company’s EBITDA margin and average comparable sales are summarized
in the tables below:
WACC: 14.25%; Perpetuity
Growth Rate: (2.0%)
|
|
|
|
|
|
|
|
|
Average Comparable Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Plan
|
|
|
|
2021E
EBITDA
Margin
at Base
Case
Revenue
|
|
|
Change
in
EBITDA
Margin
from
2016
|
|
|
(1.0%)
|
|
|
1.0%
|
|
|
2.2%
|
|
Base Case
|
|
|
4.8
|
%
|
|
|
0.00
|
%
|
|
$
|
7.65
|
|
|
$
|
7.82
|
|
|
$
|
7.92
|
|
Best Case (‘07 - ‘16)
|
|
|
5.9
|
%
|
|
|
1.1
|
%
|
|
|
8.58
|
|
|
|
8.86
|
|
|
|
9.03
|
|
Management Plan
|
|
|
8.4
|
%
|
|
|
3.6
|
%
|
|
|
10.87
|
|
|
|
11.40
|
|
|
|
11.72
|
|
WACC: 12.75%; Perpetuity
Growth Rate: (1.0%)
|
|
|
|
|
|
|
|
|
Average Comparable Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Plan
|
|
|
|
2021E
EBITDA
Margin
at Base
Case
Revenue
|
|
|
Change
in
EBITDA
Margin
from
2016
|
|
|
(1.0%)
|
|
|
1.0%
|
|
|
2.2%
|
|
Base Case
|
|
|
4.8
|
%
|
|
|
0.00
|
%
|
|
$
|
8.13
|
|
|
$
|
8.40
|
|
|
$
|
8.55
|
|
Best Case (‘07 - ‘16)
|
|
|
5.9
|
%
|
|
|
1.1
|
%
|
|
|
9.24
|
|
|
|
9.63
|
|
|
|
9.86
|
|
Management Plan
|
|
|
8.4
|
%
|
|
|
3.6
|
%
|
|
|
11.93
|
|
|
|
12.61
|
|
|
|
13.02
|
|
WACC: 11.25%; Perpetuity
Growth Rate: 0.0%
|
|
|
|
|
|
|
|
|
Average Comparable Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Plan
|
|
|
|
2021E
EBITDA
Margin
at Base
Case
Revenue
|
|
|
Change
in
EBITDA
Margin
from
2016
|
|
|
(1.0%)
|
|
|
1.0%
|
|
|
2.2%
|
|
Base Case
|
|
|
4.8
|
%
|
|
|
0.00
|
%
|
|
$
|
8.82
|
|
|
$
|
9.21
|
|
|
$
|
9.45
|
|
Best Case (‘07 - ‘16)
|
|
|
5.9
|
%
|
|
|
1.1
|
%
|
|
|
10.17
|
|
|
|
10.72
|
|
|
|
11.05
|
|
Management Plan
|
|
|
8.4
|
%
|
|
|
3.6
|
%
|
|
|
13.42
|
|
|
|
14.33
|
|
|
|
14.88
|
|
|
·
|
Guggenheim noted
that the Merger Consideration of $12.97 per share of our common stock was in line with
the aforementioned reference range based on the illustrative discounted cash flow sensitivity
analyses presented above.
|
Leveraged Buyout Analysis.
Guggenheim performed an illustrative
analysis of the implied price per share of our common stock that could theoretically be paid by a financial sponsor, assuming
a June 30, 2017 starting balance sheet and that such sponsor required a 4.5-year internal rate of return ranging from 20%-25%.
Guggenheim performed the illustrative leveraged buyout analysis assuming (i) the transaction was completed with $124 million of
total debt (implying initial leverage ratios of approximately 3.1x EBITDA and 4.1x EBITDAR, which levels were consistent with
the size of the equity guarantee provided by Monomoy (ii) the Company achieved the management projections during the 4.5-year
projection period and (iii) the financial sponsor exited its investment at the end of the 4.5-year projection period for an enterprise
value/EBITDA multiple ranging from 3.5x-5.5x.
|
·
|
Based on these
assumptions, the leveraged buyout analysis implied a reference range of values of $11.69
to $14.50 per share of our common stock.
|
|
·
|
Guggenheim noted
that the Merger Consideration of $12.97 was in line with this reference range of values.
|
West Marine’s Stock Price Trading History.
Guggenheim reviewed the Company’s
stock price trading history over a fifty-two week timeframe ended June 28, 2017 and noted, among other things, that shares of
our common stock never traded above the Merger Consideration of $12.97 during such timeframe and were bound between $7.77 and
$11.72 during such timeframe.
Premia Paid Analysis.
Guggenheim reviewed the premia paid in
transactions in which U.S. retail targets (excluding auto retailers and gas stations) were acquired in transactions announced
after June 21, 2004 with transaction values ranging between $200 million and $1 billion, as summarized in the following table:
Premia Paid Analysis: Selected Retail
M&A Transactions Announced Since June 21, 2004
Date
|
|
|
|
|
|
Cash-Adjusted Premium (%)
|
|
Announced
|
|
Acquiror
|
|
Target
|
|
1-Day
|
|
|
1-Week
|
|
|
1-Month
|
|
|
3-Month
|
|
11/07/2016
|
|
Bain Capital Private Equity
|
|
Blue Nile, Inc.
|
|
|
38
|
%
|
|
|
18
|
%
|
|
|
17
|
%
|
|
|
40
|
%
|
11/11/2015
|
|
The Kroger Co.
|
|
Roundy’s, Inc.
|
|
|
65
|
%
|
|
|
60
|
%
|
|
|
31
|
%
|
|
|
46
|
%
|
08/21/2015
|
|
Catterton Management Co., L.L.C.
|
|
Steiner Leisure Limited
|
|
|
15
|
%
|
|
|
11
|
%
|
|
|
18
|
%
|
|
|
32
|
%
|
12/05/2015
|
|
Sequential Brands Group, Inc.
|
|
Martha Stewart Living Omnimedia, Inc.
|
|
|
24
|
%
|
|
|
28
|
%
|
|
|
29
|
%
|
|
|
(5
|
)%
|
09/29/2014
|
|
JAB Holding Co.
|
|
Einstein Noah Restaurant Group, Inc.
|
|
|
51
|
%
|
|
|
52
|
%
|
|
|
42
|
%
|
|
|
28
|
%
|
07/02/2014
|
|
The Kroger Co.
|
|
Vitacost.com Inc.
|
|
|
32
|
%
|
|
|
31
|
%
|
|
|
27
|
%
|
|
|
14
|
%
|
12/20/2013
|
|
TPG Capital, L.P.
|
|
Telautograph Corp.
|
|
|
11
|
%
|
|
|
15
|
%
|
|
|
17
|
%
|
|
|
28
|
%
|
07/24/2013
|
|
Hanesbrands Inc.
|
|
Maidenform Brands, Inc.
|
|
|
23
|
%
|
|
|
26
|
%
|
|
|
36
|
%
|
|
|
30
|
%
|
07/22/2013
|
|
Spartan Stores, Inc.
|
|
Nash-Finch Co.
|
|
|
0
|
%
|
|
|
2
|
%
|
|
|
14
|
%
|
|
|
27
|
%
|
05/10/2013
|
|
TowerBrook Capital Partners L.P.
|
|
True Religion Apparel, Inc.
|
|
|
76
|
%
|
|
|
83
|
%
|
|
|
55
|
%
|
|
|
14
|
%
|
03/23/2013
|
|
Apax Partners, L.P.
|
|
rue21, Inc.
|
|
|
57
|
%
|
|
|
50
|
%
|
|
|
61
|
%
|
|
|
48
|
%
|
03/07/2013
|
|
Sycamore Partners
|
|
Hot Topic, Inc.
|
|
|
34
|
%
|
|
|
26
|
%
|
|
|
24
|
%
|
|
|
41
|
%
|
11/14/2012
|
|
Starbucks Corp.
|
|
Teavana Holdings, Inc.
|
|
|
53
|
%
|
|
|
48
|
%
|
|
|
23
|
%
|
|
|
36
|
%
|
09/26/2012
|
|
Investor Group
|
|
American Greetings Corp.
|
|
|
22
|
%
|
|
|
14
|
%
|
|
|
22
|
%
|
|
|
33
|
%
|
05/14/2012
|
|
Golf Town USA Holdings Inc.
|
|
Golfsmith International Holdings Inc.
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
38
|
%
|
|
|
38
|
%
|
05/09/2012
|
|
Bed Bath & Beyond Inc.
|
|
Cost Plus, Inc.
|
|
|
22
|
%
|
|
|
16
|
%
|
|
|
24
|
%
|
|
|
54
|
%
|
05/02/2012
|
|
Ascena Retail Group, Inc.
|
|
Charming Shoppes, Inc.
|
|
|
129
|
%
|
|
|
151
|
%
|
|
|
130
|
%
|
|
|
175
|
%
|
12/19/2011
|
|
Bi-Lo LLC
|
|
Winn-Dixie Stores, Inc.
|
|
|
76
|
%
|
|
|
84
|
%
|
|
|
52
|
%
|
|
|
37
|
%
|
06/13/2011
|
|
Honeywell International Inc.
|
|
EMS Technologies, Inc.
|
|
|
36
|
%
|
|
|
33
|
%
|
|
|
39
|
%
|
|
|
81
|
%
|
05/02/2011
|
|
PPR S.A.
|
|
Volcom, Inc.
|
|
|
30
|
%
|
|
|
40
|
%
|
|
|
41
|
%
|
|
|
63
|
%
|
08/24/2009
|
|
Advent International Corp.
|
|
Charlotte Russe Holding, Inc.
|
|
|
34
|
%
|
|
|
36
|
%
|
|
|
30
|
%
|
|
|
102
|
%
|
06/25/2009
|
|
Ascena Retail Group, Inc.
|
|
Tween Brands, Inc.
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
45
|
%
|
|
|
177
|
%
|
11/13/2006
|
|
Dick’s Sporting Goods Inc.
|
|
Golf Galaxy, Inc.
|
|
|
20
|
%
|
|
|
22
|
%
|
|
|
44
|
%
|
|
|
72
|
%
|
06/21/2004
|
|
Dick’s Sporting Goods Inc.
|
|
Gaylan’s Trading Company, Inc.
|
|
|
53
|
%
|
|
|
52
|
%
|
|
|
87
|
%
|
|
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistical Recap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
th
Percentile
|
|
|
22
|
%
|
|
|
19
|
%
|
|
|
23
|
%
|
|
|
28
|
%
|
|
|
|
|
Median
|
|
|
33
|
%
|
|
|
30
|
%
|
|
|
34
|
%
|
|
|
39
|
%
|
|
|
|
|
75
th
Percentile
|
|
|
53
|
%
|
|
|
51
|
%
|
|
|
45
|
%
|
|
|
61
|
%
|
|
·
|
Guggenheim’s
analysis of premia paid resulted in a reference range of $10.99 to $12.83 per share of
our common stock for purposes of evaluating our common stock on a change-in-control basis.
|
|
·
|
Guggenheim noted
the Merger Consideration of $12.97 implied a 54.9% cash-adjusted premium to the Company’s
unaffected stock price of $9.70, the closing price on June 28, 2017, the day prior to
the announcement of the Merger, which was above the reference range of premia values.
|
Wall Street Equity Research Analyst Stock Price Targets.
Guggenheim reviewed selected Wall Street
equity research analyst stock price targets for the Company as published prior to June 28, 2017:
|
·
|
Guggenheim noted
that such Wall Street equity research analyst stock price targets for shares of our common
stock ranged from $11.00 to $12.00 per share. For comparison purposes, Guggenheim noted
that the Merger Consideration of $12.97 per share was above the foregoing equity research
price target range for the Company.
|
|
·
|
Guggenheim noted
that the public market trading price targets published by Wall Street equity research
analysts do not necessarily reflect current market trading prices for shares of our common
stock, and such estimates are subject to various uncertainties, including the Company’s
future financial performance and future capital markets conditions.
|
Other Considerations
Except as described in the summary above,
the Company did not provide specific instructions to, or place any limitations on, Guggenheim with respect to the procedures to
be followed or factors to be considered in performing its financial analyses or providing its opinion. The type and amount of
consideration payable in the Merger were determined through negotiations between the Company and Monomoy and were approved by
the Board. The decision to enter into the Merger Agreement was solely that of the Board. Guggenheim’s opinion was just one
of the many factors taken into consideration by the Board. Consequently, Guggenheim’s financial analyses should not be viewed
as determinative of the decision of the Board with respect to the fairness, from a financial point of view, of the Merger Consideration
to holders of shares of our common stock (excluding the Company or any of its wholly owned subsidiaries or Parent or any of its
wholly owned subsidiaries).
Pursuant to the terms of Guggenheim’s
engagement letter, the Company has agreed to pay Guggenheim a cash transaction fee (based on a percentage of the aggregate consideration
involved in the Merger) contingent upon consummation of the Merger, which cash transaction fee is estimated to be approximately
$5.9 million. In connection with Guggenheim engagement, a cash milestone fee of $1.0 million became payable upon delivery of Guggenheim’s
opinion, which will be credited against the foregoing cash transaction fee. In addition, the Company has agreed to reimburse Guggenheim
for certain expenses and to indemnify Guggenheim against certain liabilities arising out of its engagement.
As previously disclosed to the Board,
aside from Guggenheim’s current engagement by the Company, Guggenheim has not been previously engaged during the past two
years by the Company, nor has Guggenheim been previously engaged during the past two years by Monomoy, to provide financial advisory
or investment banking services for which Guggenheim received fees. Guggenheim may seek to provide the Company, Monomoy, and their
respective affiliates with certain financial advisory and investment banking services unrelated to the Merger in the future, for
which services Guggenheim would expect to receive compensation.
Guggenheim and its affiliates and related
entities engage in a wide range of financial services activities for its and their own accounts and the accounts of Guggenheim
and its customers, including: asset, investment and wealth management; insurance services; investment banking, corporate finance,
mergers and acquisitions and restructuring; merchant banking; fixed income and equity sales, trading and research; and derivatives,
foreign exchange and futures. In the ordinary course of these activities, Guggenheim or its affiliates and related entities may
(i) provide such financial services to the Company, Monomoy, other participants in the Merger or their respective affiliates,
subsidiaries, investment funds and portfolio companies, for which services Guggenheim or its affiliates and related entities has
received, and may receive, compensation and (ii) directly or indirectly, hold long or short positions, trade and otherwise conduct
such activities in or with respect to certain bank debt, debt or equity securities and derivative products of or relating to the
Company, Monomoy, other participants in the Merger or their respective affiliates, subsidiaries, investment funds and portfolio
companies. Furthermore, Guggenheim or its affiliates and related entities and Guggenheim’s or its affiliates’ respective
directors, officers, employees, consultants and agents may have investments in the Company, Monomoy, other participants in the
Merger or their respective affiliates, subsidiaries, investment funds and portfolio companies.
Consistent with applicable legal and
regulatory guidelines, Guggenheim has adopted certain policies and procedures to establish and maintain the independence of its
research departments and personnel. As a result, Guggenheim’s research analysts may hold views, make statements or investment
recommendations and publish research reports with respect to the Company, Monomoy, other participants in the Merger or their respective
affiliates, subsidiaries, investment funds and portfolio companies and the Merger that differ from the views of Guggenheim’s
investment banking personnel.
Forward-Looking Financial Information
Given the unpredictability of the underlying
assumptions and estimates inherent in preparing financial projections, the Company does not as a matter of general practice publicly
disclose detailed projections as to its anticipated financial position or results of operations, other than providing, from time
to time, estimated ranges for the then-current fiscal year of certain expected financial results in its regular earnings press
releases and other investor materials.
In connection with the Company’s
evaluation of a possible transaction and other strategic alternatives, the Company’s management prepared certain forward-looking
financial information with respect to fiscal years 2017 through 2021 (the “financial projections”), which is summarized
below, and provided such information to the Board, the Strategic Committee and Guggenheim. The financial projections were made
available in the virtual data room to Monomoy and other potential buyers in connection with their due diligence investigation
and evaluation of a possible transaction.
The financial projections were prepared
assuming the Company’s continued operation on a standalone basis without any sale of or partnership with respect to the
financial services business.
None of the
financial projections were intended for public disclosure. A summary of the financial projections is included in this proxy statement
only because the financial projections or certain portions thereof were made available to the Board, the Strategic Committee,
Guggenheim, Monomoy and other potential buyers, as applicable. The inclusion of the financial projections in this proxy statement
does not constitute an admission or representation by the Company that the financial projections or the information contained
therein is material.
The financial
projections are unaudited and were not prepared with a view toward public disclosure or compliance with the guidelines established
by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information
or generally accepted accounting principles as applied in the U.S. (“GAAP”) or the published guidelines of the SEC
regarding projections and the use of non-GAAP financial measures. Neither the Company’s independent registered public accounting
firm nor any other independent accountant has compiled, examined or performed any procedures with respect to the financial projections
or expressed any opinion or any other form of assurance on the financial projections or their achievability. The Company’s
independent registered public accounting firm assumes no responsibility for, and disclaims any association with, the financial
projections.
In the view of the Company’s management,
the financial projections were prepared on a reasonable basis reflecting management’s best available estimates and judgments
regarding the Company’s future financial performance at the time of their preparation. The financial projections are not
facts and should not be relied upon as necessarily predictive of actual future results. You are cautioned not to place undue reliance
upon the financial projections. Some or all of the assumptions that have been made in connection with the preparation of the financial
projections may have changed since the date the financial projections were prepared. None of the Company, Monomoy or any of their
respective affiliates, advisors or other representatives assumes any responsibility for the validity, reasonableness, accuracy
or completeness of the financial projections or the ultimate performance of the Company relative to the financial projections.
Except as required by applicable law, neither the Company nor any of its affiliates intends to, and each of them disclaims any
obligation to, update, correct or otherwise revise the financial projections if any or all of them have changed or change or otherwise
have become, are or become inaccurate (even in the short term). These considerations should be taken into account if evaluating
the financial projections, which were prepared as of an earlier date.
The financial projections do not necessarily
reflect changes in general business or economic conditions since the time they were prepared, changes in the Company’s businesses
or their prospects or any other transactions or events that have occurred or that may occur and that were not anticipated at the
time the financial projections were prepared, and the financial projections are not necessarily indicative of current values or
necessarily predictive of future performance, which may be significantly more favorable or less favorable than as set forth therein
and should not be regarded as a representation that the financial forecasts, projected results or other estimates and assumptions
therein will be achieved.
Because the financial projections reflect
subjective judgment in many respects, they are susceptible to multiple interpretations and frequent revisions based on actual
experience and business developments. The financial projections also cover multiple fiscal years, and such information by its
nature becomes less predictive with each succeeding fiscal year. The financial projections constitute forward-looking information
and are subject to a wide variety of significant risks and uncertainties that could cause the actual results to differ materially
from the projected results, including, without limitation, the factors described in the section entitled “Risk Factors”
in the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2016, filed with the SEC on February 28,
2017, and in the Company’s other public filings with the SEC. For additional information on factors that may cause the Company’s
future financial results to materially vary from the projected results summarized below, see the section captioned “
Forward-Looking
Statements
” on page 19. Accordingly, there can be no assurance that the projected results summarized below will be
realized or that actual results will not differ materially from the projected results summarized below, and the financial projections
cannot be considered a guarantee of future operating results and should not be relied upon as such. No representation is made
by the Company or any of its affiliates, advisors or other representatives or any other person to any Company stockholder or any
other person regarding the actual performance of the Company compared to the results included in the financial projections or
otherwise.
The financial projections should be evaluated,
if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the
Company’s public filings with the SEC. For a more detailed description of the information available, see the section captioned
“
Where You Can Find More Information
” on page 19. The financial projections do not take into account any circumstances
or events occurring after the date they were prepared, including the effect of the Merger and related matters. Further, the financial
projections do not take into account the effect of any failure of the Merger to be consummated and should not be viewed in any
manner in that context.
The financial projections reflect various
estimates, assumptions and methodologies of the Company, all of which are difficult to predict and many of which are beyond the
Company’s control, including, among other things, assumptions with respect to industry performance, general business, economic,
regulatory, litigation, market and financial conditions and matters specific to the Company’s businesses. Such assumptions
include, but are not limited to, the following:
|
·
|
the Company’s
continued operation on a standalone basis;
|
|
·
|
a modest increase
in average comparable store sales at each store level for waterlife stores and waterlife-select
stores, and a slight decrease in average comparable store sales at each store level for
traditional stores, during the five-year period;
|
|
·
|
expansion into
greenfield locations with new generic waterlife and waterlife-select stores;
|
|
·
|
market consolidation,
converting traditional stores into new waterlife stores;
|
|
·
|
revitalization
of waterlife and waterlife-select stores;
|
|
·
|
no material
increase in selling space;
|
|
·
|
a steady increase
in online traffic annually due to initiatives, including content development;
|
|
·
|
modest improvement
in conversion rates;
|
|
·
|
moderate growth
of professional sales within stores and declining hub revenue (i.e., fulfilling orders
for professional customers with van delivery in certain markets) through fiscal year
2019 before stabilizing;
|
|
·
|
evolution of
product mix to reflect growth and improved profitability offset by mix shift to lower
margin channels;
|
|
·
|
growth of private
label to be a driver of improved margin;
|
|
·
|
improved online
profitability due to decreased discounting and increased efficiencies;
|
|
·
|
distribution
center expenses projected to be slightly downwards despite annual growth in retail direct-to-customer
revenue;
|
|
·
|
modest increase
in inventory turns, driven primarily by increasing merchandise expansion turn;
|
|
·
|
net working
capital expected to decrease despite top-line growth;
|
|
·
|
retail capital
expenditure reflects continued retail transformation described above;
|
|
·
|
capital expenditure
for information technology and eCommerce improvements; and
|
|
·
|
average tax
rate consistent with the Company’s current average tax rate.
|
In addition, certain of the financial
projections are non-GAAP financial measures, including EBITDA net income and unlevered cash flow. Non-GAAP financial measures
should not be considered in isolated form or as a substitute for financial information presented in compliance with GAAP, and
non-GAAP financial measures as used by the Company may not be comparable to similarly titled financial measures used by other
companies.
Financial Projections
The
following table summarizes the
financial projections:
Financial Projections
(U.S. dollars in millions, except per share amounts)
|
|
|
Fiscal Years
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
Net Revenue
|
|
$
|
714.9
|
|
|
$
|
734.2
|
|
|
$
|
772.9
|
|
|
$
|
806.1
|
|
|
$
|
839.8
|
|
% Growth
|
|
|
2.0
|
%
|
|
|
2.7
|
%
|
|
|
5.3
|
%
|
|
|
4.3
|
%
|
|
|
4.2
|
%
|
EBITDA
(1)
|
|
$
|
40.9
|
|
|
$
|
47.1
|
|
|
$
|
57.4
|
|
|
$
|
61.3
|
|
|
$
|
70.7
|
|
% Margin
|
|
|
5.7
|
%
|
|
|
6.4
|
%
|
|
|
7.4
|
%
|
|
|
7.6
|
%
|
|
|
8.4
|
%
|
EBIT
|
|
$
|
16.2
|
|
|
$
|
21.4
|
|
|
$
|
34.9
|
|
|
$
|
39.9
|
|
|
$
|
52.8
|
|
% Margin
|
|
|
2.3
|
%
|
|
|
2.9
|
%
|
|
|
4.5
|
%
|
|
|
4.9
|
%
|
|
|
6.3
|
%
|
Net Income Per Diluted Share
|
|
$
|
0.39
|
|
|
$
|
0.52
|
|
|
$
|
0.84
|
|
|
$
|
0.97
|
|
|
$
|
1.28
|
|
% Growth
|
|
|
47.6
|
%
|
|
|
32.4
|
%
|
|
|
63.5
|
%
|
|
|
14.5
|
%
|
|
|
32.7
|
%
|
Unlevered Free Cash Flow
|
|
$
|
21
|
|
|
$
|
24
|
|
|
$
|
32
|
|
|
$
|
37
|
|
|
$
|
39
|
|
|
(1)
|
Represents
earnings before interest, taxes, depreciation and amortization.
|
NEITHER THE COMPANY NOR ANY OF ITS
AFFILIATES INTENDS TO, AND EACH OF THEM DISCLAIMS ANY OBLIGATION TO, UPDATE, CORRECT OR OTHERWISE REVISE THE FINANCIAL PROJECTIONS
TO REFLECT CIRCUMSTANCES EXISTING OR EVENTS OCCURRING AFTER THE RESPECTIVE DATES WHEN THE FINANCIAL PROJECTIONS WERE PREPARED
OR TO REFLECT THE EXISTENCE OF FUTURE CIRCUMSTANCES OR THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE
ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE INACCURATE OR NO LONGER APPROPRIATE.
Financing
General
.
Parent estimates that the total amount of funds required to consummate the merger and related transactions and pay related fees
and expenses will be approximately $354 million. Parent expects this amount to be funded through a combination of the following:
|
·
|
debt financing
in an aggregate principal amount of $250 million, consisting of (i) a $225 million
senior secured first-lien credit facility of which $200 million is an asset-based revolving
line of credit and $25 million is a first-in last-out asset-based term loan, and (ii)
a $25 million second lien asset-based term loan ((i) and (ii) together, the “Debt
Financing”); and
|
|
·
|
cash equity
investments by Monomoy in an aggregate amount of up to $130 million.
|
Equity Financing.
On
June 29, 2017, Monomoy entered into an equity commitment letter (the “Equity Commitment Letter”) with Parent pursuant
to which Monomoy committed to contribute (or cause to be contributed) to Parent up to $130 million in cash in the aggregate
(the “Equity Financing”). The Equity Commitment of Monomoy is subject to the following conditions:
|
·
|
the conditions
to closing in the Merger Agreement have been satisfied or waived; and
|
|
·
|
the Debt Financing
has been funded or will be funded if and when the Equity Commitment is funded.
|
The obligation
of Monomoy to fund the Equity Commitment will automatically and immediately terminate upon the earliest to occur of: (i) the
consummation of the Merger; (ii) the termination of the Merger Agreement; or (iii) if neither of the foregoing have
occurred, 60 days after the Outside Date, unless the Company has made a claim to enforce the commitment of Monomoy in which case
the Equity Commitment continues until the claim is resolved or the parties otherwise agree.
The Company
is an express third-party beneficiary of the Equity Commitment Letter and has the right to seek specific performance of the obligations
of Monomoy under the Equity Commitment Letter under certain circumstances.
Debt Financing.
In
connection with the entry into the Merger Agreement, (i) Bank of America, N.A. (“BAML”) provided commitments to Parent
under a commitment letter dated June 27, 2017 (the “BAML Debt Commitment Letter”), which provides for a commitment
to fund up to the $225 million senior-secured portion of the Debt Financing (the “BAML Debt Commitment”) subject to
terms and express conditions, and (ii) Pathlight Capital LLC (“Pathlight”) provided its commitment to Parent under
a commitment letter dated June 27, 2017 (the “Pathlight Debt Commitment Letter”), which provides for a commitment
to fund the $25 million second-lien term loan of the Debt Financing in the form subject to terms and express conditions. Under
the BAML Debt Commitment Letter and the Pathlight Debt Commitment Letter, BAML and Pathlight have committed to provide an aggregate
principal amount of $250 million in asset-based debt financing, consisting of a $200 million senior secured first lien revolving
line of credit, a $25 million senior secured first-in last-out term loan facility and a $25 million second lien term loan
facility. Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) will act as lead arranger to form
a syndicate of financial institutions and institutional investors (with BAML, the “Lenders”) to fund the BAML Debt
Commitment, however, the formation of such a syndicate is not a condition to the BAML Debt Commitment.
The obligations
of the Lenders to provide the debt financing under the BAML Debt Commitment Letter and of Pathlight to provide the debt financing
under the Pathlight Debt Commitment Letter are subject to customary conditions, including, without limitation, the following (subject
to certain exceptions and qualifications as set forth in the BAML Debt Commitment Letter and the Pathlight Debt Commitment Letter):
|
·
|
the substantially
simultaneous closing of the Merger in accordance in all material respects with the Merger
Agreement;
|
|
·
|
the substantially
simultaneous funding of the equity financing;
|
|
·
|
the repayment
and termination of the Company’s existing senior secured credit facility;
|
|
·
|
the receipt
of certain specified financial statements of the Company and the borrower;
|
|
·
|
the execution
and delivery of definitive documentation with respect to the Debt Financing;
|
|
·
|
the absence
of a material adverse effect (as defined in the Merger Agreement and subject to certain
exceptions) on the Company since June 29, 2017;
|
|
·
|
the perfection
of the Lenders’ and Pathlight’s security interests in the collateral (subject
to certain exceptions);
|
|
·
|
the receipt
of a borrowing base certificate showing, as of the date of the Merger, excess availability
of a specified amount under the Debt Financing documentation, after giving effect to
the Merger and the payment of all related fees;
|
|
·
|
the accuracy
of certain specified representations and warranties in the Merger Agreement and in the
definitive documents with respect to the Debt Financing; and
|
|
·
|
the delivery
by the Company of documentation and other information reasonably requested by the Lenders
or Pathlight.
|
The commitment
of the Lenders under the BAML Debt Commitment Letter and the commitment of Pathlight under the Pathlight Debt Commitment Letter
expire upon the earliest of (i) the Outside Date, (ii) the consummation of the Merger without the use of the Debt Financing,
and (iii) the valid termination of the Merger Agreement.
Limited Guarantees
Concurrently
with the execution of the Merger Agreement, an affiliated fund of Monomoy has executed and delivered a limited guarantee in favor
of the Company (the “Limited Guarantee”), pursuant to which such fund has agreed, subject to the terms and conditions
of the Limited Guarantee, to guarantee the payment of Parent’s obligations to pay the Reverse Termination Fee (as described
in more detail under “
The Merger Agreement—Reverse Termination Fee and Other Remedies
”), and certain
reimbursement and indemnification obligations, which are referred to as the “Guaranteed Obligations.”
The Limited
Guarantee will terminate upon the earliest to occur of:
|
·
|
the closing
of the Merger;
|
|
·
|
the payment,
performance and/or satisfaction in full of the Guaranteed Obligations; and
|
|
·
|
the valid termination
of the Merger Agreement other than in a circumstance in which the Company is entitled
to payment of the Guaranteed Obligations, or the 30th day following any other purported
termination of the Merger Agreement unless the Company shall have commenced a suit, action
or other proceeding alleging that any Guaranteed Obligations are due and owing to the
Company.
|
In the event
that the Company, any shareholder or affiliate expressly asserts in any litigation or other legal proceeding relating to a Limited
Guarantee that certain provisions of the Limited Guarantee are illegal, invalid or unenforceable or that an affiliated fund of
Monomoy is liable in excess of the cap or other specified permitted claims, then (i) the obligations of such fund under such
Limited Guarantee will terminate, (ii) if such fund has previously made any payments under its Limited Guarantee, it will
be entitled to recover such payments from the Company and (iii) such fund will not have any liability to the Company with respect
to such Limited Guarantee.
Interests of the Company’s Directors and Executive
Officers in the Merger
When considering the recommendation of the
Board that you vote to approve 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, the interests of stockholders generally,
as more fully described below. In (i) evaluating and negotiating the Merger Agreement; (ii) approving the Merger Agreement and
the Merger; and (iii) recommending that the Merger Agreement adopted by stockholders, the Board and the Strategic Committee were
aware of and considered these interests to the extent that they existed at the time, among other matters.
Insurance and Indemnification of Directors and Executive
Officers
All rights to indemnification by the
Company or any of its subsidiaries in favor of present and former directors and officers of the Company or any of its subsidiaries
(the “indemnified parties”) set forth in the organizational documents of the Company or any of its subsidiaries as
in effect as of the date of the Merger Agreement will survive the Merger and will be observed by Parent and the Surviving Corporation
and its subsidiaries to the fullest extent permitted by applicable law. The Merger Agreement also provides that the indemnification
rights set forth in the indemnification agreements, the form of which was filed as an exhibit to the Company’s annual report
on Form 10-K for the fiscal year ended December 31, 2016, between the Company or any of its subsidiaries and any of the directors,
officers or employees thereof will be assumed by the Surviving Corporation and will continue in full force and effect in accordance
with their terms following the Effective Time.
If the Company fails to do so prior to
the Effective Time, Parent is obligated to cause the Surviving Corporation to obtain and fully pay the premium for an insurance
and indemnification policy that provides coverage for a period of six years from the Effective Time. If the Company and the Surviving
Corporation for any reason fail to obtain such a “tail” insurance policy as of the Effective Time, the Surviving Corporation
must, and Parent must cause the Surviving Corporation to, continue to maintain in effect for a period of six years from and after
the Effective Time (and for so long thereafter as any claims brought before the end of such six-year period thereunder are being
adjudicated) such insurance in place as of the date of the Merger Agreement with terms, conditions, retentions and limits of liability
that are at least as favorable as provided in the Company’s existing policies as of the date of the Merger Agreement. Alternatively,
the Surviving Corporation is obligated to, and Parent must cause the Surviving Corporation to, purchase comparable directors’
and officers’ liability insurance for such six-year period (and for so long thereafter as any claims brought before the
end of such six-year period thereunder are being adjudicated) with terms, conditions, retentions and limits of liability that
are at least as favorable as provided in the Company’s existing policies as of the date of the Merger Agreement.
For more information, see the section
captioned “
The Merger Agreement — Directors’ and Officers’ Indemnification and Insurance
.”
Treatment of Equity-Based Awards
Options
Immediately prior to the Effective
Time, each Option granted under the Company Equity Incentive Plan that is then outstanding, all of which are fully vested,
will be cancelled and, in exchange therefor, each holder of any such cancelled Option will be entitled to receive payment of
an amount in cash equal to the product of (i) the total number of shares of our common stock subject to such Option,
multiplied by (ii) the excess, if any, of (A) the Merger Consideration over (B) the exercise price per share subject to such
cancelled Option, without interest;
provided, however
, that (i) any such Option with respect to which the exercise
price per share subject thereto is greater than the Merger Consideration will be cancelled in exchange for no consideration
and (ii) such option payments may be reduced by the amount of any required tax withholdings as contemplated by the Merger
Agreement.
Employee RSUs
Immediately prior to the Effective Time,
each RSU granted under the Company Equity Incentive Plan that is then outstanding (other than those RSUs held by a non-employee
director of the Company) will be assumed by the Surviving Corporation and will be converted into a Cash Replacement Company RSU.
Such Cash Replacement Company RSUs will, subject to the holder’s continued employment with the Surviving Corporation through
the applicable vesting dates, vest and be payable at the same time as the RSUs for such Cash Replacement Company RSUs were exchanged
would have vested pursuant to their terms. All Cash Replacement Company RSUs will have the same terms and conditions as applied
to the RSUs for which they were exchanged, except for terms rendered inoperative by reason of the transactions contemplated by
the Merger Agreement or for administrative or ministerial changes that are not materially detrimental to the holders and that
are necessary for the administration of the Cash Replacement Company RSUs. With respect to PSUs, the number of PSUs assumed by
the Surviving Corporation and converted into Cash Replacement Company RSUs will be determined (A) for PSUs with a performance
period that by its terms has ended prior to the Effective Time, based on actual performance through the end of such performance
period, and (B) for PSUs with a performance period that by its terms has not ended prior to the Effective Time, assuming performance
at 100% of target levels.
Non-Employee Director RSUs
Immediately prior to the Effective Time,
each award of unvested RSUs granted under the Company Equity Incentive Plan, that is then outstanding and is held by a non-employee
director of the Company will be fully vested and cancelled and, in exchange therefor, each holder of any such cancelled RSUs will
be entitled to receive payment of an amount in cash equal to the product of (i) the Merger Consideration, multiplied by (ii) the
total number of shares of our common stock subject to such RSUs, without interest;
provided, however
, that any such RSU
payments may be reduced by the amount of any required tax withholdings as contemplated by the Merger Agreement.
Summary Table
The following table sets forth the number
of shares of our common stock underlying Options and RSUs currently held by each of the Company’s executive officers and
non-employee directors, and also the cash payments that each Company executive officer is expected to receive with respect to
his vested outstanding Options (and, in the case of RSUs granted to Company executive officers, the equity acceleration value
of such unvested outstanding awards upon a qualified termination in connection with a change in control) and that each Company
non-employee director is expected to receive with respect to his or her vested Options and unvested outstanding RSUs. The amounts
in the table are based on the equity awards held by our executive officers and directors as of July 14, 2017, the latest practicable
date to determine such amounts before the filing of this proxy statement, and the Merger Consideration of $12.97 per share. These
numbers do not forecast any grants, additional issuances, dividends, additional deferrals or forfeitures of equity-based awards
following the date of this proxy statement. Depending on when the closing date of the Merger occurs, certain equity-based awards
shown in the table may vest in accordance with their terms.
Name
|
|
Options (#)
|
|
|
Options ($)
|
|
|
RSUs (#)(3)
|
|
|
RSUs ($)(1)(3)
|
|
|
PSUs (#)(2)
|
|
|
PSUs ($)(1)
|
|
|
Total ($)(1)
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew L. Hyde
|
|
|
126,667
|
|
|
$
|
147,134
|
|
|
|
81,802
|
|
|
$
|
1,065,062
|
|
|
|
35,230
|
|
|
$
|
458,695
|
|
|
$
|
1,670,890
|
|
Jeffrey L. Lasher
|
|
|
—
|
|
|
|
—
|
|
|
|
41,410
|
|
|
$
|
539,158
|
|
|
|
14,325
|
|
|
$
|
186,512
|
|
|
$
|
725,670
|
|
Barry Kelley
|
|
|
30,833
|
|
|
$
|
70,766
|
|
|
|
30,410
|
|
|
$
|
395,938
|
|
|
|
13,062
|
|
|
$
|
170,067
|
|
|
$
|
636,772
|
|
Paul Rutenis
|
|
|
—
|
|
|
|
—
|
|
|
|
41,410
|
|
|
$
|
539,158
|
|
|
|
14,325
|
|
|
$
|
186,512
|
|
|
$
|
725,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barbara L. Rambo
|
|
|
—
|
|
|
|
—
|
|
|
|
6,493
|
|
|
$
|
84,492
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
84,492
|
|
Randolph K. Repass
|
|
|
10,123
|
|
|
$
|
40,290
|
|
|
|
6,493
|
|
|
$
|
84,353
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
124,643
|
|
Alice M. Richter
|
|
|
—
|
|
|
|
—
|
|
|
|
6,493
|
|
|
$
|
84,492
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
84,492
|
|
Dennis F. Madsen
|
|
|
6,691
|
|
|
$
|
9,255
|
|
|
|
6,493
|
|
|
$
|
84,492
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
93,748
|
|
Christiana Shi
|
|
|
—
|
|
|
|
—
|
|
|
|
6,493
|
|
|
$
|
84,492
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
84,492
|
|
James F. Nordstrom, Jr.
|
|
|
—
|
|
|
|
—
|
|
|
|
6,493
|
|
|
$
|
84,492
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
84,492
|
|
Robert D. Olsen
|
|
|
—
|
|
|
|
—
|
|
|
|
6,493
|
|
|
$
|
84,492
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
84,492
|
|
|
(1)
|
This amount includes the value of
accrued dividends in the amount of $0.05 per share as of July 14, 2017 that would be payable
when the RSUs (and PSUs) are settled. No interest will accrue or otherwise be payable
with respect to any accrued dividends.
|
|
(2)
|
This amount does not include the number
of PSUs which are outstanding as of July 14, 2017, but will be forfeited due to failure
to fully meet performance goals under the Company Equity Incentive Plan in each of the
2015 and 2016 years as follows: Mathew L. Hyde: 5,127; Jeffrey L. Lasher: 2,496; Barry
Kelley: 1,944; and Paul Rutenis: 2,496. With respect to PSU awards granted in 2017, this
amount reflects the number of PSUs that would be awarded based on target performance
as the performance period for such awards will not be determined until the end of the
2017 fiscal year.
|
|
(3)
|
This amount only includes time-based
RSUs.
|
Treatment of Purchase Rights under the SPP
The Company’s Amended and Restated
Associates Stock Buying Plan (the “SPP”) will be terminated prior to the Effective Time and the Company will take
all action necessary to: (i) cause any outstanding offering period under the SPP to be terminated prior to the Effective Time;
(ii) make any pro-rata adjustments that may be necessary to reflect the shortened offering period; (iii) provide that all outstanding
options granted under the SPP (the “SPP Options”) will be canceled as of the closing date of the Merger,
provided
that each holder of an SPP Option may exercise each outstanding purchase right under the SPP prior to the Effective Time;
(iv) provide that no further offering period or purchase period will commence under the SPP after the date of the Merger Agreement;
and (v) ensure that no individual may make a new election to purchase shares in any current offering period or increase his or
her election to purchase shares in any current offering period. On such new exercise date, the Company shall apply the funds credited
as of such date under the SPP within each participant’s payroll withholding account to the purchase of whole shares of our
common stock in accordance with the terms of the SPP.
Payments Upon Termination Following Change-in-Control
All Executive Officers
We are parties to employment offer letters
with each of our executive officers. These offer letters generally provide that each executive officer is entitled to receive
severance in accordance with the Company’s
Amended and Restated
Executive Officer Severance Plan (the “
Top Hat Severance Plan”) in the event their employment is terminated
without “Cause” or they resign for “Good Reason” in various scenarios, including in connection with a
change in control, which will occur upon the consummation of the Merger. Each executive officer has also executed a separate election
letter to only receive severance benefits in accordance with the Top Hat Severance Plan.
Pursuant to the Top Hat Severance Plan,
if an executive officer’s employment is terminated without Cause or if such executive officer resigns for Good Reason within
24 months following a change in control, which will occur upon the consummation of the Merger, and provided such executive officer
signs and does not revoke a release of all claims within 90 days following the date of the executive officer’s termination
of employment, then the executive officer will be entitled to receive accelerated vesting of all of his or her unvested RSUs.
In addition, such executive officer will be entitled to receive severance benefits equal to (i) the sum of the executive officers’
annual base salary, plus the full amount of his or her annual target bonuses (
provided, however
, that with respect to executive
officers with the title of: (a) “Chief Executive Officer,” such sum will be multiplied by one and one-half times,
(b) “Executive Vice President” or “Senior Vice President,” such sum will be multiplied by one time, and
(c) “Vice President,” or any other title, such sum will be multiplied by one-half times), (ii) the prorated amount
of his or her target bonus for the year in which the termination occurred, (iii) Company-provided health continuation coverage
following termination of employment for 18 months for executive officers with the title of “Chief Executive Officer”
and “Executive Vice President” and 12 months for executive officers with any other title, and (iv) outplacement services
for a period of one year following termination of employment in an amount not to exceed $20,000. The cash portion of these payments
will be paid in a lump sum following the date on which the required release becomes effective. In the event any payments or benefits
payable pursuant to the Top Hat Severance Plan cause the applicable executive officer to be subject to any golden parachute excise
tax imposed pursuant to Section 4999 of the Internal Revenue Code, payments made to such executive officer pursuant to the Top
Hat Severance Plan will be reduced to an amount equal to the greatest dollar amount that would not subject the named executive
officer to the imposition of the excise tax, unless the executive officer would be better off (on an after-tax basis) receiving
all payments and paying all excise and income taxes.
The Merger will constitute a “change
in control” for purposes of these agreements. “Cause” and “Good Reason” are defined as follows in
the Top Hat Severance Plan:
|
·
|
“Cause”
is defined as one or more of the following events: if the executive officer (i) has breached
any material obligation to the Company or its affiliates that is or could reasonably
be expected to result in material harm to the Company; (ii) has violated any significant
Company policy; (iii) has violated any of the Company’s operating and/or financial/accounting
procedures which results in a material loss to the Company; (iv) has been arrested for,
convicted of, or has pled guilty or nolo contendere to, any felony, or to any misdemeanor
involving moral turpitude (including forgery, fraud, theft or embezzlement); (v) has
been arrested for, convicted of, or has pled guilty or nolo contendere to, any offense
involving fraud, dishonesty, breach of trust or money laundering; (vi) has engaged in
dishonesty, embezzlement, misappropriation or fraud in connection with the business of
the Company, or has stolen property or opportunities of the Company, or has assaulted
or battered an associate or director of the Company; (vii) has failed substantially to
perform his or her assigned duties with the Company (other than a failure resulting from
the executive officer’s incapacity due to physical or mental illness or from the
assignment to the executive officers that would constitute “Good Reason”);
or (viii) has engaged in willful malfeasance, illegal conduct, gross negligence or misconduct
demonstrably injurious to the Company;
provided
,
however
, that it shall
only be deemed cause pursuant to clauses (i), (ii), (vii) and (viii) if the named executive
officer is given written notice describing the basis of cause and, if the event is reasonably
susceptible of cure, the named executive officer fails to cure within ten (10) days.
|
|
·
|
“Good
Reason” is defined as one or more of the following conditions that occur without
the executive officer’s written consent; (i) a material and adverse change in the
executive officer’s title, position or responsibilities (excluding reporting responsibilities)
from his or title, position or responsibilities in effect immediately prior thereto (it
being understood that a change in title, position or responsibilities that results from
the Company no longer having publicly-traded securities will not be deemed to be material
in and of itself); (ii) a reduction in the executive officer’s base salary by more
than ten percent, other than in connection with a reduction of ten percent or more applicable
to all or substantially all of the Company’s senior management; (iii) a relocation
of the Company’s principal offices to which the executive officer reports to a
location more than 50 miles from its current location, excluding any executive officer
who was not previously assigned to a principal location or any required travel on the
Company’s business, (iv) the Company requests that the executive officer engage
or participate in any unlawful act, or (v) the failure of any successor to the Company
to assume the Top Hat Severance Plan;
provided
,
however
, that it shall
only be deemed good reason pursuant to the foregoing definition if (x) the Company is
given written notice from the named executive officer within 60 days following the first
occurrence of a condition that the executive officer considers to constitute good reason,
(y) the Company is given 30 days to investigate the allegations made by the executive
officer and fails to remedy such condition within 30 days following such investigation,
and (z) the executive officer resigns from employment within 30 days following the end
of the period within which the Company was entitled to remedy the condition constituting
good reason but failed to do so.
|
New Management Arrangements
As of the date of this proxy statement,
none of the Company, Parent or Sub has entered into any employment agreements with the Company’s named executive officers
solely in connection with the Merger. No material terms have been discussed to date, but going forward certain of the Company’s
executive officers may have discussions, or may enter into agreements with, Parent or Sub or their respective affiliates regarding
employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates.
Golden Parachute Compensation
In accordance with Item 402(t) of Regulation
S-K, the table below sets forth the compensation that is based on or otherwise relates to the Merger that may be paid or become
payable to the Company’s named executive officers. Please see the previous portions of this section for further information
regarding this compensation.
The amounts indicated in the table below
are estimates of the amounts that would be payable assuming, solely for purposes of this table, that the Merger is consummated
on July 14, 2017, and that the employment of each of the named executive officers was subject to an involuntary termination on
the date described in the footnotes below, as applicable. Our executive officers will not receive pension, non-qualified deferred
compensation, tax reimbursement or other benefits in connection with the Merger. For purposes of calculating such amounts, we
have assumed that no named executive officer will receive a reduction in benefits as a result of the golden parachute rules as
described in the section captioned “
The Merger – Interests of the Company’s Directors and Executive Officers
in the Merger
–
Payments upon Termination following Change-in-Control
” above.
In addition to the assumptions regarding
the consummation date of the Merger and the termination of employment, these estimates are based on certain other assumptions
that are described in the footnotes accompanying the table below. Accordingly, the ultimate values to be received by a named executive
officer in connection with the Merger may differ from the amounts set forth below.
Name
|
|
Cash
($)(1)
|
|
|
Equity
($)(2)
|
|
|
Perquisites
($)(3)
|
|
|
Total Payments
($)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew L. Hyde
|
|
|
2,829,369
|
|
|
|
1,670,890
|
|
|
|
44,046
|
|
|
$
|
4,544,305
|
|
Jeffrey L. Lasher
|
|
|
1,142,630
|
|
|
|
725,670
|
|
|
|
49,228
|
|
|
$
|
1,917,528
|
|
Barry Kelley
|
|
|
994,354
|
|
|
|
636,772
|
|
|
|
48,889
|
|
|
$
|
1,680,015
|
|
Paul Rutenis
|
|
|
1,115,451
|
|
|
|
725,670
|
|
|
|
59,737
|
|
|
$
|
1,900,858
|
|
|
(1)
|
This amount represents the “double-trigger” cash
severance payments to which each named executive officer may become entitled under the
Top Hat Severance Plan, as described in the section captioned “
The Merger –
Interests of the Company’s Directors and Executive Officers in the Merger
–
Payments upon Termination following Change-in-Control
” above. For each named
executive officer, the amount in this column assumes that such named executive officer
experiences a qualifying termination upon the consummation of the Merger or within 24
months thereafter.
|
The amount represents the amounts described above
and assumes a prorated performance bonus is payable as of July 14, 2017, the assumed Effective Time. The amounts shown in this
column are based on the compensation and benefit levels in effect on July 14, 2017, the latest practicable date to determine such
amounts before the filing of this proxy statement; therefore, if compensation and benefit levels are changed after such date,
actual payments to an executive officer may be different than those provided for above. Set forth below are the values of the
cash severance components described above:
Name
|
|
Salary
Component
($)
|
|
|
Target
Bonus
Component
($)
|
|
|
Pro
Rata Bonus
Component
($)
|
|
|
Total ($)
|
|
Matthew L. Hyde
|
|
|
1,248,000
|
|
|
|
1,248,000
|
|
|
|
333,369
|
|
|
|
2,829,369
|
|
Jeffrey L. Lasher
|
|
|
630,000
|
|
|
|
378,000
|
|
|
|
134,630
|
|
|
|
1,142,630
|
|
Barry Kelley
|
|
|
548,246
|
|
|
|
328,948
|
|
|
|
117,160
|
|
|
|
994,354
|
|
Paul Rutenis
|
|
|
615,014
|
|
|
|
369,009
|
|
|
|
131,428
|
|
|
|
1,115,451
|
|
|
(2)
|
This amount represents the aggregate value of (i) the “single-trigger”
cash consideration to be received by each named executive officer in exchange for the
cancellation of all outstanding Options, which will occur upon consummation of the Merger,
and (ii) the “double-trigger” acceleration value of the unvested RSUs held
by each of the named executive officers that would be accelerated assuming a qualifying
termination upon the consummation of the Merger or within 24 months thereafter. This
amount includes the value of accrued dividends in the amount of $0.05 per share as of
July 14, 2017 that will be payable when the RSUs (and PSUs) are settled. The amounts
shown are based on the number of Options, RSUs and PSUs held by each named executive
officer as of July 14, 2017, the latest practicable date to determine such amounts before
the filing of this proxy statement. The amounts shown do not attempt to forecast any
grants, additional issuances, dividends, additional deferrals or forfeitures of RSUs
and/or PSUs following the date of this proxy statement. Depending on when the closing
of the Merger occurs, certain RSUs and PSUs will vest in accordance with their terms.
No interest will accrue or otherwise be payable with respect to any accrued dividends.
The value of the RSUs that would be accelerated assuming a qualifying termination upon
the change in control are the “double-trigger” vesting acceleration benefits
to which each named executive officer is entitled under the Top Hat Severance Plan, as
described in the section captioned “
The Merger – Interests of the Company’s
Directors and Executive Officers in the Merger – Payments upon Termination following
Change-in-Control
” above.
|
Set forth below are the values of the cash consideration
to be received in connection with the cancellation of vested Options and the unvested RSUs that would vest upon a qualifying termination
based on the Merger Consideration of $12.97 per share:
Name
|
|
Options ($)
|
|
|
Company
Time-Based
RSUs
($)
|
|
|
Company
Performance-Based
RSUs
($)
|
|
Matthew L. Hyde
|
|
|
147,134
|
|
|
|
1,065,062
|
|
|
|
458,695
|
|
Jeffrey L. Lasher
|
|
|
—
|
|
|
|
539,158
|
|
|
|
186,512
|
|
Barry Kelley
|
|
|
70,766
|
|
|
|
395,938
|
|
|
|
170,067
|
|
Paul Rutenis
|
|
|
—
|
|
|
|
539,158
|
|
|
|
186,512
|
|
|
(3)
|
Equals the value of “double-trigger” continued medical
benefits (for 18 months for Messrs. Hyde, Lasher, Kelley and Rutenis) and the value of
outplacement services ($20,000 per person) assuming a qualifying termination upon the
consummation of the Merger or within 24 months thereafter, as described in the section
captioned “
The Merger – Interests of the Company’s Directors and
Executive Officers in the Merger – Payments upon Termination following Change-in-Control
”
above. The amounts reflected in the column above reflect health and benefits rates in
effect for 2017; therefore, if benefits levels change between the date of this proxy
statement and the closing of the Merger, such amounts will change.
|
|
(4)
|
Equals the sum of the “Cash,” “Equity Award
Vesting” and “Perquisites” columns.
|
The “single-trigger” and “double-trigger”
components of the aggregate total compensation amounts, respectively, for each named executive officer are as follows:
Name
|
|
Single-Trigger
Payments
($)
|
|
|
Double-Trigger
Payments
($)
|
|
Matthew L. Hyde
|
|
|
147,134
|
|
|
|
4,397,171
|
|
Jeffrey L. Lasher
|
|
|
—
|
|
|
|
1,917,528
|
|
Barry Kelley
|
|
|
70,766
|
|
|
|
1,609,249
|
|
Paul Rutenis
|
|
|
—
|
|
|
|
1,900,858
|
|
Any amounts shown in the tables above that are
subject to the golden parachute excise tax under Section 4999 of the Internal Revenue Code may be subject to reduction to the
extent such reduction would result in the named executive officer retaining a greater after-tax amount of such payment.
Closing and Effective Time of the Merger
The closing of the Merger will take place
(i) on the date that is two business day following the satisfaction or waiver (to the extent permitted by applicable law) of all
of the conditions to the closing of the Merger (as described in the section of this proxy captioned “
The Merger Agreement
— Conditions to the Merger
”), 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 the closing or (ii) at another date agreed to in writing by the
parties. The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of
Delaware, or at such other time as is agreed upon in writing by Parent and the Company and specified in the certificate of merger
in accordance with the DGCL.
Appraisal Rights
If the Merger is consummated, stockholders
who have complied exactly with the procedures set forth in Section 262 of the DGCL, including stockholders who: (i) do not vote
in favor of the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated thereby; (ii)
continuously hold their shares of our common stock through the Effective Time; and (iii) properly demand appraisal of their shares
of our common stock in compliance with the requirements of Section 262 are entitled to exercise appraisal rights in connection
with the Merger under Section 262.
The following discussion is not a complete
statement of the law pertaining to appraisal rights under Section 262 and is qualified in its entirety by the full text of Section
262, which is attached to this proxy statement as
Annex C
and incorporated herein by reference. The following summary does
not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights
under Section 262. Only a holder of record of shares of our common stock is entitled to demand appraisal rights for the shares
registered in such holder’s name. A person having a beneficial interest in shares of our common stock held of record in
the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the
steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of our common stock
through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or
the other nominee.
Under Section 262, holders of shares
of our common stock who: (i) do not vote in favor of the adoption of the Merger Agreement and approval of the Merger and the other
transactions contemplated thereby; (ii) continuously hold their shares of our common stock through the Effective Time; and (iii)
otherwise follow exactly the procedures set forth in Section 262, will be entitled to have their shares appraised by the Court
of Chancery and to receive payment in cash of the “fair value” of the shares of our common stock, exclusive of any
element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount
determined to be fair value, if any, as determined by the Court of Chancery. Unless the Court of Chancery, in its discretion,
determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective
Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established
from time to time during such period.
Under Section 262, where a merger agreement
is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must
notify each of its stockholders entitled to exercise appraisal rights that appraisal rights are available and include in the notice
a copy of Section 262. This proxy statement constitutes the Company’s notice to stockholders that appraisal rights are available
in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection
with the Merger, any holder of shares of our common stock who wishes to exercise appraisal rights or who wishes to preserve such
holder’s right to do so should review Annex C carefully.
Failure to comply exactly with the requirements of Section
262 in a timely and proper manner will result in the loss of appraisal rights under the DGCL.
A stockholder who loses his, her or its
appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement. Moreover, because of
the complexity of the procedures for exercising the right to seek appraisal of shares of our common stock, the Company believes
that if a stockholder considers exercising such rights, such stockholder should seek the advice of legal counsel.
Stockholders wishing to exercise the
right to seek an appraisal of their shares of our common stock must, among other requirements, do
ALL
of the following:
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the stockholder
must not vote in favor of the proposal to adopt the Merger Agreement and approve the
Merger and the other transactions contemplated thereby;
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the stockholder
must deliver to the Company a written demand for appraisal that complies with Section
262 before the vote on the Merger Agreement at the Special Meeting; and
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the stockholder
must continuously hold the shares of our common stock through the Effective Time.
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The stockholder or the Surviving Corporation
must also file a petition in the Court of Chancery requesting a determination of the fair value of the shares of our common stock
within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention
of doing so.
Because a proxy that does not contain
voting instructions will, unless revoked, be voted in favor of the Merger Agreement, a stockholder who votes by proxy and who
wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement and approval of the Merger and the
other transactions contemplated thereby, abstain or not vote its shares.
Filing Written Demand
Any holder of shares of our common stock
wishing to exercise appraisal rights must deliver to the Company, before the vote on the adoption of the Merger Agreement and
approval of the Merger and the other transactions contemplated thereby, at the Special Meeting at which the proposal to adopt
the Merger Agreement and approve the Merger and the other transactions contemplated thereby will be submitted to the stockholders,
a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in
favor of the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated thereby. A holder
of shares of our common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal
is made, and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain
voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement and approval of the Merger
and the other transactions contemplated thereby and it will constitute a waiver of the stockholder’s right of appraisal
and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes
to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement
and approval of the Merger and the other transactions contemplated thereby or abstain from voting on the adoption of the Merger
Agreement and approval of the Merger and the other transactions contemplated thereby. Neither voting against the adoption of the
Merger Agreement and approval of the Merger and the other transactions contemplated thereby, nor abstaining from voting or failing
to vote on the proposal to adopt the Merger Agreement and approve the Merger and the other transactions contemplated thereby will,
in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for
appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement and approval of the
Merger and the other transactions contemplated thereby. A stockholder’s failure to make the written demand prior to the
taking of the vote on the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated
thereby at the Special Meeting will result in a loss of appraisal rights under the DGCL.
Only a holder of record of shares of
our common stock is entitled to demand appraisal rights for the shares registered in such holder’s name. A demand for appraisal
in respect of shares of our common stock should be executed by or on behalf of the holder of record and must reasonably inform
the Company of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s
shares of our common stock in connection with the Merger. If the shares of our common stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if
the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed
by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute
a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly
disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.
STOCKHOLDERS WHO HOLD THEIR SHARES OF
OUR COMMON STOCK IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT
WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER
NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES OF OUR COMMON STOCK. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF
OUR COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE
THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.
All written demands for appraisal pursuant
to Section 262 should be delivered to:
West Marine, Inc.
Attn: Corporate Secretary
500 Westridge Drive
Watsonville, California 95076-4100
Any holder of shares of our common stock
may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering
to the Company a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than
60 days after the Effective Time will require written approval of the Surviving Corporation.
No appraisal proceeding in the Court
of Chancery will be dismissed without the approval of the Court of Chancery, and such approval may be conditioned upon such terms
as the Court of Chancery deems just;
provided
,
however
, that such dismissal will 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 within 60 days after the Effective Time.
Notice by the Surviving Corporation
If the Merger is consummated, within
ten days after the Effective Time, the Surviving Corporation will notify each holder of shares of our common stock who has made
a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the adoption of the Merger Agreement
and approval of the Merger and the other transactions contemplated thereby that the Merger has become effective and the effective
date thereof, and include a copy in such notice of Section 262.
Filing a Petition for Appraisal
Within 120 days after the Effective Time,
the Surviving Corporation or any holder of shares of our common stock who has complied with Section 262 and is entitled to exercise
appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Court of Chancery, with a
copy served on the Surviving Corporation in the case of a petition filed by a stockholder, demanding a determination of the fair
value of the shares held by all stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has
no present intention, to file a petition, and holders should not assume that the Surviving Corporation will file a petition or
initiate any negotiations with respect to the fair value of the shares of our common stock. Accordingly, any holders of shares
of our common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal
rights in respect of their shares of our common stock within the time and in the manner prescribed by Section 262. The failure
of a holder of shares of our common stock to file such a petition within the period specified in Section 262 will nullify the
stockholder’s previous written demand for appraisal.
Within 120 days after the Effective Time,
any holder of shares of our common stock who has complied with the requirements for exercise of appraisal rights will be entitled,
upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted
in favor of the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated thereby with
respect to which the Company has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving
Corporation must mail this statement to the requesting stockholder within ten days after receipt of the written request for such
a statement or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. A
beneficial owner of shares 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 seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above,
however, the demand for appraisal can only be made by a stockholder of record.
If a petition for an appraisal is duly
filed by a holder of shares of our common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation
will then be obligated within 20 days after such service to file with the Delaware Register in Chancery 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. After notice to the stockholders as required by the court, the Court of Chancery is empowered
to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled
to exercise appraisal rights thereunder. The Court of Chancery may require stockholders demanding appraisal of their shares to
submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings,
and if any stockholder fails to comply with that direction, the Court of Chancery may dismiss the proceedings as to such stockholder.
Determination of Fair Value
After determining the holders of our
common stock entitled to appraisal, the Court of Chancery will appraise the “fair value” of the shares of our common
stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest,
if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Court of Chancery will take
into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from
the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal
Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time
and the date of payment of the judgment. In
Weinberger v. UOP, Inc.
, the Supreme Court of Delaware discussed the factors
that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques
or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should
be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a
company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market
value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained
as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair
value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In
Cede & Co. v. Technicolor, Inc.
, the Delaware Supreme Court stated that such exclusion is a “narrow exclusion
[that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising
from such accomplishment or expectation. In
Weinberger
, the Supreme Court of Delaware also stated that “elements
of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered.”
Stockholders considering seeking appraisal
should be aware that the fair value of their shares as so determined by the Court of Chancery could be more than, the same as
or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that
an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger
is not an opinion as to, and does not in any manner address, fair value under Section 262.
Although the Company believes that
the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by
the Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher
or lower than, or the same as, the Merger Consideration
. Neither the Company nor Parent anticipates offering more than the
Merger Consideration to any stockholder exercising appraisal rights, and each of the Company and Parent reserves the right to
assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of our common stock
is less than the Merger Consideration. If a petition for appraisal is not timely filed, then the right to an appraisal will cease.
The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be
determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable under the circumstances.
Upon application of a stockholder, the Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder
in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of
experts, be charged pro rata against the value of all the shares entitled to be appraised.
If any stockholder who demands appraisal
of his, her or its shares of our common stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s
right to appraisal, such stockholder’s shares of our common stock will be deemed to have been converted at the Effective
Time into the right to receive the Merger Consideration. A stockholder will fail to perfect, or effectively lose or withdraw,
the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time or if the
stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance
of the Merger Consideration in accordance with Section 262.
From and after the Effective Time, no
stockholder who has demanded appraisal rights will be entitled to vote such shares of our common stock for any purpose or to receive
payment of dividends or other distributions on our common stock, except dividends or other distributions on the holder’s
shares of our common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal
is filed, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and
an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving
Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Court
of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder who commenced the proceeding or joined
that proceeding as a named party without the approval of the court.
Failure to comply exactly with all
of the procedures set forth in Section 262 will result in the loss of a stockholder’s statutory appraisal rights. Consequently,
any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those
rights.
Material U.S. Federal Income Tax Consequences of the Merger
The following discussion is a summary
of certain material U.S. federal income tax consequences of the Merger that may be relevant to certain U.S. Holders and Non-U.S.
Holders (each as defined below) of shares of our common stock whose shares are converted into the right to receive cash pursuant
to the Merger. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury
regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”)
and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change
or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of
our common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for
investment purposes).
This discussion is for general information
only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances.
For example, this discussion does not address:
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tax consequences
that may be relevant to holders who may be subject to special treatment under U.S. federal
income tax laws, such as banks or other financial institutions; tax-exempt organizations;
retirement plans or other tax-deferred accounts; S-corporations or any other entities
or arrangements treated as partnerships or pass-through entities for U.S. federal income
tax purposes (and shareholders, partners or investors therein); insurance companies;
mutual funds; brokers or dealers in stocks or securities; traders in securities that
elect to use the mark-to-market method of accounting for their securities; regulated
investment companies; real estate investment trusts; entities subject to the U.S. anti-inversion
rules; personal holding companies; controlled foreign corporations, passive foreign investment
companies or corporations that accumulate earnings to avoid U.S. federal income tax;
or certain former citizens, or long-term residents, of the United States;
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tax consequences
to holders holding the shares of our common stock as part of a hedging, constructive
sale or conversion, straddle or other risk reduction transaction;
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tax consequences
to holders that received their shares of our common stock on exercise of notes, warrants
or options, through a tax qualified retirement plan, or otherwise in a compensatory transaction;
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tax consequences
to holders who own an equity interest, actually or constructively, in HPE or the Surviving
Corporation following the Merger;
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tax consequences
to U.S. Holders whose “functional currency” is not the U.S. dollar;
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tax consequences
to holders who hold their shares of our common stock through a bank, financial institution
or other entity, or a branch thereof, located, organized or resident outside the United
States;
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tax consequences
to holders who hold their shares of our common stock as “qualified small business
stock” within the meaning of Section 1202 of the Code or Section 1244 Stock for
purposes of the Code;
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tax consequences
to holders of their shares of our common stock who demand appraisal rights under Delaware
law;
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the U.S. federal
estate, gift or alternative minimum tax consequences, if any; or
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any state, local
or foreign tax consequences.
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If a partnership (including an entity
or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner (for
U.S. federal income tax purposes) of shares of our common stock, then the tax treatment of a partner in such partnership will
generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares
of our common stock and partners (or persons treated as partners for U.S. federal income tax purposes) therein should consult
their tax advisors regarding the tax consequences of the Merger.
No ruling from the IRS and no opinion
of counsel has been or will be obtained regarding the U.S. federal income tax consequences of the Merger described below. No assurance
can be given that the IRS will agree with the views expressed in this summary. If the IRS contests a conclusion set forth herein,
no assurance can be given that a holder would ultimately prevail in a final determination by a court.
THIS DISCUSSION IS PROVIDED FOR GENERAL
INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT SUCH HOLDER’S OWN TAX
ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND
ANY CONSEQUENCES ARISING UNDER U.S. FEDERAL NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION,
INCLUDING POSSIBLE CHANGES IN SUCH LAWS.
U.S. Holders
For purposes of this discussion, a “U.S.
Holder” is a beneficial owner (for U.S. federal income tax purposes) of shares of our common stock that is for U.S. federal
income tax purposes:
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an individual
who is a citizen or resident of the United States;
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a corporation,
or other entity taxable as a corporation for U.S. federal income tax purposes, created
or organized in or under the laws of the United States or any state thereof or the District
of Columbia;
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an estate, the
income of which is subject to U.S. federal income taxation regardless of its source;
or
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a trust (i)
if a court within the United States is able to exercise primary jurisdiction over its
administration and one or more United States persons, as defined in Section 7701(a)(30)
of the Code, have the authority to control all of its substantial decisions; or (ii)
that has a valid election in effect under applicable Treasury regulations to be treated
as a United States person.
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The receipt of cash by a U.S. Holder
in exchange for shares of our common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes.
In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received
and the U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the Merger. A U.S. Holder’s adjusted
tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year
at the time of the consummation of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain
of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. Gain or
loss realized generally must be calculated separately for each block of shares (
i.e.
, shares acquired at the same cost
in a single transaction) surrendered pursuant to the Merger.
Additionally, a 3.8% tax generally is
imposed on all or a portion of the “net investment income” (within the meaning of the Code) of certain individuals
and on the undistributed net investment income of certain estates and trusts. For individuals, the additional 3.8% tax generally
is imposed on all or a portion of the net investment income of individuals with a modified adjusted gross income of over $200,000
($250,000 in the case of joint filers). For these purposes, “net investment income” generally will include any gain
recognized on the receipt of cash in exchange for shares of our common stock pursuant to the Merger.
Non-U.S. Holders
For purposes of this discussion, the
term “Non-U.S. Holder” means a beneficial owner (for U.S. federal income tax purposes) of shares of our common stock
that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.
Non-U.S. Holders should consult their
own tax advisors to determine the U.S. federal, state, local, and foreign tax consequences that may be relevant to them in light
of their particular circumstances. Any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject
to U.S. federal income tax unless:
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the gain is
effectively connected with a trade or business of such Non-U.S. Holder in the United
States (and, if required by an applicable income tax treaty, is attributable to a permanent
establishment or fixed base maintained by such Non-U.S. Holder in the United States),
in which case such gain generally will be subject to U.S. federal income tax on a net
income basis at rates generally applicable to U.S. persons, and, if such Non-U.S. Holder
is a corporation, such gain may also be subject to the branch profits tax at a rate of
30% (or a lower rate under an applicable income tax treaty);
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such Non-U.S.
Holder is an individual who is present in the United States for 183 days or more in the
taxable year of that disposition, and certain other specified conditions are met, in
which case such gain will be subject to U.S. federal income tax at a rate of 30% (or
a lower rate under an applicable income tax treaty) and may be offset by certain U.S.
source capital losses; or
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the Company
is or has been a “United States real property holding corporation” as such
term is defined in Section 897(c) of the Code at any time within the shorter of the five-year
period preceding the Merger or such Non-U.S. Holder’s holding period with respect
to the applicable shares of our common stock and certain other requirements are met,
in which case such gain will be subject to U.S. federal income tax at rates generally
applicable to U.S. persons (as described in the first bullet point above except that
the branch profits tax will not apply). We believe that we are not, and have not been,
a USRPHC at any time during the five-year period preceding the Merger.
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Information Reporting and Backup Withholding
Information reporting and backup withholding
(at a current rate of 28%) may apply to the proceeds received by a holder pursuant to the Merger. Backup withholding generally
will not apply to (i) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such holder is
not subject to backup withholding on a properly completed IRS Form W-9 (or a substitute or successor form) or (ii) a Non-U.S.
Holder that (A) provides a certification of such holder’s foreign status on a properly completed appropriate series of IRS
Form W-8 (or a substitute or successor form) or (B) otherwise establishes an exemption from backup withholding. Any amounts withheld
under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax
liability,
provided
that the required information is timely furnished to the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS
ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO PARTICULAR HOLDERS OF SHARES OF OUR COMMON STOCK. HOLDERS
OF SHARES ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE RECEIPT OF CASH FOR THEIR
SHARES PURSUANT TO THE MERGER UNDER ANY U.S. FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, INCLUDING POSSIBLE CHANGES IN SUCH
LAWS.
Regulatory Approvals Required for the Merger
Parent and the Company have generally
agreed to (and Parent has agreed to cause Sub and each of Parent’s and Sub’s affiliated investment funds to and the
Company has agreed to cause each of its subsidiaries to) use their reasonable best efforts to promptly obtain all necessary actions
or approvals from governmental entities to consummate the Merger and the other transactions contemplated by the Merger Agreement.
These approvals (i) include that the applicable waiting period under the HSR Act has expired or been terminated; and (ii) may
include the approval or clearance of the Merger pursuant to antitrust laws of potentially other jurisdictions (collectively, the
“foreign jurisdictions”) as required.
HSR Act and U.S. Antitrust Matters
Under the HSR Act and the rules promulgated
thereunder, the Merger cannot be consummated until Parent and the Company, or their “ultimate parent entities,” file
a notification and report form with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department
of Justice (the “DOJ”) under the HSR Act and the applicable waiting period has expired or been terminated. A transaction
notifiable under the HSR Act may not be consummated until the expiration of waiting period following the parties’ filing
of their respective HSR Act notification forms (typically a 30-day period) or the early termination of that waiting period.
At any time before or after consummation
of the Merger, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action
under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the consummation of
the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets
or terminate existing relationships and contractual rights. At any time before or after the consummation of the Merger, and notwithstanding
the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems
necessary. Such action could include seeking to enjoin the consummation of the Merger or seeking divestiture of substantial assets
of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual
rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.
Foreign Competition Laws
Under the competition laws of certain
foreign jurisdictions, certain competition law filings may be necessary. Parent and the Company, or their “ultimate parent
entities,” have not yet made the necessary filings as dictated by the competition laws of foreign jurisdictions.
Other Regulatory Approvals
One or more governmental agencies may
impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents.
Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any
of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way
to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately
be obtained and there may be a substantial period of time between the approval by stockholders and the consummation of the Merger.
Although we expect that all required
regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will
be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition
of additional conditions on the consummation of the Merger, including the requirement to divest assets, or require changes to
the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.
THE MERGER AGREEMENT
Explanatory Note Regarding the Merger Agreement
The following summary describes the material
provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement
are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this
proxy statement as
Annex A
and is incorporated into this proxy statement by reference. We encourage you to read the Merger
Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that
is important to you.
The rights and obligations of the parties are governed by the express terms of the Merger Agreement and
not by this summary or any other information contained in this proxy statement. Capitalized terms in this section but not defined
in this proxy statement have the meaning ascribed to such terms in the Merger Agreement
.
The representations, warranties, covenants
and agreements described in this section and included in the Merger Agreement (i) were made only for purposes of the Merger Agreement
and as of specific dates, (ii) were made solely for the benefit of the parties to the Merger Agreement and (iii) may be subject
to important qualifications, limitations and supplemental information agreed to by Parent, the Company and Sub in connection with
negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard
of materiality different from those generally applicable to reports and documents filed with the SEC and, in some cases, were
qualified by matters disclosed to Parent and Sub by the Company in the disclosure letter to the Merger Agreement. In addition,
the representations and warranties may have been included in the Merger Agreement for the purposes of allocating contractual risk
between the parties to the Merger Agreement, rather than to establish matters as facts, and may be subject to standards of materiality
applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under
the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof
as characterizations of the actual state of facts or condition of the Company, Parent or Sub or any of their respective affiliates
or businesses. Moreover, information concerning the subject matter of the representations and warranties may have changed after
the date of the Merger Agreement and do not purport to be accurate as of the date of this proxy statement and, accordingly, you
should not rely on such representations and warranties as characterizations of the actual state of facts as of the date of this
proxy statement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective
businesses of the Company, Parent and Sub because the parties may take certain actions that are either expressly permitted in
the disclosure letter delivered by the Company in connection with the execution of the Merger Agreement or as otherwise consented
to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described
below, and included as
Annex A
, only to provide you with information regarding its terms and conditions, and not to provide
you with any other factual information regarding the Company, Parent, Sub or their respective businesses or affiliates. Accordingly,
the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone and you should
read the information provided elsewhere in this document and in our filings with the SEC regarding the Company and our business.
Form and Effects of the Merger; Directors and Officers;
Certificate of Incorporation and Bylaws
Upon the terms and subject to the conditions
of the Merger Agreement and in accordance with the DGCL, at the Effective Time, Sub, a wholly-owned subsidiary of Parent, will
merge with and into the Company. The separate corporate existence of Sub will cease, and the Company will continue as the Surviving
Corporation and will become a wholly-owned subsidiary of Parent.
From and after the Effective Time, the
Surviving Corporation will possess all properties, rights, privileges, powers and franchises of the Company and Sub, and all of
the debts, liabilities and duties of the Company and Sub will become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, the certificate
of incorporation of the Surviving Corporation will be amended and restated in its entirety to read as set forth in Exhibit A to
the Merger Agreement and the bylaws of the Surviving Corporation will be amended and restated in their entirety to conform to
the bylaws of Sub as in effect immediately prior to the Effective Time (except that the references to the name of Sub will be
replaced by references to “West Marine, Inc.”), in each case, until thereafter amended in accordance with applicable
law and the applicable provisions thereof.
From and after the Effective Time, the
directors of Sub immediately prior to the Effective Time will be the initial directors of the Surviving Corporation. The officers
of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation. The directors
and officers will serve in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.
Closing and Effective Time of the Merger
Unless otherwise mutually agreed by the
parties to the Merger Agreement, the closing of the Merger is expected to occur at 9:00 a.m. New York City time on the date that
is two business days following the satisfaction or waiver (to the extent permitted by applicable law) of the conditions to the
Merger set forth in the Merger Agreement and described in the section captioned “
The Merger Agreement — Conditions
to the Merger
” (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but
subject to the satisfaction or waiver of those conditions at the closing of the Merger).
The Merger will become effective upon
the filing of the certificate of merger with the Secretary of State of the State of Delaware or at such later date and time as
is agreed upon by Parent and the Company and specified in the certificate of merger in accordance with the DGCL. As of the date
of this proxy statement, we expect to consummate the Merger in the third quarter of fiscal year 2017; however, consummation of
the Merger is subject to the satisfaction or (to the extent permitted by applicable law) waiver of the conditions to the consummation
of the Merger more fully described in the section captioned “
The Merger Agreement — Conditions to the Merger
”
and we cannot specify when, or assure you that, the Company and Parent will satisfy or waive all or any conditions to the Merger.
There may be a substantial amount of time between the date of the Special Meeting and the consummation of the Merger and it is
possible that factors outside the control of the Company or Parent could delay the consummation of the Merger, or prevent the
Merger from being consummated; however, we expect to consummate the Merger promptly following the satisfaction or (to the extent
permitted by applicable law) waiver of the conditions more fully described below in the section captioned “
The Merger
Agreement — Conditions to the Merger
.”
Merger Consideration
Effect of the Merger on the Company’s Capital Stock
At the Effective Time, each share of
our common stock issued and outstanding immediately prior to the Effective Time (including any shares resulting from the settlement
of RSUs which become settlable as of the consummation of the Merger and any shares issued upon the exercise of Options, but excluding
Cancelled Shares and Dissenting Shares) will be cancelled and will automatically be converted into the right to receive the Merger
Consideration of $12.97 in cash, without interest, and subject to deduction for any required withholding tax. At the Effective
Time, all of the Cancelled Shares will be automatically canceled and retired without payment of any consideration. Each Dissenting
Share will not be converted into the right to receive Merger Consideration, unless and until such stockholder fails to perfect
or effectively withdraws or loses such stockholder’s right to appraisal under the DGCL, at which time each such share of
our common stock will be converted into and exchangeable only for the right to receive, as of the later of the Effective Time
and the time that such right to appraisal is irrevocably lost, the Merger Consideration. Dissenting shares shall be treated in
accordance with Section 262, as more fully described in the section captioned “
The Merger — Appraisal Rights
.”
Treatment of the Company Equity-Based Awards
The Merger Agreement provides that the
Company’s equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment
at the Effective Time:
Options
Immediately prior to the Effective Time,
each Option that is then outstanding will be cancelled and, in exchange therefor, each holder of any such cancelled Option will
be entitled to receive payment of an amount in cash equal to the product of (i) the total number of shares of our common stock
subject to such Option, multiplied by (ii) the excess, if any, of (A) the Merger Consideration over (B) the exercise price per
share subject to such cancelled Option, without interest;
provided, however
, that (i) any such Option with respect to which
the exercise price per share subject thereto is greater than the Merger Consideration will be cancelled in exchange for no consideration
and (ii) such option payments may be reduced by the amount of any required tax withholdings as contemplated by the Merger Agreement.
Employee RSUs
Immediately prior to the Effective Time,
each award of unvested RSUs (including PSUs) granted under the Company Equity Incentive Plan, that is then outstanding (other
than those RSUs held by a non-employee director of the Company) will be assumed by the Surviving Corporation and will be converted
into a Cash Replacement Company RSU. Such Cash Replacement Company RSUs will, subject to the holder’s continued employment
with the Surviving Company through the applicable vesting dates, vest and be payable at the same time as the RSUs for such Cash
Replacement Company RSUs were exchanged would have vested pursuant to their terms. All Cash Replacement Company RSUs will have
the same terms and conditions as applied to the RSUs for which they were exchanged, except for terms rendered inoperative by reason
of the transactions contemplated by the Merger Agreement or for administrative or ministerial changes that are not materially
detrimental to the holders and that are necessary for the administration of the Cash Replacement Company RSUs. With respect to
PSUs, the number of PSUs assumed by the Surviving Corporation and converted into Cash Replacement Company RSUs will be determined
(A) for PSUs with a performance period that by its terms has ended prior to the Effective Time, based on actual performance through
the end of such performance period, and (B) for PSUs with a performance period that by its terms has not ended prior to the Effective
Time, assuming performance at 100% of target levels.
Non-Employee Director RSUs
Immediately prior to the Effective Time,
each award of unvested RSUs granted under the Company Equity Incentive Plan that is then outstanding and is held by a non-employee
director of the Company will be fully vested and cancelled and, in exchange therefor, each holder of any such cancelled RSUs will
be entitled to receive payment of an amount in cash equal to the product of (i) the Merger Consideration, multiplied by (ii) the
total number of shares of our common stock subject to such RSUs, without interest;
provided, however
, that any such RSU
payments may be reduced by the amount of any required tax withholdings as contemplated by the Merger Agreement.
SPP Options
The SPP will be terminated prior to the
Effective Time and the Company will take all action necessary to (i) cause any outstanding offering period under the SPP to be
terminated prior to the Effective Time, (ii) make any pro-rata adjustments that may be necessary to reflect the shortened offering
period, (iii) provide that all outstanding SPP Options will be canceled as of the closing date of the Merger,
provided
that each holder of an SPP Option may exercise each outstanding purchase right under the SPP prior to the Effective Time, (iv)
provide that no further offering period or purchase period will commence under the SPP after the date of the Merger Agreement
and (v) ensure that no individual may make a new election to purchase shares in any current offering period or increase his or
her election to purchase shares in any current offering period. On such new exercise date, the Company shall apply the funds credited
as of such date under the SPP within each participant’s payroll withholding account to the purchase of whole shares of our
common stock in accordance with the terms of the SPP.
Exchange and Payment Procedures
Prior to the Effective Time, Parent will
designate and deposit with a U.S.-based nationally recognized financial institution reasonably acceptable to the Company (the
“Paying Agent”) cash sufficient to pay the aggregate Merger Consideration payable to stockholders pursuant to the
terms of the Merger Agreement (the “Exchange Fund”). In the event that the Exchange Fund becomes insufficient to make
such payments, Parent shall promptly deposit, or cause to be deposited, additional funds with the Paying Agent in an amount sufficient
to make such payments.
As promptly as practicable after the
Effective Time (but in no event later than the second business day following the Effective Time), Parent will cause the Paying
Agent to mail to each person who, immediately prior to the Effective Time, was a holder of record of certificate(s) (a “certificate”)
representing outstanding shares of our common stock that were converted into the right to receive the Merger Consideration (i)
a letter of transmittal and (ii) instructions for effecting the surrender of the certificate in exchange for payment of the Merger
Consideration.
Upon surrender to the Paying Agent of
a certificate along with a duly completed and validly executed letter of transmittal and such other documents as may be required
by the Paying Agent, the holder of such certificate will be entitled to receive the Merger Consideration for each share formerly
represented by such certificate (other than with respect to Dissenting Shares and Cancelled Shares), subject to deduction for
any required withholding tax and without interest. Payment of the Merger Consideration with respect to non-certificated shares
of our common stock represented by book-entry (the “book-entry shares”) (other than with respect to Dissenting Shares
and Cancelled Shares) will only be made to the person in whose name such book-entry shares are registered and will be made promptly
following the Effective Time without any action on the part of the person in whose name such book-entry shares are registered,
subject to deduction for any required withholding tax and without interest.
Certificates should not be surrendered
by stockholders prior to the Effective Time and should be sent only pursuant to instructions set forth in the letters of transmittal
to be mailed to stockholders as promptly as practicable following the Effective Time.
The letter of transmittal will include
instructions of the procedures to be taken by a holder of a certificate if such holder has lost a certificate or if such certificate
has been stolen or destroyed. In the event any certificate has been lost, stolen or destroyed, the Paying Agent may, in its reasonable
discretion and as a condition precedent to the payment of any Merger Consideration, require the owner of such lost, stolen or
destroyed certificate to provide an appropriate affidavit and to deliver a bond in a customary amount.
If any Merger Consideration is to be
paid to a person other than the person in whose name the surrendered certificate is registered, then, as a condition of payment
of the Merger Consideration, the surrendered certificate is properly endorsed or is otherwise in proper form for transfer and
the person requesting such payment shall pay to the Paying Agent any transfer and other similar taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder of the certificate so surrendered or shall establish
to the reasonable satisfaction of the Paying Agent that such taxes either have been paid or are not required to be paid.
The Merger Consideration paid in accordance
with the terms of the Merger Agreement upon surrender of any shares of our common stock shall represent full payment and satisfaction
of all rights pertaining to such shares of our common stock. From and after the Effective Time, the holders of shares of our common
stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of our common
stock except as otherwise provided for in the Merger Agreement or by applicable law. If, after the Effective Time, certificates
are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in the Merger Agreement,
Any portion of the Exchange Fund (including
any interest received with respect thereto) that is not distributed to holders of shares of our common stock following the first
anniversary of the Effective Time will be delivered to the Surviving Corporation upon demand, and any remaining holders of shares
of our common stock will thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or other similar
laws) with respect to the Merger Consideration payable upon due surrender of their shares of our common stock, without interest.
None of Parent, Sub, the Company, the Surviving Corporation and the Paying Agent will be liable to any holder or former holder
of our common stock or to any other person or entity with respect to any cash amounts properly delivered to any public official
pursuant to any applicable abandoned property law, escheat or similar laws.
Withholding
Each of Parent, the surviving corporation,
the Company, Sub and the Paying Agent will be entitled to deduct and withhold from the consideration otherwise payable to any
holder of shares of our common stock, Options or RSUs such amounts for taxes that it is required to deduct and withhold with respect
to making such payment, or the vesting, waiver or restrictions or other actions provided for in the Merger Agreement, under all
applicable tax laws.
Representations and Warranties
The Merger Agreement contains representations
and warranties of the Company, Parent and Sub.
Some of the representations and warranties
in the Merger Agreement made by the Company are qualified as to “materiality” or “Company Material Adverse Effect.”
For purposes of the Merger Agreement, “Company Material Adverse Effect” means, with respect to the Company, any change,
circumstance, development, occurrence, state of facts, event or effect that has had, or would reasonably be expected to have,
individually or in the aggregate together with all other changes, circumstances, developments, occurrences, states of facts, events
or effects, a material adverse effect on the business, financial condition or continuing results of operations of the Company
and its subsidiaries, taken as a whole;
provided
,
however
, that none of the following shall constitute or be taken
into account in determining whether there has been, a “Company Material Adverse Effect”:
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the entry into
or the announcement or pendency of the Merger Agreement or the Merger and the other transactions
contemplated by the Merger Agreement or the consummation of the Merger and the other
transactions contemplated by the Merger Agreement, in each case, including (i) by reason
of the identity of, or any facts or circumstances relating to, Parent, Sub or any of
their respective affiliates, (ii) by reason of any communication by Parent or any of
its affiliates regarding the plans or intentions of Parent with respect to the conduct
of the business of the Company and its subsidiaries following the Effective Time and
(iii) the impact of any of the foregoing on any relationships with customers, suppliers,
vendors, business partners, employees or regulators;
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any change,
circumstance, development, occurrence, state of facts, event or effect affecting the
economy or the financial, credit or securities markets in the United States or elsewhere
in the world (including interest rates and exchange rates) generally affecting the industries
in which the Company or any of its subsidiaries operates, except to the extent they materially
and disproportionately adversely affect the Company and its subsidiaries, taken as a
whole, compared to other companies operating primarily in the same industries in which
the Company and its subsidiaries operate;
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the suspension
of trading in securities generally on the NASDAQ;
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any development
or change in applicable Law, GAAP or accounting standards or the interpretation of any
of the foregoing, except to the extent they materially and disproportionately adversely
affect the Company and its subsidiaries, taken as a whole, compared to other companies
operating primarily in the same industries in which the Company and its subsidiaries
operate;
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any action taken
by the Company or any of its subsidiaries that is expressly required by the Merger Agreement
or at Parent’s request or the failure by the Company or any of its subsidiaries
to take any action that is prohibited by the Merger Agreement (including, if applicable,
to the extent Parent fails to provide its consent to such action after receipt of a written
request therefor);
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the commencement,
occurrence, continuation or escalation of any armed hostilities or acts of war (whether
or not declared) or terrorism, except to the extent they materially and disproportionately
adversely affect the Company and its subsidiaries, taken as a whole, compared to other
companies operating primarily in the same industries in which the Company and its subsidiaries
operate;
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any actions
or claims made or brought by any of the current or former Company stockholders (or on
their behalf or on behalf of the Company, but in any event only in their capacities as
current or former stockholders) arising out of the Merger Agreement, the Merger or any
of the other transactions contemplated by the Merger Agreement;
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the existence,
occurrence or continuation of any weather-related or force majeure events, including
any earthquakes, floods, hurricanes, tropical storms, fires or other natural disasters
or any national, international or regional calamity, except to the extent they materially
and disproportionately adversely affect the Company and its subsidiaries, taken as a
whole, compared to other companies operating primarily in the same industries in which
the Company and its subsidiaries operate; or
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any changes
in the market price or trading volume of the shares of our common stock, any changes
in the ratings or the ratings outlook for the Company or any of its subsidiaries by any
applicable rating agency, any changes in any analyst’s recommendations or ratings
with respect to the Company or any of its subsidiaries or any failure of the Company
to meet any internal or external projections, budgets, guidance, forecasts or estimates
of revenues, earnings or other metrics for any period ending on or after the date of
the Merger Agreement (it being understood that the exceptions in this clause shall not
prevent or otherwise affect the underlying cause of any such change or failure referred
to therein (to the extent not otherwise falling within any of the exceptions provided
by the foregoing clauses) from being taken into account in determining whether a Company
Material Adverse Effect has occurred).
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In the Merger Agreement, the Company
has made representations and warranties to Parent and Sub that are subject, in some cases, to specified exceptions and qualifications
contained in the Merger Agreement. These representations and warranties relate to, among other things:
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due organization,
valid existence, good standing and authority and qualification to conduct business with
respect to the Company and its subsidiaries;
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the Company’s
certificate of incorporation and bylaws and the equivalent governing documents of its
subsidiaries;
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the capital
structure of the Company as well as the ownership and capital structure of its subsidiaries;
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the Company’s
corporate power and authority to enter into and perform the Merger Agreement and the
enforceability of the Merger Agreement;
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the Board’s
approval and recommendation of the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement;
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the absence
of any conflicts with, or violations of, laws, organizational documents or the Company’s
material contracts or the creation of encumbrances upon the properties, assets or rights
pursuant to the Company’s material contracts, in each case as a result of the Company’s
execution, delivery or performance of the Merger Agreement or the consummation by the
Company of the transactions contemplated by the Merger Agreement;
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required consents
or approvals of and regulatory filings with governmental entity in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby;
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possession of
authorizations, licenses and permits necessary to operate the business;
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the Company’s
SEC filings and financial statements included in such SEC filings;
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the absence
of any untrue statement of material fact or omission of statements of material fact required
to be stated in this proxy statement;
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internal control
over financial reporting and disclosure controls and procedures related to reports filed
under the Exchange Act;
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the conduct
of the business in the ordinary course in all material respects and the absence of a
Company Material Adverse Effect, in each case since April 1, 2017;
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the absence
of undisclosed liabilities;
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the absence
of litigations and outstanding governmental orders and judgments;
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matters relating
to employees and employee benefit plans;
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the payment
of taxes, the filing of tax returns, the absence of tax proceedings or tax liabilities
for another person, and other tax matters related to the Company and its subsidiaries;
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real property
leased by the Company and its subsidiaries;
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compliance with
environmental laws;
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intellectual
property matters;
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compliance with
privacy and security laws;
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the receipt
of the opinion of Guggenheim by the Company with respect to the fairness of the Merger
Consideration to the Company stockholders from a financial point of view, as of the date
of such opinion and subject to the assumptions and limitations set forth therein;
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the inapplicability
of state anti-takeover statutes to the Merger;
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the Requisite
Stockholder Approval;
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payment of fees
to brokers, finders or investment bankers in connection with the Merger Agreement and
the transactions contemplated thereby; and
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acknowledgement
by the Company
of the absence
of representations and warranties by Parent or Sub other than those set forth in the
Merger Agreement and the Limited Guarantee.
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In the Merger Agreement, Parent and Sub
have made customary representations and warranties to the Company that are subject, in some cases, to specified exceptions and
qualifications contained in the Merger Agreement, including as would not, individually or in the aggregate, reasonably be expected
to prevent or materially delay the ability of Parent and Sub to consummate the Merger and the other transactions contemplated
by the Merger Agreement. These representations and warranties relate to, among other things:
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due organization,
valid existence, good standing and authority and qualification to conduct business with
respect to Parent and Sub;
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Parent’s
and Sub’s corporate authority to enter into and perform the Merger Agreement and
the enforceability of the Merger Agreement;
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the absence
of any conflicts with, or violations of, laws, organizational documents or contracts
or the creation of encumbrances upon Parent’s or Sub’s properties, assets
or rights, in each case as a result of Parent’s and Sub’s execution, delivery
or performance of the Merger Agreement or the consummation by Parent and Sub of the transactions
contemplated by the Merger Agreement;
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required consents
or approvals of and regulatory filings with governmental entity in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby;
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the absence
of any untrue statement of material fact or omission of statements of material fact required
to be stated in this proxy statement from any information supplied or to be supplied
in writing by or on behalf of Parent or Sub specifically for inclusion in this proxy
statement;
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the absence
of litigations and outstanding governmental orders and judgments;
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the
capitalization of Sub and absence of any activities other than pursuant to consummation
of the transactions contemplated in the Merger Agreement;
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l
ack
of “interested stockholder” status pursuant to Section 203 of the DGCL;
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the financing
and the availability of funds to consummate the Merger and the other transactions contemplated
by the Merger Agreement;
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payment of fees
to brokers, finders or investment bankers in connection with the Merger Agreement and
the transactions contemplated thereby;
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solvency of
Parent, Surviving Corporation and their respective subsidiaries;
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absence of arrangements
relating to the transactions contemplated by the Merger Agreement or operations of the
Surviving Corporation after the Effective Time;
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acknowledgment
by Parent and Sub
as to independent
investigation and the absence of reliance upon any representations and warranties of
the Company other than those set forth in the Merger Agreement and a certificate to be
delivered pursuant to the Merger Agreement;
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the absence
of arrangements pursuant to which the Company stockholders are entitled to consideration
different from the Merger Consideration or agree to vote against any Superior Proposal;
and
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investment intention
of Parent.
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The representations and warranties of
the Company, Parent and Merge Sub contained in the Merger Agreement will not survive the consummation of the Merger.
Covenants Regarding Conduct of Business by the Company
Prior to the Merger
Between the date of the Merger Agreement
and the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its terms (the “Pre-Closing
Period”), except as set forth in the Company disclosure letter, as expressly contemplated or as required by the Merger Agreement
or as required by applicable law, by any governmental entity of competent jurisdiction or by the rules of the NASDAQ, unless Parent
otherwise agrees in writing (which agreement not to be unreasonably withheld, delayed or conditioned), the Company is required
to, and is required to cause its subsidiaries to, conduct its operations in all material respects in the ordinary course in substantially
the same manner as conducted before the date of the Merger Agreement and in compliance with applicable law.
In addition, during the Pre-Closing Period,
except as set forth in the Company disclosure letter, as expressly contemplated or required by the Merger Agreement, or as required
by applicable law, by any governmental entity of competent jurisdiction or by the rules of the NASDAQ, the Company will not, and
will cause each of its subsidiaries not to, do any of the following without Parent’s prior written consent (which consent
not to be unreasonably withheld, delayed or conditioned):
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amend or modify
the corporate organizational documents of the Company or any of its subsidiaries;
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issue or authorize
the issuance of any equity securities, any securities convertible into, or exchangeable
or exercisable for, any such equity securities, or any rights to acquire any such equity
securities, other than upon the exercise the outstanding purchase right under the SSP,
Options, options granted under the SSP and the vesting of RSUs;
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other than certain
exceptions, sell or otherwise encumber or dispose of any properties or non-cash assets
with a value in excess of $1 million in the aggregate;
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declare, set
aside, make or pay any dividend or other distribution with respect to the capital stock
of the Company, or, other than certain exceptions, offer to redeem, repurchase or acquire,
any shares of its capital stock;
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other than certain
exceptions, reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase
or otherwise acquire any of its equity securities or securities or other rights exercisable
for or convertible into any such equity securities or amend any term of any equity securities;
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other than certain
exceptions, merge or consolidate with any person or adopt a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization or other reorganization;
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make or offer
to make any acquisition of a material business or enter into a new business unrelated
to the Company’s current business;
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other than certain
exceptions, incur any indebtedness for borrowed money or issue any debt securities, or
assume or guarantee the obligations of any person (other than a wholly-owned subsidiary
of the Company) for borrowed money, with the aggregate principal amount outstanding at
any one time in excess of $500,000;
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other than certain
exceptions, make any loans, advances or capital contributions to, or investments in,
any other person (other than any subsidiary of the Company);
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except to the
extent required by law or the terms of any benefit plan: (i) (A) other than as required
by any contract made available to Parent prior to and in effect as of the date of the
Merger Agreement, increase the compensation, bonus, severance or benefits payable or
to become payable to, or (B) grant any severance, retention, transaction, change in control
or termination pay or other similar benefit to, any current or former directors, officers
or employees, consultants, independent contractors or other individual service providers;
(ii) other than certain exceptions, enter into any employment, consulting, independent
contractor, individual service provider or severance agreement; (iii) establish, adopt,
enter into or amend any benefit plan, collective bargaining, bonus, profit sharing, thrift,
pension, retirement, deferred compensation, employment, termination, severance or other
plan or agreement; (iv) accelerate the payment, right to payment, funding or vesting
of any compensation or benefits; (v) hire any employee with an expected annual compensation
in excess of $250,000 or terminate any employee with an annual compensation in excess
of $250,000, other than terminations for cause; or (vi) take any action to amend or waive
any performance or vesting criteria or accelerate vesting, exercisability or funding
under any benefit plan of the Company
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except in each
case to the extent required by law, make, revoke or change any material tax election
inconsistent with past practice, surrender any claim for a refund of taxes, enter into
a closing agreement with respect to any material amount of taxes, amend any material
tax return or settle or compromise any material tax proceeding or assessment by any governmental
entity;
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make any material
change in accounting policies or procedures, other than as required by GAAP, applicable
law or any governmental entity with competent jurisdiction;
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make any capital
expenditures except as set forth in the Company disclosure letter;
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enter into,
modify or amend or terminate any material contract or any contract with a supplier except,
in each case, for (A) entering into purchase orders in the ordinary course of business,
(B) renewals of contracts for a term or renewal term of one year or less cancellable
by the Company or its subsidiaries, without penalty or other liability, upon notice of
90 days or less and (C) new contracts with suppliers entered into in the ordinary course
of business that do not require an annual expenditure of $250,000 individually or $500,000
in the aggregate;
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settle or compromise
any proceeding or series of proceedings that involve, individually or in the aggregate,
the payment of more than $5 million (net of any amount covered by insurance or indemnification)
in excess of the amount reserved on the latest consolidated balance sheet of the Company
in respect of the proceedings and do not involve any material injunction or non-monetary
relieve on the Company or any of its subsidiaries; or
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authorize or
enter into any contract to do any of the foregoing.
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Restriction on Solicitation of Competing Proposals
Except as permitted by the terms of the
Merger Agreement, the Company will, and will cause each of its subsidiaries and its and their respective directors, officers,
employees, managers, consultants, accountants, advisors, investment bankers and counsel (collectively, the “representatives”)
to:
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cease any solicitations,
discussions or negotiations with any persons that may be ongoing with respect to any
Competing Proposal (as defined below); and
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terminate “data
room” access for such persons and their representatives and request the prompt
return or destruction of any non-public information regarding the company or its subsidiaries
furnished to such persons and their representatives.
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Except as permitted by the terms of the
Merger Agreement, the Company has also agreed that it will not, and will cause each of its subsidiaries and its and their respective
representatives not to:
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initiate, solicit,
facilitate, or knowingly encourage the submission of any Competing Proposal;
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furnish any
non-public information regarding the Company or any of its subsidiaries to any third
person in connection with or in response to a Competing Proposal;
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participate
in any discussions or negotiations with any third person with respect to any Competing
Proposal;
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terminate, waive,
amend or modify any provision of, or grant permission under, any confidentiality agreement
or standstill agreement to which the Company or any of its subsidiaries is party;
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waive the applicability
of all or any portion of any takeover statute in respect of any person; or
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resolve to agree
to take any of the foregoing actions.
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Notwithstanding the restrictions described
above, the Company may furnish information with respect to it and its subsidiaries to, and participate in discussions or negotiations
with, the person making a Competing Proposal and such person’s representatives regarding such Competing Proposal if:
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the Company
has received a
bona fide
written Competing Proposal that did not result from a
material breach of the non-solicitation provisions of the Merger Agreement, which Competing
Proposal is made on or after the date of the Merger Agreement and prior to the Special
Meeting (or any adjournment or postponement thereof); and
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the Board determines
in good faith, after consultation with its financial advisors and outside counsel, that
such Competing Proposal constitutes or would reasonably be expected to lead to a Superior
Proposal (as defined below) and that failure to take such action would reasonably be
expected to be inconsistent with the directors’ fiduciary duties under law.
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When furnishing any such non-public information
to, or entering into discussions or negotiations with, such person, the Company will: (i) not, not permit its subsidiaries, and
not authorize its representatives to, disclose any non-public information regarding the Company to such person without first entering
into an acceptable confidentiality agreement with such person that contains substantially similar terms to those contained in
the confidentiality agreement entered into by and between the Company and Monomoy (an “Acceptable Confidentiality Agreement”);
(ii) promptly (and in any event within 48 hours) advise Parent in writing of the receipt of any Competing Proposal that constitutes
or would reasonably be expected to lead to a Superior Proposal and shall disclose to Parent the material terms of any such Competing
Proposal (but shall have no obligation to disclose to Parent the identity of any person making such Competing Proposal or the
terms thereof); (iii) keep Parent informed in all material respects on a prompt basis of any material developments, discussions
or negotiations regarding such Competing Proposal; and (iv) as promptly as practicable (and in any event within 24 hours thereafter)
provide to Parent any information concerning the Company or its subsidiaries provided or made available to such other person (or
its representatives) that was not previously provided or made available to Parent.
A “Competing Proposal” means,
other than the transactions contemplated by the Merger Agreement, any proposal, inquiry, indication of interest or offer, from
any person or group of persons (other than Parent, Sub or any of their respective affiliates) relating to, in a single transaction
or a series of related transactions, (i) the direct or indirect acquisition (whether by merger, consolidation, equity investment,
joint venture, recapitalization, reorganization or otherwise) by any person or group of persons of more than 20% of the consolidated
assets of the Company and its subsidiaries, taken as a whole, (ii) the acquisition in any manner, directly or indirectly, by any
person or group of persons of more than 20% of any class of equity securities of the Company or any of its subsidiaries or (iii)
any merger, consolidation, share exchange, recapitalization, liquidation, dissolution or similar transaction that would result
in any person or group of persons beneficially owning, directly or indirectly, more than 20% of the voting power of the surviving
entity in a merger involving the Company or any of its subsidiaries or the resulting direct or indirect parent of the Company
or such surviving entity (or any securities convertible into, or exchangeable for, securities representing such voting power).
A “Superior Proposal” means
an unsolicited Competing Proposal (with all percentages in the definition of Competing Proposal increased to 50%), which was not
obtained or made as a result of a breach of the non-solicitation provisions of the Merger Agreement, made by any person on terms
that the Board determines in good faith, after consultation with the Company’s financial advisors and outside legal counsel,
and considering such factors as the Board considers to be appropriate, are (i) more favorable to the Company and its stockholders
from a financial perspective than the transactions contemplated by the Merger Agreement and (ii) reasonably capable of being completed
in accordance with its terms.
Obligation of the Board with respect to Its Recommendation
In addition, except as permitted by the
Merger Agreement, neither the Board nor any of its committees will: (i) adopt, authorize, approve, endorse, recommend or otherwise
declare advisable the adoption of any Competing Proposal; (ii) following the public announcement of a Competing Proposal, at the
written request of Parent, fail to reaffirm publicly the Company Recommendation (as defined in the Merger Agreement and described
in the section captioned “
The Merger Agreement — Obligations with respect to this Proxy Statement and the Special
Meeting
”) within ten business days after Parent’s written request to do so (
provided
,
however
, that
Parent shall be entitled to make such written request for reaffirmation only once as to each Competing Proposal unless the price
contemplated by such Competing Proposal is increased); (iii) following the commencement of a tender offer or exchange relating
to the shares of our common stock by a person unaffiliated with Parent, fail to reaffirm the Company Recommendation and recommend
that the Company stockholders reject such tender offer or exchange offer within ten business days after the commencement of such
tender offer or exchange offer; (iv) withhold, change, modify, amend or otherwise propose publicly to withdraw, change, modify,
amend, in each case, in a manner adverse to Parent, the Company Recommendation or fail to include the Company Recommendation in
this proxy statement (any of the foregoing, a “Change of Company Recommendation”); or (v) allow the Company or any
of its subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement or other similar agreement relating to any Competing Proposal (other than an Acceptable Confidentiality
Agreement) or requiring the Company to abandon, terminate or fail to consummate the transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, the
Company is permitted to: (i) take and disclose to its stockholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item
1012(a) of Regulation M-A promulgated under the Exchange Act or (ii) issue a “stop, look and listen” statement pending
disclosure of its position, as contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act;
provided
,
however
,
that a position disclosed pursuant to clause (i) shall not be deemed a Change of Company Recommendation if it includes either
an express rejection of any applicable Competing Proposal or an express reaffirmation of the Company Recommendation;
provided,
further
, that the Company may not make a Change of Company Recommendation except as expressly permitted by the Merger Agreement.
Furthermore, at any time prior to obtaining
approval of the Merger Agreement by the Company stockholders, the Board may make a Change of Company Recommendation if:
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(i) a Competing
Proposal (that did not result from a material breach of the non-solicitation provisions
of the Merger) is made to the Company after the date of the Merger Agreement by a third
person and such Competing Proposal is not withdrawn and (ii) the Board determines in
good faith (after consultation with its financial advisors and outside legal counsel)
that such Competing Proposal constitutes a Superior Proposal;
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the Company
provides Parent prior written notice of the Company’s intention to make a Change
of Company Recommendation (the “Notice of Change of Recommendation”) no less
than three business days prior to the Board making a Change of Company Recommendation,
which notice shall identify the person making such Superior Proposal and include the
material terms and conditions of such Superior Proposal (it being agreed that neither
the delivery of such notice by the Company nor the public announcement that the Board
has received or is evaluating a Competing Proposal, in and of itself, shall constitute
a Change of Company Recommendation);
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the Company
has (to the extent requested by Parent) negotiated in good faith with Parent with respect
to any changes to the terms of the Merger Agreement proposed by Parent during such three
business days prior to making such Change of Company Recommendation (it being understood
and agreed that any amendment to any material term of such Superior Proposal shall require
a new Notice of Change of Recommendation and an additional two-day period from the date
of such notice); and
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taking into
account any changes to the terms of the Merger Agreement offered by Parent in writing
to the Company, the Board has determined in good faith (after consultation with its financial
advisors and outside legal counsel) that such Competing Proposal would continue to constitute
a Superior Proposal even if such changes offered in writing by Parent were to be given
effect.
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In addition, at any time prior to the
Effective Time, the Board may make a Change of Company Recommendation if:
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there shall
occur or arise after the date of the Merger Agreement a material development or material
change in circumstances (or if such material development or material change in circumstances
occurred or arose on or prior to the date of the Merger Agreement, the material consequences
of which are not known to the Board as of the date of the Merger Agreement and only become
known to the Board prior to the Effective Time), in each case, that was not reasonably
foreseeable and that relates to the Company or any of its subsidiaries but does not relate
to any Competing Proposal (each, an “Intervening Event”);
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the Board determines
in good faith (after consultation with its financial advisors and outside legal counsel)
that, in light of such Intervening Event, the failure to withdraw or modify the Company
Recommendation in a manner adverse to Parent would, if the Merger Agreement were not
amended or an alternative transaction with Parent were not entered into, be inconsistent
with the Board’s fiduciary obligations to the Company stockholders under applicable
law;
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the Company
provides Parent a Notice of Change of Recommendation, which notice shall describe the
Intervening Event (it being agreed that neither the delivery of the Notice of Change
of Recommendation by the Company nor the public announcement that the Board is considering
making a Change of Company Recommendation under applicable law will constitute a Change
of Company Recommendation);
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the Company
has (to the extent requested by Parent) negotiated in good faith with Parent with respect
to any changes to the terms of the Merger Agreement proposed by Parent for at least three
business days following receipt by Parent of such Notice of Change of Recommendation;
and
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taking into
account any changes to the terms of Merger Agreement offered by Parent in writing to
the Company, the Board has determined in good faith (after consultation with its financial
advisors and outside legal counsel) that the failure to withdraw or modify the Company
Recommendation would be inconsistent with the Board’s fiduciary obligations to
the Company stockholders under applicable law in light of such Intervening Event.
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Obligations with respect to this Proxy Statement and the
Special Meeting
The Merger Agreement requires that
the Company, as promptly as reasonably practicable following the date of the Merger Agreement, prepare and file with the SEC
this proxy statement. Parent is required to cooperate with the Company in the preparation of this proxy statement and is
required to furnish all information concerning it and Sub as may be required to be set forth in this proxy statement under
applicable law. The Company is required, with Parent’s cooperation, to use commercially reasonable efforts to have this
proxy statement cleared by the SEC as promptly as reasonably practicable. The Company is required to, as soon as reasonably
practicable after this proxy statement is cleared by the SEC for mailing to the Company stockholders, duly give notice of,
convene and hold a meeting of its stockholders to consider the adoption of the Merger Agreement. The Board will, subject to
the right of the Board to make a Change of Company Recommendation pursuant to the provisions described in the
section captioned “
The Merger Agreement — Obligation of the Board with respect to Its
Recommendation,
” recommend to the Company stockholders that the Requisite Stockholder Approval be given (the
“Company Recommendation”). The Company will include the Company Recommendation in the proxy statement.
The Company may delay or postpone convening
the stockholders’ meeting (i) with consent of Parent, (ii) for the absence of a quorum, (iii) to allow reasonable additional
time for any supplemental or amended disclosure which the Company has determined in god faith (after consultation with outside
legal counsel) is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed
by the Company stockholders prior to the stockholders’ meeting, or (iv) to allow additional solicitation of votes in order
to obtain the Requisite Stockholder Approval.
Access to Information
Until the Effective Time or the termination
of the Merger Agreement in accordance with its terms, subject to certain express exceptions, the Company is required to, and is
required to cause each of its subsidiaries to, provide to Parent, Sub and their respective representatives reasonable access during
normal business hours in such manner as not to interfere with the operation of any business conducted by the Company or any of
its subsidiaries, upon prior written notice to the Company, to the Company’s and its subsidiaries’ officers, employees,
properties, offices and other facilities and to their books and records, and furnish promptly such information concerning the
business, properties, contracts, assets and liabilities of the Company and its subsidiaries as Parent or its representatives may
reasonably request.
Efforts to Consummate the Merger
Subject to provisions relating to a Change
of Company Recommendation, each of the Company and Parent is required to (and Parent is required to cause each of its affiliated
investment funds to) use reasonable best efforts to consummate the Merger and the other transactions contemplated by the Merger
Agreement and to cause the conditions to Parent’s, Sub’s and the Company’s obligations to effect the Merger
to be satisfied. Parent is required to (and is required to cause Sub and each of Parent’s and Sub’s affiliated investment
funds to) and the Company is required to (and is required to cause each of its subsidiaries to) use reasonable best effectors
to (i) promptly obtain all actions or nonactions, consents, permits, waivers, approvals, authorizations and orders from governmental
entities or other persons necessary or advisable in connection with the consummation of the transactions contemplated by the Merger
Agreement, (ii) as promptly as practicable, and in any event within ten business days after the date of the Merger Agreement,
make and not withdraw all registrations and filings with any governmental entity or other persons necessary or advisable in connection
with the consummation of the transactions contemplated by the Merger Agreement, including the filings required under the HSR Act
or any other antitrust law, (iii) defend all lawsuits or other legal, regulatory, administrative or other proceedings to which
it or any of its affiliates is a party challenging or affecting the Merger Agreement or the consummation of the transactions contemplated
by the Merger Agreement, (iv) seek to have lifted or rescinded any injunction or restraining order adversely affecting the ability
of the parties to consummate the transactions contemplated by the Merger Agreement, (v) seek to resolve any objection or assertion
by any governmental entity challenging the Merger Agreement or the transactions contemplated by the Merger Agreement, and (vi)
execute and deliver any additional instruments necessary or advisable to consummate the transactions contemplated by the Merger
Agreement.
Each party is required to consult and
cooperate with the other parties in connection with any filing, analysis, appearance, presentation, memorandum, brief, argument,
opinion or proposal made or submitted to any governmental entity in connection with the transactions contemplated by the Merger
Agreement. Each party is required to notify and keep the other parties informed as of the status of any request, inquiry, investigation
or legal proceeding by or before any governmental entity with respect to the transactions contemplated by the Merger Agreement.
In addition, each party is required to promptly inform the other parties of any communication to or from the FTC, the Antitrust
Division or any other governmental entity regarding the transactions contemplated by the Merger Agreement.
Directors’ and Officers’ Indemnification and
Insurance
From and after the Effective Time, Parent
is required to, and is required to cause the Surviving Corporation to, to the extent provided in the organizational documents
of the Company and its subsidiaries in effect as of the date of the Merger Agreement, indemnify, defend and hold harmless each
current or former director or officer of the Company or any of its subsidiaries against (i) losses, expenses, judgments, fines,
claims, damages or liabilities (including amounts paid in settlement) arising out of actions or omissions occurring at or prior
to the Effective Time to the extent that they are based on or arise out of the fact that such person is or was a director or officer
of the Company or any of its subsidiaries (the “Indemnified Liabilities”), and (ii) all Indemnified Liabilities to
the extent that they are based on or arise out of or pertain to the transactions contemplated by the Merger Agreement.
The Company is permitted to, prior to
the Effective Time, and if the Company fails to do so, Parent is obligated to cause the Surviving Corporation to obtain and fully
pay the premium for an insurance and indemnification policy that provides coverage for a period of six years from the Effective
Time for events occurring prior to the Effective Time that is substantially equivalent to and in any event no less favorable in
the aggregate to the intended beneficiaries thereof than the Company’s existing directors’ and officers’ liability
insurance policy. If the Company and the Surviving Corporation for any reason fail to obtain such a “tail” insurance
policy as of the Effective Time, the Surviving Corporation is required to, and Parent is required to cause the Surviving Corporation
to, continue to maintain in effect for a period of six years from and after the Effective Time (and for so long thereafter as
any claims brought before the end of such six-year period thereunder are being adjudicated) such insurance in place as of the
date of the Merger Agreement with terms, conditions, retentions and limits of liability that are at least as favorable as provided
in the Company’s existing policies as of the date of the Merger Agreement. Alternatively, the Surviving Corporation is obligated
to, and Parent is obligated to cause the Surviving Corporation to, purchase comparable directors’ and officers’ liability
insurance for such six-year period (and for so long thereafter as any claims brought before the end of such six-year period thereunder
are being adjudicated) with terms, conditions, retentions and limits of liability that are at least as favorable as provided in
the Company’s existing policies as of the date of the Merger Agreement.
Furthermore, for at least six years from
and after the Effective Time, the organizational documents of the Surviving Corporation and each of its subsidiaries must contain
provisions no less favorable with respect to exculpation, indemnification and advancement of expenses for periods at or prior
to the Effective Time than are currently set forth in the organizational documents of the Company and its subsidiaries. The Merger
Agreement also provides that the indemnification rights set forth in the indemnification agreements, the form of which was filed
as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2016, between the Company
or any of its subsidiaries and any of the directors, officers or employees thereof will be assumed by the Surviving Corporation
and will continue in full force and effect in accordance with their terms following the Effective Time.
Financing Covenants
The consummation of the Merger is not
conditioned upon Parent’s or Sub’s receipt of the equity financing or any other financing. However, under the Merger
Agreement, Parent and Sub are obligated to use their reasonable best efforts to arrange the equity financing and debt financings
on the terms and conditions described in the original equity commitment letter and debt commitment letters. Parent will not permit
any amendment or modification of, or any waiver or consent under, any provision of the original equity commitment letter or debt
commitment letters or other documentation relating to the financings without the prior written consent of the Company if such
amendment, modification, waiver or consent would (i) reasonably be expected to adversely affect Parent’s or Sub’s
ability to consummate the transactions contemplated by the Merger Agreement, (ii) reduce the aggregate amount of the financing
to fund the amounts required to be paid by Parent or Sub under the Merger Agreement below the amounts required to consummate the
transactions contemplated by the Merger Agreement, (iii) impose new or additional conditions or expand upon (or amend or modify
in any manner adverse to the interests of the Company) the conditions precedent to the financings as set forth in the original
equity commitment letter or debt commitment letters or other documentation relating to the financings, (iv) reasonably be expected
to delay the closing of the Merger, or (v) amend any remedies available in respect of the debt financing.
Subject to certain exceptions, on or
prior to the closing, the Company must use its commercially reasonable efforts to provide, or cause its representatives to provide,
to Parent and Sub, at Parent’s sole expense, customary cooperation reasonably requested by Parent and Sub in connection
with the arrangement, syndication and consummation of the debt financing. Parent has agreed to reimburse the Company for all reasonable
and documented out-of-pocket costs and expenses incurred by the Company or any of its subsidiaries in connection with such cooperation
and to indemnify the Company, its subsidiaries and their respective representatives against losses incurred in connection with
the arrangement of the debt financing and any information used in connection therewith.
Employee Benefits
For a period of one year following the
Effective Time, Parent is required to provide, or is required to cause its subsidiaries, including the Surviving Corporation,
to provide, each employee of the Company or its subsidiaries who continues to be employed by the Surviving Corporation or any
subsidiary thereof with (i) base salary, wages and cash-based commission opportunities at a rate that is substantially comparable
in the aggregate to the rate of base salary, wages or commission opportunities provided to such employee immediately prior to
the Effective Time, (ii) an annual bonus opportunity that is substantially comparable in the aggregate to the annual cash-based
bonus opportunity provided to such employee immediately prior to the Effective Time, (iii) severance benefits that are substantially
comparable in the aggregate to the severance benefits provided under the severance plan, policy or agreement in effect for the
benefit of such employee immediately prior to the Effective Time, and (iv) other benefits (including paid-time off, but excluding,
for the avoidance of doubt, equity incentive compensation) that are substantially comparable, in the aggregate, to the other compensation
and benefits provided to such employee immediately prior to the Effective Time under the Company’s benefit plans.
Without limiting the generality of the
foregoing, from and after the Effective Time, Parent shall, or shall cause its subsidiaries, including the Surviving Corporation,
to, assume, honor and continue all of the Company’s and its subsidiaries’ employment, severance, retention and termination
plans, policies, programs, agreements and arrangements in existence as of the date of the Merger Agreement, in accordance with
their terms as in effect immediately prior to the Effective Time and, for a period of one year following the Effective Time, shall
do so without any amendment or modification, other than any amendment or modification required to comply with applicable law or
as permitted pursuant to the terms of the applicable plans, policies, programs, agreements and arrangements.
For purposes of eligibility to participate,
vesting and, with respect to vacation and severance only, determination of the level of benefits under Parent’s and its
subsidiaries’ benefit plans providing benefits to any continuing employees after the Effective Time, continuing employees
will be credited for service with or recognized by the Company and its subsidiaries prior to the Effective Time to the extent
that credit for such service is recognized under corresponding benefit plans of the Company or its subsidiaries prior to the Effective
Time;
provided
,
however
, that credit for such service will not apply with respect to benefit accruals under
any equity based compensation plan, long-term incentive plan, defined benefit pension plan, retiree plan or welfare plan, or if
credit for such service would result in a duplication of benefits.
Additionally, Parent shall, or shall
cause its subsidiaries, including the Surviving Corporation, to use commercially reasonable efforts to waive, or cause to be waived,
any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any welfare benefit
plan maintained by Parent or any of its subsidiaries, including the Surviving Corporation, in which continuing employees (and
his or her covered dependents) will be eligible to participate from and after the Effective Time, except to the extent such pre-exiting
condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under
the comparable benefit plans of the Company immediately prior to the Effective Time. Parent shall, or shall cause its subsidiaries,
including the Surviving Corporation, to recognize, or cause to be recognized, the dollar amount of all co-payments, deductibles
and similar expenses incurred by each continuing employee (and his or her eligible dependents) during the calendar year in which
the Effective Time occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant
welfare benefit plans in which such continuing employee (and dependents) will be eligible to participate from and after the Effective
Time.
Securityholder Litigation
The Company is required to promptly advise
Parent of any litigation commenced after the date of the Merger Agreement against the Company or any of its directors by any of
its stockholders (on their own behalf or on behalf of the Company) to the extent relating to the Merger Agreement or the transactions
contemplated by the Merger Agreement and to keep Parent reasonably and regularly informed regarding any such litigation. The Company
may not settle any such litigation without the prior written consent of Parent (not to be unreasonably withheld, delayed or conditioned).
Other Covenants and Agreements
The Merger Agreement contains
other covenants to and agreements regarding various other matters, including:
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public statements
with respect to the transactions contemplated by the Merger Agreement;
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state anti-takeover
or other similar laws;
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the Company’s
ability to take all actions reasonably necessary or advisable to ensure that dispositions
of equity securities of the Company (including derivative securities) by any officer
or director of the Company who is subject to Section 16 of the Exchange Act pursuant
to the transactions contemplated by the Merger Agreement are exempt under Rule 16b-3
promulgated under the Exchange Act; and
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each party being
responsible for costs and expenses incurred by it in connection with the Merger Agreement
and the transactions contemplated by the Merger Agreement and the responsibility of Parent,
Sub and, after the closing of the Merger, the Surviving Corporation, for all transfer
taxes incurred in connection with the transactions contemplated by the Merger Agreement.
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Conditions to the Merger
Conditions to Each Party’s Obligations
Each party’s obligations to consummate
the Merger are subject to the satisfaction or waiver of the following conditions at or prior to the Effective Time:
|
·
|
the Company
will have obtained the Requisite Stockholder Approval at the Special Meeting or any adjournment
or postponement thereof;
|
|
·
|
no governmental
entity of competent jurisdiction will have issued, enacted, entered, promulgated or enforced
any law, order, injunction or decree that will render the consummation of the Merger
illegal, or prohibit, enjoin or otherwise prevent the Merger; and
|
|
·
|
any waiting
period (and any extension thereof) applicable to the Merger under the HSR Act will have
been terminated or expired and any other approval or waiting period under any other applicable
competition, merger control, antitrust laws will have been obtained, terminated or expired.
|
Additional Conditions to Parent and Sub’s Obligations
In addition, the obligations of Parent
and Sub to effect the Merger are subject to the satisfaction or waiver by Parent of the following conditions:
|
·
|
the Company’s
representations and warranties regarding our organization and qualification, authority
to enter into the Merger Agreement, takeover statutes, Requisite Stockholder Approval
and broker fees will be true and correct in all material respects as of the closing date
(except to the extent expressly made as of a specific date, in which case as of such
specific date, which need only be true and correct as of such date or time);
|
|
·
|
the Company’s
representations and warranties regarding the absence of a Company Material Adverse Effect
since April 1, 2017 through the date of the Merger Agreement will be true and correct
in all respects as of the closing date;
|
|
·
|
certain elements
of the Company’s representations and warranties regarding our capitalization will
be true and correct in all respects as of the closing date (except to the extent expressly
made as of a specific date, in which case as of such specific date, which need only be
true and correct as of such date or time), except for any failure of such representations
and warranties to be true and correct would not increase the aggregate consideration
payable by Parent to the holders of shares of our common stock, Options and RSUs by more
than a
de minimus
amount;
|
|
·
|
the Company’s
representations and warranties set forth in the Merger Agreement (other than those noted
in the preceding three bullet points) will be true and correct (disregarding all materiality
and Company Material Adverse Effect qualifications contained in such representations
and warranties) as of the closing date (except to the extent expressly made as of a specific
date, in which case as of such specific date, which need only be true and correct as
of such date or time), except for any failure of such representations and warranties
to be true and correct that would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect;
|
|
·
|
the Company
will have performed or complied with in all material respects with all obligations, agreements
and covenants required by the Merger Agreement to be performed or complied with by the
Company prior to or at the closing;
|
|
·
|
since June 29,
2017, there will not have occurred a Company Material Adverse Effect; and
|
|
·
|
the Company
will have delivered to Parent a certificate signed on behalf of the Company by an executive
officer of the Company as to the satisfaction of the conditions to Parent’s and
Sub’s obligations to consummate the Merger.
|
Additional Conditions to the Company’s Obligations
In addition, the Company’s obligations
to effect the Merger are subject to the satisfaction or waiver by the Company of the following conditions:
|
·
|
the representations
and warranties of Parent and Sub in the Merger Agreement will be true and correct in
all material respects as of the closing date, except for (i) any failure to be so true
and correct that would not, individually or in the aggregate, prevent or materially delay
the consummation of the Merger or the ability of Parent and Sub to fully perform their
respective covenants and obligations pursuant to the Merger Agreement and (ii) such representations
and warranties that expressly relate to a specific date or time (which need only be true
and correct as of such date or time);
|
|
·
|
Parent and Sub
will have performed or complied with in all material respects all obligations and agreements
contained in the Merger Agreement to be performed or complied with by each of them prior
to or at the closing; and
|
|
·
|
Parent and Sub
will have delivered to the Company a certificate signed on behalf of Parent and Sub by
an executive officer of Parent as to the satisfaction of the conditions to the Company’s
obligations to consummate the Merger.
|
Termination of the Merger Agreement
The Merger Agreement may be terminated
under the following circumstances:
|
·
|
by Parent and
the Company by mutual written consent if the Board has recommended termination;
|
|
·
|
by either Parent
or, if the Board has recommended termination, the Company, if:
|
|
·
|
the
closing of the Merger has not occurred on or before the Outside Date;
|
|
·
|
the
Requisite Stockholder Approval has not been obtained at a stockholders’ meeting
or any adjournment or postponement thereof; or
|
|
·
|
a
governmental entity of competent jurisdiction has issued a final, non-appealable law,
order, decree or injunction permanently enjoining, restraining or prohibiting the Merger;
|
|
·
|
the
Board has failed to include its recommendation that the Company stockholders adopt
the Merger Agreement in this proxy statement or has effected a Change of Company Recommendation;
or
|
|
·
|
the
Company has breached any of its representations, warranties or covenants in the Merger
Agreement, and such breach would result in certain conditions to the Merger not being
satisfied and such breach is not curable prior to the Outside Date or has not been cured
within 30 calendar days after delivery of notice thereof by Parent to the Company;
provided
that this termination right will not be available to Parent if any breach by Parent
or Sub of any representation, warranty or covenant in the Merger Agreement would result
in certain conditions to the Merger not being satisfied;
|
|
·
|
prior to the Company
stockholder approval, (i) the Board has
effected
a Change of Company Recommendation, (ii) the Company has complied with the non-solicitation
provisions of the Merger Agreement, (iii) concurrently with, or immediately after, the
termination of the Merger Agreement, the Company enters into a definitive acquisition
agreement with respect to a Superior Proposal and (iv) the Company has previously paid
or substantially concurrently pays the Company Termination Fee to Parent;
|
|
·
|
Parent
or Sub has breached any of its representations, warranties or covenants in the Merger
Agreement, and such breach would result in certain conditions to the Merger not being
satisfied and such breach is not curable prior to the Outside Date or has not been cured
within 30 calendar days after delivery of notice by the Company to Parent;
provided
that this termination right will not be available to the Company if any breach by
the Company of any representation, warranty or covenant in the Merger Agreement would
result in certain conditions to the Merger not being satisfied; or
|
|
·
|
(i) all conditions
to Parent’s and Sub’s obligations to effect the Merger have been satisfied
or waived (other than those conditions, by their nature, are to be satisfied by actions
taken at the closing, and each of which is capable of being satisfied at the closing
and is reasonably expected to be satisfied as of the closing), (ii) Parent and Sub fail
to consummate the Merger on the closing date as required by the Merger Agreement, (iii)
the Company has irrevocably confirmed by written notice to Parent that (A) all conditions
to the Company’s obligations to effect the Merger have been satisfied or irrevocably
waived (other than those conditions which, by their nature, are to be satisfied by actions
taken at the closing) and (B) the Company stands ready, willing and able to consummate
the Merger (and it has not delivered written notice purporting to revoke such notice)
and (iv) Parent and Sub fail to consummate the Merger on the third business day following
delivery of such written notice.
|
Effect of Termination
If the Merger Agreement is terminated,
the Merge Agreement will become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or
their respective subsidiaries, officers or directors or any affiliate of any of the foregoing, except that certain provisions
of the Merger Agreement, including each party’s acknowledgement of absence of other representations and warranties made
by the other parties other than those set forth in the Merger Agreement, the Limited Guarantee and/or a certificate delivered
pursuant to the Merger Agreement, confidentiality, termination fees provisions and miscellaneous provisions, will survive any
such termination and remain in full force and effect. Subject to each party’s acknowledgement of absence of other representations
and warranties made by the other parties other than those set forth in the Merger Agreement, the Limited Guarantee and/or a certificate
delivered pursuant to the Merger Agreement and the termination fees payable by the Company or Parent described in the sections
captioned “
The Merger Agreement — Company Termination Fee”
and “
The Merger Agreement –
Reverse Termination Fee and Other Remedies,
” the termination of the Merger Agreement will not relieve any party from
any liabilities or damages incurred or suffered by another party as a result of such first party’s intentional fraud or
willful and material breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement.
Company Termination Fee
The Company has agreed to pay Parent
the Company Termination Fee if the Merger Agreement is terminated as described below:
|
·
|
by Parent if
the
Board has failed
to include its recommendation that the Company stockholders adopt the Merger Agreement
in this proxy statement or has effected a Change of Company Recommendation; or
|
|
·
|
by the Company
if (i) the Board has
effected
a Change of Company Recommendation, (ii) the Company complies with the non-solicitation
provisions of the Merger Agreement, and (iii) concurrently with, or immediately after,
the termination of the Merger Agreement, the Company enters into a definitive acquisition
agreement with respect to a Superior Proposal.
|
In addition, the Company has agreed to
pay Parent the Company Termination Fee if the Merger Agreement is terminated as described below:
|
·
|
(i) by the Company
or Parent if the closing has not occurred on or before the Outside Date (
but
only if the terminating party has not materially breached any representation, warranty
or covenant, which has caused the failure of the closing to occur on or before the Outside
Date), (ii) by the Company or Parent if the Requisite Stockholder Approval has not been
obtained at a stockholders’ meeting or any adjournment or postponement thereof,
or
(iii) by Parent if the Company’s failure to perform in any material
respect its obligations, agreements or covenants under the Merger Agreement required
to be performed prior to or at the closing has resulted in the closing condition relating
to the Company’s performance of obligations, agreements or covenants not being
satisfied, and such failure is not curable prior to the Outside Date, or if curable prior
to the Outside Date, it has not been cured within 30 calendar days after delivery of
written notice thereof by Parent to the Company;
|
|
·
|
prior
to the Special Meeting or any adjournment or postponement thereof, a Competing Proposal
has been publicly disclosed;
and
|
|
·
|
within
12 months after the termination of the Merger Agreement, the Company has entered into
a definitive agreement with respect to any Competing Proposal and any Competing Proposal
is subsequently consummated;
provided
that each reference to 20% in the definition
of “Competing Proposal” will be deemed to be a reference to “50%.”
|
Reverse Termination Fee and Other Remedies
Parent has agreed to pay the Company
the Reverse Termination Fee if the Merger Agreement is terminated as described below:
|
·
|
by the Company
if (i) all conditions to Parent’s and Sub’s obligations to effect the Merger
have been satisfied or waived (other than those conditions, by their nature, are to be
satisfied by actions taken at the closing, and each of which is capable of being satisfied
at the closing and is reasonably expected to be satisfied as of the closing), (ii) Parent
and Sub fail to consummate the Merger on the closing date as required by the Merger Agreement,
(iii) the Company has irrevocably confirmed by written notice to Parent that (A) all
conditions to the Company’s obligations to effect the Merger have been satisfied
or irrevocably waived (other than those conditions which, by their nature, are to be
satisfied by actions taken at the closing) and (B) the Company stands ready, willing
and able to consummate the Merger (and it has not delivered written notice purporting
to revoke such notice), and (iv) Parent and Sub fail to consummate the Merger on the
third business day following delivery of such written notice; or
|
|
·
|
by the Company
or Parent if the closing has not occurred on or before the Outside Date (
but
only if the terminating party has not materially breached any representation, warranty
or covenant, which has caused the failure of the closing to occur on or before the Outside
Date) at a time when the Company had the right to terminate the Merger Agreement under
the circumstance described in the immediately preceding bullet point.
|
Furthermore, Parent has agreed that the
Company has the right to seek damages following a termination of the Merger Agreement by the Company in the instance where Parent
or Sub has internationally breached its covenants specified in Article V of the Merger Agreement and such breach is not curable
prior to the Outside Date or has not been cured within 30 days after delivery of notice by the Company to Parent;
provided
,
however
, that under no circumstance will the Company or any of its affiliates be entitled to receive damages for such alleged
intentional breach in excess of $15 million.
In addition, prior to the termination
of the Merger Agreement by the Company, the Company will be entitled to obtain specific performance to cause Parent and Sub to
cause the Equity Financing to be funded and to consummate the Merger only if: (i) all conditions to Parent’s and Sub’s
obligations to effect the Merger have been satisfied or waived (other than those conditions, by their nature, are to be satisfied
by actions taken at the closing, and each of which is capable of being satisfied at the closing and is reasonably expected to
be satisfied as of the closing), (ii) the BAML Debt Commitment comprised in the Debt Financing has been funded or will be funded
at the closing if the Equity Financing is funded at the closing, (iii) the Company has irrevocably confirmed in a written notice
to Parent (and has not purported to revoke such notice) that (A) all conditions to Parent’s and Sub’s obligations
to effect the Merger have been satisfied or waived (other than those conditions which, by their nature, are to be satisfied by
actions taken at the closing), and (B) if specific performance is granted and the Equity Financing and BAML Debt Commitment are
funded, the Company stands ready, willing and able to consummate the closing. If a court of competent jurisdiction has declined
to specifically enforce the obligations of Parent to cause the Equity Financing to be funded and to consummate the Merger under
the above circumstance and has instead granted an award of damages for such alleged breach of Parent’s obligation to cause
the Equity Financing to be funded and to consummate the Merger, the Company may enforce such award and accept damages for such
alleged breach only if, within ten business days following such determination (i) the Company confirms to the Parent in writing
that the Company stands ready, willing and able to consummate the closing (whether or not this Agreement has previously been terminated),
and (ii) Parent does not consummate the transactions contemplated by this Agreement within ten business days of such written confirmation;
provided
,
however
, that under no circumstances will the Company or any of its affiliates be entitled to enforce
such an award or accept damages for such alleged breach in excess of $25 million.
While the Company may pursue both a grant
of specific performance to the extent permitted by the Merger Agreement and the payment of the Reverse Termination Fee or damages
as described above relating to any intentional breach, under no circumstances will the Company be permitted or entitled to receive
both such grant of specific performance (or damages contemplated pursuant to the immediately preceding paragraph) and the payment
of the Reverse Termination Fee or damages relating to any intentional breach.
Amendment and Waiver
The Merger Agreement provides that subject
to the other provisions of the Merger Agreement, the Merger Agreement may be amended by the parties thereto at any time by execution
of an instrument in writing signed on behalf of each of the Company, Parent and Sub. However, in the event that the Merger Agreement
has been adopted by the Company stockholders, no amendment will be made to the Merger Agreement that requires the approval of
such stockholders under applicable law or rules of any relevant stock exchange without such approval;
provided
,
however
,
that no amendment, modification, waiver or termination may be made to certain sections of the Merger Agreement in a manner adverse
to the interests of any debt financing sources related party without the written consent of such debt financing sources.
The parties may at any time prior to
the Effective Time (such action to be set forth in a written instrument duly executed and delivered on behalf of such party),
(i) extend the time for the performance of any of the obligations or other acts of the other parties; (ii) waive any breaches
of or inaccuracies in the representations and warranties of the other parties or (iii) waive compliance with any of the covenants
or conditions of the other parties;
provided
, that after the approval of the Company stockholders has been obtained, no
waiver may be made that, if obtained, would decrease the Merger Consideration or adversely affect the rights of the stockholders,
without approval of the Company stockholders.
Governing Law
The Merger Agreement is governed by Delaware
law, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of
the State of Delaware.
Specific Performance
Parent, Sub and the Company have agreed
that irreparable damage would occur if any provision of the Merger Agreement is not performed, or is threatened to be not performed,
in accordance with its specific terms or is otherwise breached. Subject to certain provisions of the Merger Agreement, the parties
acknowledge and agree that (i) the parties shall be entitled to an injunction, specific performance and other equitable relief
to prevent breaches or threatened breaches of the Merger Agreement and to enforce specifically the terms and provisions of the
Merger Agreement, this being in addition to any other remedy to which they are entitled at law or in equity, and (ii) no party
will require the other to post any bond or other security as a condition to institute any proceeding for specific performance
under the Merger Agreement.
Subject to limited exceptions (including
the receipt of Reverse Termination Fee or damages described in the section captioned “
The Merger Agreement – Reverse
Termination Fee and Other Remedies
”), the Company has agreed that, prior to the closing of the Merger, specific performance
will be the sole and exclusive remedy with respect to breaches by Parent or Sub in connection with the Merger Agreement or the
transactions contemplated by the Merger Agreement (whether in contract, tort or otherwise) and that it may not seek or accept
any other form of relief that may be available for breach under the Merger Agreement or otherwise in connection with the Merger
Agreement or the transactions contemplated by the Merger Agreement (including monetary damages).
THE VOTING AGREEMENT
The following is a summary of selected
material terms and provisions of the Voting Agreement. This summary does not purport to be complete and may not contain all of
the information about the Voting Agreement that may be important to you. You are encouraged to read the Voting Agreement carefully
and in its entirety. This summary is qualified in its entirety by reference to the complete text of the Voting Agreement, a copy
of which is attached hereto as Annex D, and which is incorporated by reference into this proxy statement.
Concurrently with the execution of the
Merger Agreement, Randolph K. Repass, his spouse and certain of the Repass family trusts, which beneficially owned, in the aggregate,
approximately 20% of the issued and outstanding shares of our common stock as of that date, entered into the Voting Agreement
with Parent and Sub. Certain other Repass family trusts, which beneficially owned shares of our common stock but were not able
to deliver their signature pages concurrently with the execution of the Merger Agreement, signed the Voting Agreement on the following
day, June 30, 2017, which increased the total issued and outstanding shares of our common stock subject to the Voting Agreement
to approximately 24% as of June 30, 2017 and [ ● ] as of the Record Date.
Voting Provisions
Pursuant to the Voting Agreement, during
the period beginning on the date of the Voting Agreement and ending on the End Date (as defined below), such stockholders, solely
in their capacities as holders of our common stock, Options, and shares of our common stock, Options or other equity securities
of the Company that they may acquire at any time during the term of the Voting Agreement (collectively, the “stockholder
securities”), have agreed to, or to cause the holder of record on applicable record date to, (a) appear at each stockholders’
meeting or otherwise cause all of their stockholder securities entitled to vote to be counted as present thereat for purposes
of calculating a quorum and (b) vote (or cause to be voted), in person or by proxy, all stockholder securities beneficially owned
thereby and entitled to vote:
|
·
|
in favor of
(i) the approval of the Merger Agreement and the approval of the Merger and the other
transactions contemplated by the Merger Agreement and (ii) any other matter reasonably
necessary to consummate the transactions contemplated thereby (including the Merger);
and
|
|
·
|
against (i)
any action or agreement which could reasonably be expected to impede, interfere with,
prevent, delay or adversely affect the Merger Agreement, the Merger or the Voting Agreement,
(ii) any Competing Proposal and (iii) any action, proposal, transaction or agreement
that could reasonably be expected to result in a breach of any covenant, representation
or warranty or any other obligation or agreement of such stockholders under the Voting
Agreement.
|
Notwithstanding the foregoing, such stockholders
will retain at all times the right to vote their stockholder securities held by them in their sole discretions and without any
other limitation on those matters other than those set forth above that are at any time or from time to time presented for consideration
to the Company stockholders at any annual, special or other meeting of the Company stockholders or any action by written consent
in lieu of a meeting of the Company stockholders.
Restrictions on Transfer; Other Actions
Subject to limited exceptions, such stockholders
have covenanted and agreed that, except as contemplated by the Voting Agreement or in the Merger Agreement, each will not, and
will cause each of its subsidiaries and affiliates not to:
|
·
|
directly or
indirectly (i) transfer, assign, sell, gift-over, hedge, pledge or otherwise dispose
(whether by sale, liquidation, dissolution, dividend or distribution) of, (ii) enter
into any derivative arrangement with respect to, or (iii) create any lien (other than
any liens arising under the Voting Agreement or the Merger Agreement or any applicable
restrictions on transfer under the Securities Act, the securities laws of any state within
the United States or pursuant to any written policies of the Company with respect to
restrictions upon the trading of securities under applicable securities laws) on or (iv)
enter into any agreement with respect to (any of the foregoing, a “transfer”)
any or all of its, his or her stockholder securities;
|
|
·
|
enter into any
contract, option or other agreement, arrangement or understanding with respect to any
transfer;
|
|
·
|
grant any proxy,
power-of-attorney or other authorization or consent with respect to any of the stockholder
securities with respect to any matter that is in contravention of the obligations of
such stockholder under the Voting Agreement with respect to the stockholder securities;
or
|
|
·
|
deposit any
of the stockholder securities into a voting trust, or enter into a voting agreement or
arrangement with respect to any of such stockholder securities in contravention of the
obligations of such stockholder under the Voting Agreement with respect to the stockholder
securities.
|
Such stockholders agree that they will
not exercise any appraisal rights available to them with respect to the Merger in accordance with Section 262 of the DGCL.
Non-Solicitation
Beginning on the date of the Voting Agreement
and ending on the End Date, each such stockholder will not, and will cause its representative not to, directly or indirectly take
any action that the Company is prohibited from taking under the non-solicitation provisions described in the section captioned
“
The Merger Agreement –Restriction on Solicitation of Competing Proposals
.”
Termination
The Voting Agreement terminates immediately
and automatically, and be of no further force and effect, without any notice or other action by any person, upon the earliest
to occur of the following (the “End Date”):
|
·
|
valid termination
of the Merger Agreement in accordance with its terms;
|
|
·
|
the mutual written
consent of Parent and the stockholders party to the Voting Agreement; or
|
|
·
|
any change to
the terms of the Merger Agreement without the prior written consent of the stockholders
party to the Voting Agreement that (i) reduces the Merger Consideration or any other
consideration otherwise payable with respect to the Options beneficially owned by such
stockholders or (ii) changes the form of consideration payable in the Merger or any consideration
otherwise payable with respect to the shares of our common stock or Options beneficially
owned by such stockholders.
|
MARKET PRICES AND DIVIDEND DATA
Our common stock is listed on the NASDAQ
under the symbol “WMAR.” As of July 14, 2017, there were 25,279,066 shares of our common stock outstanding, held by
approximately 616 stockholders of record. On March 24, 2017, we declared a cash dividend of $0.05 per share on issued and outstanding
shares of our common stock, which was paid on May 25, 2017 to the Company stockholders of record as of the close of business on
May 11, 2017.
The following table presents the high
and low intra-day sale prices of our common stock on the NASDAQ during the fiscal quarters indicated:
|
|
Common Stock Prices
|
|
|
|
High
|
|
|
Low
|
|
Fiscal Year 2017 – Quarter Ended
|
|
|
|
|
|
|
|
|
July 29, 2017 (through July [ • ], 2017)
|
|
$
|
[ • ]
|
|
|
$
|
[ • ]
|
|
April 1, 2017
|
|
|
10.78
|
|
|
|
8.68
|
|
Fiscal Year 2016 — Quarter Ended
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
$
|
11.42
|
|
|
$
|
7.77
|
|
October 1, 2016
|
|
|
9.99
|
|
|
|
8.02
|
|
July 2, 2016
|
|
|
10.14
|
|
|
|
8.13
|
|
April 2, 2016
|
|
|
9.81
|
|
|
|
7.70
|
|
Fiscal Year 2015 — Quarter Ended
|
|
|
|
|
|
|
|
|
January 2, 2016
|
|
$
|
10.39
|
|
|
$
|
8.22
|
|
October 3, 2015
|
|
|
10.03
|
|
|
|
7.65
|
|
July 4, 2015
|
|
|
11.08
|
|
|
|
8.91
|
|
April 4, 2015
|
|
|
13.72
|
|
|
|
9.13
|
|
On June 29, 2017, the last full
trading day prior to the public announcement of the Merger, the closing price of our common stock was $9.65 per share. On July
14, 2017, the last practicable trading day prior to the date of this proxy statement, the closing price of our common stock was
$12.86 per share.
Following the Merger, there will be no
further market for our common stock and it will be delisted from the NASDAQ and deregistered under the Exchange Act. As a result,
following the Merger we will no longer file periodic reports with the SEC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain
information with respect to the beneficial ownership of our common stock, as of July 14, 2017, of each person or entity who we
know to beneficially own 5% or more of the outstanding shares of our common stock and all of our current directors and executive
officers as a group.
Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person, and the percentage ownership
of that person, shares of our common stock subject to stock options held by that person that are currently exercisable, or exercisable
within 60 days of July 14, 2017, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other person. Unless otherwise indicated below, the address of each beneficial owner listed in
the table is c/o West Marine, Inc., 500 Westridge Drive, Watsonville, California 95076-4100.
The percentages in the table below are
based on 25,279,066 shares of our common stock outstanding as of July 14, 2017. Except as indicated in the footnotes to this table
and pursuant to applicable community property laws, to our knowledge, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite such stockholder’s name. The information provided in this
table is based on our records and information filed with the SEC, unless otherwise noted.
Name
|
|
Number of
Shares
Beneficially
Owned
|
|
|
Percentage
Beneficially
Owned
|
|
Randolph K. Repass(1)
|
|
|
6,463,779
|
|
|
|
25.6
|
%
|
Dimensional Fund Advisors LP(2)
|
|
|
2,097,189
|
|
|
|
8.3
|
%
|
Franklin Resources, Inc.(3)
|
|
|
2,039,905
|
|
|
|
8.1
|
%
|
Royce & Associates, LLC(4)
|
|
|
1,306,947
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
Named Executive
Officers:
|
|
|
|
|
|
|
|
|
Matthew L. Hyde(5)
|
|
|
221,822
|
|
|
|
*
|
|
Jeffrey L. Lasher(6)
|
|
|
13,678
|
|
|
|
*
|
|
Barry Kelley(7)
|
|
|
86,969
|
|
|
|
*
|
|
Paul Rutenis(8)
|
|
|
16,162
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Directors:
|
|
|
|
|
|
|
|
|
Dennis F. Madsen(9)
|
|
|
40,698
|
|
|
|
*
|
|
James F. Nordstrom, Jr.(10)
|
|
|
26,176
|
|
|
|
*
|
|
Robert D. Olsen(11)
|
|
|
26,176
|
|
|
|
*
|
|
Barbara L. Rambo(12)
|
|
|
41,988
|
|
|
|
*
|
|
Randolph K. Repass(1)
|
|
|
6,463,779
|
|
|
|
25.6
|
%
|
Alice M. Richter(13)
|
|
|
44,364
|
|
|
|
*
|
|
Christiana Shi(14)
|
|
|
34,083
|
|
|
|
*
|
|
All current directors and executive officers as a group(15)
|
|
|
7,015,895
|
|
|
|
27.8
|
%
|
|
(1)
|
Mr. Repass is a director of West Marine, Inc. Includes 230,600 shares
held by Mr. Repass’ spouse, 372,715 shares held in trust for Mr. Repass’
younger adult son, 147,800 shares held in trust for Mr. Repass’ older adult son,
40,400 shares held in trust for the benefit of Mr. Repass’ grandchildren, 801,383
shares held in a grantor retained annuity trust and 358,201 shares held by the Repass-Rodgers
Family Foundation Inc. Mr. Repass has sole voting power with respect to 5,415,180 shares
and sole dispositive power with respect to 6,233,179 shares and is deemed to have shared
voting and dispositive power with respect to 230,600 shares. Includes stock options exercisable
within 60 days to purchase 10,123 shares. Also includes 6,493 RSUs scheduled to vest
on June 1, 2018 that will be fully vested and cancelled at the Effective Time of the
Merger pursuant to the Merger Agreement. Mr. Repass disclaims beneficial ownership of
all shares attributed to his spouse and all shares held by the Repass-Rodgers Family
Foundation.
|
|
(2)
|
The information contained in the table and this footnote with
respect to Dimensional Fund Advisors LP is based solely on a statement on Schedule 13G/A
filed February 9, 2017, reporting beneficial ownership as of December 31, 2016, by Dimensional
Fund Advisors LP to the effect that (a) it has sole dispositive power over all of the
reported shares and (b) it has sole voting power over 2,035,856 shares. The business
address for Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin,
Texas 78746.
|
|
(3)
|
The information contained in the table and this footnote with
respect to Franklin Resources, Inc. is based solely on a statement on Schedule 13G/A
filed December 12, 2016, reporting beneficial ownership as of November 30, 2016, by Franklin
Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr., Franklin Templeton Investments
Corp., Templeton Investment Counsel, LLC and Franklin Advisory Services, LLC to the effect
that (a) each (directly or indirectly) has dispositive and voting power over these shares
to the extent disclosed therein and (b) these shares are held by investment companies
or other managed accounts which are advised by subsidiaries of Franklin Resources, Inc.
pursuant to investment management contracts which grant to such subsidiaries all investment
and voting power over these shares. The business address for Franklin Resources, Inc.,
Charles B. Johnson and Rupert H. Johnson, Jr. is One Franklin Parkway, San Mateo, California
94403-1906. The business address for Franklin Templeton Investments Corp. is 200 King
Street West, Suite 1500, Toronto, Ontario, Canada M5H 3T4. The business address for Templeton
Investment Counsel, LLC is 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301 and the
business address for Franklin Advisory Services, LLC is 55 Challenger Road, Suite 501,
Ridgefield Park, New Jersey 07660.
|
|
(4)
|
The information contained in the table and this footnote with
respect to Royce & Associates, LLC is based solely on a statement on Schedule 13G/A
filed January 23, 2017, reporting beneficial ownership as of December 31, 2016, by Royce
& Associates, LP to the effect that it has sole dispositive and voting power over
all of these shares. The business address for Royce & Associates, LLC is 745 Fifth
Avenue, New York, New York 10151.
|
|
(5)
|
Consists of (a) 95,155 shares of our common stock and (b) 126,667
shares issuable upon the exercise of options exercisable within 60 days of July 14, 2017.
|
|
(6)
|
Consists of 13,678 shares of our common stock.
|
|
(7)
|
Consists of (a) 56,136 shares of our common stock and (b) 30,833
shares issuable upon the exercise of options exercisable within 60 days of July 14, 2017.
|
|
(8)
|
Consists of 16,162 shares of our common stock.
|
|
(9)
|
Consists of (a) 27,514 shares of our common stock, (b) 6,691 shares
issuable upon the exercise of options exercisable within 60 days of July 14, 2017 and
(c) 6,493 RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled
at the Effective Time of the Merger pursuant to the Merger Agreement.
|
|
(10)
|
Consists of (a) 19,683 shares of our common stock and (b) 6,493
RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled at the
Effective Time of the Merger pursuant to the Merger Agreement.
|
|
(11)
|
Consists of (a) 19,683 shares of our common stock and (b) 6,493
RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled at the
Effective Time of the Merger pursuant to the Merger Agreement.
|
|
(12)
|
Consists of (a) 35,495 shares of our common stock and (b) 6,493
RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled at the
Effective Time of the Merger pursuant to the Merger Agreement.
|
|
(13)
|
Consists of (a) 37,871 shares of our common stock and (b) 6,493
RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled at the
Effective Time of the Merger pursuant to the Merger Agreement.
|
|
(14)
|
Consists of (a) 27,590 shares of our common stock and (b) 6,493
RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled at the
Effective Time of the Merger pursuant to the Merger Agreement.
|
|
(15)
|
Consists of (a) 6,796,130 shares of our common stock, (b) 174,314
shares issuable upon the exercise of options exercisable within 60 days of July 14, 2017
and (c) 45,451 RSUs scheduled to vest on June 1, 2018 that will be fully vested and cancelled
at the Effective Time of the Merger pursuant to the Merger Agreement.
|
FUTURE STOCKHOLDER PROPOSALS
If the Merger is consummated, we will
have no public stockholders and there will be no public participation in any future meetings of the Company stockholders. However,
if the Merger is not consummated, stockholders will continue to be entitled to attend and participate in stockholder meetings.
The Company will hold an annual meeting
in 2018 only if the Merger has not already been consummated.
Proposals of stockholders that are intended
for inclusion in our proxy statement relating to our annual meeting in 2018, if held, must be received by us at our offices at
500 Westridge Drive, Watsonville, California 95076-4100, Attention: Corporate Secretary, no later than December 22, 2017, and
must satisfy the conditions established by the SEC, including, but not limited to, Rule 14a-8 promulgated under the Exchange Act,
and in our bylaws for stockholder proposals in order to be included in our proxy statement for that meeting.
Stockholders may only present a matter
for consideration at our annual meeting in 2018, if held, if certain procedures are followed. Under our bylaws, in order for a
matter to be deemed properly presented by a stockholder, timely notice must be received by the secretary of the corporation at
the principal executive offices of the Company not later than the close of business on the 90th day nor earlier than the close
of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. To be timely for
the 2018 annual meeting, a stockholder’s notice must be delivered to or mailed and received by the Corporate Secretary at
the principal executive offices of the Company between February 1, 2018 and March 3, 2018.
Nominations for the election of directors
at an annual meeting may be made only (i) by or at the direction of the Board, or (ii) by a stockholder who has delivered timely
written notice to our Corporate Secretary and who was a stockholder at the time of that notice and as of the record date for that
meeting. The notice must contain specified information about the nominees and about the stockholder proposing such nominations.
To be timely for the next annual meeting, a stockholder’s notice must be delivered to or mailed and received by the Corporate
Secretary at the principal executive offices of the Company between February 1, 2018 and March 3, 2018.
Stockholders may contact the Corporate
Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making
stockholder proposals.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to “incorporate
by reference” information into this proxy statement, which means that we can disclose important information to you by referring
you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy
statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent
to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have
previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated
by reference into this proxy statement.
The following Company filings with the
SEC are incorporated by reference:
|
·
|
the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the
SEC on February 28, 2017;
|
|
·
|
the information
specifically incorporated by reference into the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2016 from the Company’s definitive
proxy statement on Schedule 14A for the Company’s 2017 Annual Meeting of Stockholders,
filed with the SEC on April 21, 2017;
|
|
·
|
the Company’s
Quarterly Reports on Form 10-Q for the fiscal quarter ended April 1, 2017 filed with
the SEC on May 1, 2017; and
|
|
·
|
the Company’s
Current Reports on Form 8-K filed on March 24, 2017 (excluding the portions furnished
under Items 7.01 and 9.01), April 14, 2017, June 5, 2017 and June 30, 2017.
|
We also incorporate by reference into
this proxy statement additional documents that we may file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this proxy statement and the earlier of the date of the Special Meeting or the termination of
the Merger Agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q, as well as Current Reports on Form 8-K and proxy soliciting materials. The information provided on our website is not part
of this proxy statement, and therefore is not incorporated by reference herein.
Information furnished under Item 2.02
or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated by reference into
this proxy statement.
You may read and copy any reports, statements
or other information that we file with the Securities and Exchange Commission at the SEC’s public reference room at the
following location: Station Place, 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of those documents
at prescribed rates by writing to the Public Reference Section of the SEC at that address. Please call the SEC at (800) SEC-0330
for further information on the public reference room. These SEC filings are also available to the public from commercial document
retrieval services and at
www.sec.gov
.
You may obtain any of the documents we
file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:
West Marine, Inc.
Attn: Corporate Secretary
500 Westridge Drive
Watsonville, California 95076-4100
If you would like to request documents
from us, please do so as soon as possible, to receive them before the Special Meeting. Please note that all of our documents that
we file with the SEC are also promptly available through the Investor Relations section of our website,
www.westmarine.com
.
The information included on our website is not incorporated by reference into this proxy statement.
If you have any questions concerning
the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting
your shares of our common stock, please contact our Proxy Solicitor:
D.F. King & Co., Inc.
Stockholders May Call Toll-Free: (866)
751-6312
Banks & Brokers May Call Collect: (212)
269-5550
Email:
WMAR@dfking.com
MISCELLANEOUS
The Company has supplied all information
relating to the Company, and Parent has supplied, and the Company has not independently verified, all of the information relating
to Monomoy, Parent and Sub contained in this proxy statement.
You should rely only on the information
contained in this proxy statement, the annexes to this proxy statement and the documents that we incorporate by reference in this
proxy statement in voting on the Merger. 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 (or as of an earlier date if so indicated in
this proxy statement), and the mailing of this proxy statement to stockholders does not create any implication to the contrary.
This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom,
it is unlawful to make a proxy solicitation.
Annex A
AGREEMENT AND PLAN OF MERGER
among
RISING TIDE PARENT INC.,
RISING TIDE MERGER SUB INC.
and
WEST MARINE, INC.
Dated as of June 29, 2017
TABLE OF CONTENTS
This AGREEMENT AND PLAN OF MERGER, dated
as of June 29, 2017 (this “
Agreement
”), is made and entered into by and among Rising Tide Parent Inc., a Delaware
corporation (“
Parent
”), Rising Tide Merger Sub Inc., a Delaware corporation and a wholly-owned Subsidiary of
Parent (“
Sub
”), and West Marine, Inc., a Delaware corporation (the “
Company
”). Certain capitalized
terms used in this Agreement are defined in
Annex I
, and other capitalized terms used in this Agreement are defined in the
Sections where such terms first appear.
RECITALS
WHEREAS,
the respective boards of directors
of Parent, Sub and the Company have each approved the acquisition of the Company by Parent on the terms and subject to the conditions
set forth in this Agreement;
WHEREAS,
concurrently with the Closing,
upon the terms and subject to the conditions set forth in this Agreement, Sub will be merged with and into the Company (the “
Merger
”
and together with the other transactions contemplated by this Agreement, the “
Transactions
”) in accordance with
the General Corporation Law of the State of Delaware (the “
DGCL
”), whereby each issued and outstanding Share,
other than the Cancelled Shares and Dissenting Shares, will be converted into the right to receive the Merger Consideration;
WHEREAS,
the board of directors of
Parent has determined that this Agreement and the Transactions are advisable and in the best interests of Parent and has approved
this Agreement and the Transactions;
WHEREAS,
the board of directors of
Sub has (a) determined that this Agreement and the Transactions are in the best interests of Sub and its sole stockholder, (b)
adopted and declared advisable this Agreement and the consummation by Sub of the Transactions and (c) on the terms and subject
to the conditions set forth in this Agreement, resolved to recommend that the sole stockholder of Sub adopt this Agreement;
WHEREAS,
Parent, as sole stockholder
of Sub, shall adopt this Agreement immediately following the execution of this Agreement;
WHEREAS,
the board of directors of
the Company has (a) adopted and declared advisable this Agreement and the consummation by the Company of the Transactions, (b) approved
the execution, delivery and performance of this Agreement and the consummation by the Company of the Transaction, (c) determined
that this Agreement and the Transactions, including the Merger, are advisable and in the best interests of the Company and its
stockholders and (d) resolved to recommend that the stockholders of the Company adopt this Agreement and to submit this Agreement
to the stockholders of the Company for adoption;
WHEREAS,
concurrently with the
execution and delivery of this Agreement, Shareholders holding approximately 20% of the outstanding shares of Company Common
Stock have executed Voting Agreement in the form attached hereto as
Exhibit B
, whereby, subject to the terms and
conditions set forth therein, such stockholder have agreed to vote their shares in favor of the Merger;
WHEREAS,
concurrently with the execution
and delivery of this Agreement, and as a condition to the willingness of the Company to enter into this Agreement, (a) Monomoy
Capital Partners III, L.P. and the Company are entering into that certain limited guarantee (the “
Limited Guarantee
”)
and (b) the Financing Commitments (as defined below) are being delivered to the Company; and
WHEREAS,
each of Parent, Sub and the
Company desire to make certain representations, warranties, covenants and agreements in connection with the Transactions and also
to prescribe various conditions to the Transactions.
AGREEMENT
NOW, THEREFORE,
in consideration of
the foregoing and the mutual representations, warranties and covenants and subject to the conditions set forth in this Agreement,
and intending to be legally bound hereby, the parties hereby agree as follows:
Article I
THE MERGER
Section 1.01
The Merger
. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the DGCL, at the Effective Time, Sub shall be merged with and into the Company, whereupon the
separate existence of Sub shall cease, and the Company shall continue as the surviving corporation (the “
Surviving Corporation
”)
and shall succeed to and assume all the rights and obligations of Sub and the Company in accordance with Section 259 of the DGCL.
Section 1.02
Closing
. The closing of the Merger (the “
Closing
”)
will take place (a) at 9:00 a.m. New York City time on the date that is two (2) Business Days following the satisfaction or
waiver (to the extent permitted by applicable Law) of the conditions set forth in Article VI (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 the Closing)
or (b) at another time or date agreed to in writing by the parties. The Closing will take place at the offices of Sidley Austin
LLP, 1001 Page Mill Road, Palo Alto, California 94304, or at another place agreed to in writing by the parties. The date upon which
the Closing actually occurs shall be referred to herein as the “Closing Date.”
Section 1.03
Effective Time
. Concurrently with the Closing, the Company shall
file a certificate of merger (the “
Certificate of Merger
”) with the office of the Secretary of State of the
State of Delaware in such form as required by, and executed in accordance with, the applicable provisions of the DGCL. The Merger
shall become effective on the date and time at which the Certificate of Merger has been duly filed with the Secretary of State
of the State of Delaware or at such other later date and time as is agreed between the parties and specified in the Certificate
of Merger (such date and time, the “
Effective Time
”).
Section 1.04
Organizational Documents, Directors and Officers of the Surviving Corporation
.
(a)
Organizational
Documents
. At the Effective Time, (i) the Company Charter, as in
effect immediately prior to the Effective Time,
shall be amended and restated to read in its entirety as set forth in
Exhibit A
, and as so amended and restated shall
be the certificate of incorporation of the Surviving Corporation, and (ii) the Company By-laws shall be amended and restated
in their entirety to read as the bylaws of Sub, as in effect immediately prior to the Effective Time, and as so amended and
restated, shall be the by-laws of the Surviving Corporation (except that references to the name of Sub shall be replaced by
references to the name of the Surviving Corporation), in each case until, subject to
Section 5.07
, thereafter
amended in accordance with applicable Law and the applicable provisions of the certificate of incorporation and by-laws of
the Surviving Corporation.
(b)
Directors
. Subject to applicable Law, the board of directors of the Surviving
Corporation effective as of, and immediately following, the Effective Time shall consist of the members of the board of directors
of Sub immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and by-laws
of the Surviving Corporation.
(c)
Officers
. From and after the Effective Time, the officers of the Company at
the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation.
Article II
EFFECT OF THE MERGER ON CAPITAL STOCK
Section 2.01
Conversion of Securities
.
(a)
At the Effective Time, by virtue of the Merger and without any action on the part
of Parent, Sub, the Company or the holders of any capital stock of the Company or Sub:
(i)
Conversion of Company Common Stock
. Each share of Company Common Stock (each,
a “
Share
” and collectively, the “
Shares
”) issued and outstanding immediately prior to the
Effective Time, other than the Cancelled Shares and the Dissenting Shares, shall automatically be converted into the right to receive
$12.97 in cash, without interest (the “
Merger Consideration
”), and all of such Shares shall cease to be outstanding,
shall cease to exist, and each certificate representing a Share (a “
Certificate
”) or non-certificated Share
represented by book-entry (“
Book-Entry Shares
”) that formerly represented any of the Shares (other than the
Cancelled Shares and the Dissenting Shares) shall thereafter be cancelled and cease to have any rights with respect thereto, except
the right to receive the Merger Consideration without interest thereon, subject to
Section 2.05
.
(ii)
Cancellation of Company-Owned Shares and Parent-Owned Shares
. All Shares that
are held in the treasury of the Company or owned of record by any wholly-owned Company Subsidiary and all Shares owned of record
by Parent or any of its wholly-owned Subsidiaries (such Shares, the “
Cancelled Shares
”) shall be cancelled and
shall cease to exist, with no payment being made with respect thereto.
(iii)
Capital Stock of Sub
. Each issued and outstanding share of capital stock of
Sub shall be automatically 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)
Merger Consideration Adjustment
. Notwithstanding anything in this Agreement
to the contrary, if, from the date of this Agreement until the Effective Time, the number of outstanding Shares shall have been
changed into a different number of shares or a different class by reason of any reclassification, stock split (including a reverse
stock split), recapitalization, split-up, combination, exchange of shares, readjustment or other similar transaction, or a stock
dividend or stock distribution thereon shall be declared with a record date within said period, the Merger Consideration shall
be appropriately adjusted to provide the holders of Shares the same economic effect as contemplated by this Agreement prior to
such event.
Section 2.02
Exchange of Certificates; Payment for Shares
.
(a)
Paying Agent
. Prior to the Effective Time, Parent shall designate a U.S.-based
nationally recognized financial institution reasonably acceptable to the Company to act as agent (the “
Paying Agent
”)
for the holders of Shares to receive the funds to which such holders shall become entitled pursuant to this Agreement. Prior to
the Effective Time, Parent shall deposit with the Paying Agent, in immediately available funds, a cash amount equal to the sum
of the Aggregate Common Stock Consideration (the “
Exchange Fund
”). The Exchange Fund shall be for the benefit
of the holders of Shares that are entitled to receive the Merger Consideration. For purposes of determining the aggregate amount
to be so deposited, Parent shall assume that no stockholder of the Company shall perfect any right to appraisal of such stockholder
or its Shares. In the event the Exchange Fund shall be insufficient to make the payments contemplated by
Section 2.01(a)(i)
and this
Section 2.02
, Parent shall promptly deposit, or cause to be deposited, additional funds with the Paying Agent
in an amount sufficient to make such payments. Funds made available to the Paying Agent may be invested by the Paying Agent, as
directed by Parent, but only in short-term obligations of, or short-term obligations fully guaranteed as to principal and interest
by, the United States of America with maturities of no more than 30 days or in commercial paper obligations rated A-1 or P1 or
better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, pending payment thereof by the Paying
Agent to the holders of Shares pursuant to
Section 2.01(a)(i)
and
Section 2.02
;
provided
, that no
investment of such deposited funds shall relieve Parent, the Surviving Corporation or the Paying Agent from promptly making the
payments required by
Section 2.01(a)(i)
and this
Section 2.02
, and following any losses from any such investment,
Parent shall promptly provide additional funds to the Paying Agent, for the benefit of the holders of Shares, in the amount of
such losses, which additional funds will be held and disbursed in the same manner as funds initially deposited with the Paying
Agent to make the payments contemplated by
Section 2.01(a)(i)
and
Section 2.02
. Any interest or income
produced by such investments will be payable to Sub or Parent, as Parent directs. Parent shall direct the Paying Agent to hold
the Exchange Fund for the benefit of the former holders of Shares and to make payments from the Exchange Fund in accordance with
Section 2.01(a)(i)
and
Section 2.02
. The Exchange Fund shall not be used for any purpose other than to
fund payments pursuant to
Section 2.01(a)(i)
or
Section 2.02
, except as expressly provided for in this
Agreement.
(b)
Procedures
for Surrender
. As promptly as practicable after the Effective Time (but in no event later than the second Business Day
following the Effective Time), Parent shall cause the Paying Agent to mail to each holder of record of a Certificate whose
Shares were converted into the right to receive the Merger Consideration pursuant to this Agreement: (i) a letter of
transmittal, which shall specify that delivery shall be effected, and risk of loss and title
to the Certificate shall
pass, only upon delivery of the Certificate (or affidavit of loss in lieu thereof in accordance with
Section 2.02(e)
to the Paying Agent) and shall otherwise be in such form and have such other provisions as Parent may reasonably specify
after consultation with the Company and (ii) instructions for effecting the surrender of the Certificate in exchange for
payment of the Merger Consideration. Upon surrender of a Certificate (or affidavit of loss in lieu thereof in accordance with
Section 2.02(e)
)
for cancellation to the Paying Agent, and upon delivery of a letter of transmittal, duly executed and in proper form, with
respect to such Certificate, the holder of such Certificate shall be entitled to receive in exchange therefor the portion of
the Aggregate Common Stock Consideration into which the Shares formerly represented by such Certificate were converted
pursuant to
Section 2.01
(less any required Tax withholdings as provided in
Section 2.05
), and the
Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is
not registered in the transfer records of the Company, payment may be made and the Merger Consideration may be issued to a
person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or shall otherwise be in proper form for transfer, and the person requesting such payment shall pay to the
Paying Agent any transfer and other similar Taxes required by reason of the payment of the Merger Consideration to a person
other than the registered holder of the Certificate so surrendered or shall establish to the reasonable satisfaction of the
Paying Agent that such Taxes either have been paid or are not required to be paid. Payment of the Merger Consideration with
respect to Book-Entry Shares shall only be made to the person in whose name such Book-Entry Shares are registered and shall
be made promptly following the Effective Time without any action on the part of the person in whose name such Book-Entry
Shares are registered. No interest shall be paid or accrue on any portion of the Merger Consideration payable upon surrender
of any Certificate (or affidavit of loss in lieu thereof in accordance with
Section 2.02(e)
) or Book-Entry
Share.
(c)
Transfer Books; No Further Ownership Rights in Shares
. As of the Effective
Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers
of Shares on the records of the Company. The Merger Consideration paid in accordance with the terms of this
Article II
upon surrender of any Shares shall represent full payment and satisfaction of all rights pertaining to such Shares. From and after
the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided for in this Agreement or by applicable Law. If, after the Effective Time, Certificates
are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Agreement.
(d)
Termination
of Exchange Fund; Abandoned Property; No Liability
. At any time following the first anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any portion of the Exchange Fund
(including any interest received with respect thereto) not disbursed to holders of Shares, and thereafter such holders shall
be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) with
respect to the Merger Consideration payable upon due surrender of their Shares and compliance with the procedures set forth
in
Section 2.02(b)
, without interest. Notwithstanding the foregoing, none of Parent, the Surviving Corporation or
the Paying Agent shall be liable to any holder of a Share for Merger Consideration properly
delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
(e)
Lost, Stolen or Destroyed Certificates
. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit (in form and substance reasonably acceptable to the Paying Agent) of
that fact by the person claiming such Certificate to be lost, stolen or destroyed, the Paying Agent or the Surviving Corporation,
as applicable, shall issue in exchange for such lost, stolen or destroyed Certificate the portion of the Aggregate Common Stock
Consideration into which the Shares formerly represented by such Certificate were converted pursuant to
Section 2.01(a)(i)
;
provided
,
however
, that the Paying Agent may, in its reasonable discretion and as a condition precedent to the payment
of such Merger Consideration, require the owner of such lost, stolen or destroyed Certificate to provide a bond in a customary
amount.
Section 2.03
Treatment of Company Options, RSUs and Equity Plans
.
(a)
Treatment of Company Options
. Prior to the Effective Time, the Company’s
board of directors (or, if appropriate, any committee thereof) shall adopt appropriate resolutions to provide that, immediately
prior to the Effective Time, each outstanding option to purchase Shares granted under the Company Equity Incentive Plan (the “
Company
Options
”) shall be fully vested and cancelled and, in exchange therefor, each holder of any such cancelled Company Option
shall be entitled to receive, in consideration of the cancellation of such Company Option and in settlement therefor, a payment
in cash of an amount equal to the product of (i) the total number of Shares subject to such cancelled Company Option and (ii) the
excess, if any, of (A) the Merger Consideration over (B) the exercise price per Share subject to such cancelled Company Option,
without interest (such amounts payable hereunder, the “
Option Payments
”);
provided
,
however
, that
(i) any such Company Option with respect to which the exercise price per Share subject thereto is greater than the Merger Consideration
shall be cancelled in exchange for no consideration and (ii) such Option Payments may be reduced by the amount of any required
Tax withholdings as provided in
Section 2.05
. From and after the Effective Time, no Company Option shall be exercisable,
and each Company Option shall only entitle the holder thereof to the payment provided for in this
Section 2.03(a)
.
(b)
Treatment
of Employee Restricted Stock Units
. Prior to the Effective Time, the Company’s board of directors (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions to provide that, immediately prior to the
Effective Time, each then outstanding unvested award of time-based restricted stock units and performance-based restricted
stock units (each, an “
RSU
”) with respect to Shares (each, an “
RSU Award
”) granted
pursuant to the Company Equity Incentive Plan, other than any RSU Award held by a non-employee director of the Company, shall
be assumed by the Surviving Corporation and shall be converted into the right to receive an amount in cash, without interest,
equal to (i) the Merger Consideration, multiplied by (ii) the number of RSUs subject to such RSU Award
(the
“
Cash Replacement Company RSU Awards
”)
, which Cash Replacement Company RSU Awards will, subject to
the holder’s continued employment with the Surviving Corporation through the applicable vesting dates, vest and be
payable at the same time as the RSU Awards for which such Cash Replacement RSU Awards were exchanged would have vested
pursuant to their terms. All Cash Replacement Company RSU Awards will have the same terms and conditions (including, with
respect to vesting (including accelerated vesting on specific terminations of employment, to the extent applicable)) and
settlement as applied to the RSU Awards for which they were exchanged, except for terms rendered inoperative by reason of the
transactions contemplated by this Agreement or for such other administrative or ministerial changes that are not materially
detrimental to the holders and that in the reasonable and good faith determination of Parent are necessary for the
administration of the Cash Replacement Company RSU Awards; provided, however, that no such change shall cause the Cash
Replacement Company RSU Awards to violate Code Section 409A. To the extent an RSU Award is subject to performance conditions,
the number of RSUs that are assumed by the Surviving Corporation and are converted into Cash Replacement Company RSU Awards
shall be determined (A) for RSU Awards with a performance period that by its terms has ended prior to the Effective Time,
based on actual performance through the end of such performance period, and (B) for RSU Awards with a performance period that
by its terms has not ended prior to the Effective Time, assuming performance of 100% of target levels.
(c)
Treatment of Director Restricted Stock Units
. Prior to the Effective Time, the Company’s board of directors
(or, if appropriate, any committee thereof) shall adopt appropriate resolutions to provide that, immediately prior to the Effective
Time, each outstanding unvested
RSU Award
granted pursuant to the Company Equity Incentive Plan and held by a non-employee
director of the Company immediately prior to the Effective Time shall be fully vested and cancelled and, in exchange therefor,
each holder of any such cancelled RSU Award shall be entitled to receive, in consideration of the cancellation of such RSU Award
and in settlement therefor, a payment in cash of an amount equal to the product of (i) the Merger Consideration multiplied by (ii)
the number of RSUs subject to such RSU Award, without interest (such amounts payable hereunder, the “
RSU Payments
”)
(less any required Tax withholdings as provided in Section 2.05).
(d)
Termination of Company Equity Incentive Plan and Company Stock Purchase Plan
.
(i)
As of the Effective Time, the Company Equity Incentive Plan and the Company Stock
Purchase Plan shall terminate, and no further Company Options, RSUs or other rights with respect to Shares shall be granted thereunder.
(ii)
As
soon as practicable following the date of this Agreement, but prior to the Effective Time, the Company shall take all action
that may be necessary to: (A) cause any outstanding offering period under the Company Stock Purchase Plan to be terminated
prior to the Effective Time; (B) make any pro-rata adjustments that may be necessary to reflect the shortened offering
period, but otherwise treat such shortened offering period as a fully effective and completed offering period for all
purposes under the Company Stock Purchase Plan; (C) provide that all outstanding options granted under the Company Stock
Purchase Plan (the “
SPP Options
”) shall be cancelled as of the Closing Date (if not terminated
earlier pursuant to the terms of the Company Stock Purchase Plan), provided that each holder of an SPP Option may exercise
(consistent with the Company Stock Purchase Plan and prior to the Effective Time) each outstanding purchase right under the
Company Stock Purchase Plan; (D) provide that no further offering period or purchase period shall commence under the Company
Stock Purchase Plan after the date of this Agreement; and (E) ensure that no individual shall be permitted to make a
new
election to purchase shares in any current offering period or increase his or her election to purchase shares in any current
offering period;
provided
,
however
, that the actions described in clauses “(A)” through
“(E)” of this sentence shall be conditioned upon the consummation of the Merger. On such new exercise date, the
Company shall apply the funds credited as of such date under the Company Stock Purchase Plan within each participant’s
payroll withholding account to the purchase of whole shares of Company Common Stock in accordance with the terms of the
Company Stock Purchase Plan.
(e)
Parent Funding
. At the Effective Time, Parent shall deposit with the Surviving
Corporation cash in the amount necessary to make the payments required under this
Section 2.03
. Parent shall cause
the Surviving Corporation to make the payments required under this
Section 2.03
within three Business Days after the
Effective Time. Parent shall cause the Surviving Corporation to pay through the Payroll Agent the applicable Option Payments and
RSU Payments, if any, to the holders of Company Options and RSUs, in each case, subject to
Section 2.05
.
Section 2.04
Dissenting Shares
. Notwithstanding anything in this Agreement to
the contrary, any issued and outstanding Shares held by a person (a “
Dissenting Stockholder
”) who is entitled
to appraisal rights under Section 262 of the DGCL and has complied with all the provisions of the DGCL concerning the right of
holders of Shares to require appraisal of such Shares (“
Dissenting Shares
”) shall not be converted into the
right to receive the Merger Consideration as described in
Section 2.01(a)(i)
, but shall become the right to receive
the fair value of such Shares pursuant to the procedures set forth in Section 262 of the DGCL. If such Dissenting Stockholder
withdraws such Dissenting Stockholder’s demand for appraisal or fails to perfect or otherwise loses such Dissenting Stockholder’s
right of appraisal with respect to such Shares, in any case pursuant to the DGCL, such Shares shall be deemed to be converted as
of the Effective Time into the right to receive the Merger Consideration for each such Share, without interest and subject to
Section 2.05
.
The Company shall give Parent prompt notice of any demands for appraisal of Shares received by the Company, withdrawals of such
demands and any other instruments served on the Company pursuant to Section 262 of the DGCL. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands.
Section 2.05
Withholding Rights
. Each of Parent, Sub, the Surviving Corporation
and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement
in respect of the Shares, Company Options and RSU Awards vested or cancelled in the Merger, such amounts as it is required to deduct
and withhold with respect to the making of such payment, or the vesting, waiver of restrictions or other actions provided for in
this Agreement, under the Code or any other applicable state, local or foreign Tax Law. To the extent that amounts are so withheld
by the Surviving Corporation, Sub, Parent or the Paying Agent, as the case may be, such withheld amounts (a) shall be remitted
by the Surviving Corporation, Sub, Parent or the Paying Agent, as applicable, to the applicable Governmental Entity, and (b) shall
be treated for all purposes of this Agreement as having been paid to the holder of Shares, Company Options or RSU Awards in respect
of which such deduction and withholding was made by the Surviving Corporation, Sub, Parent or the Paying Agent, as the case may
be.
Article III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (a) as disclosed in the Company SEC
Documents filed or furnished prior to the date of this Agreement, other than disclosures in the “Risk Factors” sections
of any such filings and any disclosure of risks included in any “forward-looking statements” disclaimer contained in
any such filings, or (b) as disclosed in the separate disclosure letter that is being delivered by the Company to Parent on the
date of this Agreement, including the documents attached to or incorporated by reference in such disclosure letter (the “
Company
Disclosure Letter
”) (it being agreed that disclosure of any item in any section or subsection of the Company
Disclosure Letter shall also be deemed to be disclosed with respect to any other section or subsection in this Agreement
to which the relevance of such item is reasonably apparent), the Company hereby represents and warrants to Parent and Sub as follows:
Section 3.01
Organization and Qualification; Subsidiaries
.
(a)
The Company and each Company Subsidiary is a corporation or other legal entity duly
incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization.
The Company and each Company Subsidiary has requisite corporate or other legal entity, as the case may be, power and authority
to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, except where the
failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company and each Company Subsidiary is duly qualified to do business and is in good standing in each
jurisdiction where the ownership, leasing or operation of its properties or assets or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
(b)
The Company has made available to Parent true and complete copies of (i) the Certificate
of Incorporation, as amended, of the Company (the “
Company Charter
”) (ii) the Bylaws, as amended, of the Company
(the “
Company By-laws
”) and the equivalent governing documents of each Company Subsidiary (the “
Subsidiary
Organizational Documents
”). Each of the Company Charter and the Company By-laws is in full force and effect, and the
Company is not in violation of any of the provisions of such documents.
Section 3.02
Capitalization
.
(a)
The authorized capital stock of the Company consists of 50,000,000 Shares and 1,000,000 shares of the Company’s
preferred stock, par value $0.001 per share (“
Company Preferred Stock
”). As of the close of business on June
28, 2017 (the “
Specified Date
”), (i) 25,278,072 Shares were issued and outstanding, all of which were duly authorized,
validly issued, fully paid and nonassessable, and free of preemptive rights, (ii) no shares of Company Preferred Stock were issued
and outstanding, (iii) 688,889 Shares were held in treasury, and (iv) except as set forth in this
Section 3.02(a)
,
there were no other issued or outstanding shares of capital stock of the Company.
(b)
As of the close of business on the Specified Date, the Company had no Shares or Company Preferred Stock reserved
for issuance, except
484,688 Shares reserved for issuance with respect to outstanding Company Options
(with a weighted average exercise price of $10.94, (v) 677,128 Shares reserved for issuance with respect to outstanding RSUs (comprised
of 494,937 time-based restricted stock units and 182,191 performance-based restricted stock units (assuming achievement of all
applicable performance goals at maximum levels), (vi) the closing price as of the first date of the current offering period pursuant
to the Company Stock Purchase Plan was $11.26, and (vii) as of the Specified Date, the Company had received aggregate contributions
of $110,982.08 for the current offering period pursuant to the Company Stock Purchase Plan
. Except as set forth in
Section 3.02(a)
and
3.02(b)
and for changes since the close of business on the Specified Date resulting from (x) the exercise of Company
Options outstanding on the Specified Date, (y) the vesting and settlement of RSUs outstanding on the Specified Date, and (z) Shares
purchased pursuant to the Company Stock Purchase Plan pursuant to SPP Options outstanding on the Specified Date, as of the close
of business on the date of this Agreement, there are no issued, reserved for issuance or outstanding (A) options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible securities, agreements or commitments of any character to which
the Company or any of the Company Subsidiaries is a party obligating the Company or any of the Company Subsidiaries to issue, transfer
or sell any shares of capital stock or other equity interest in the Company or any of the Company Subsidiaries or securities convertible
into or exchangeable for such shares or equity interests relating to or based on the value of the equity securities of the Company
or any Company Subsidiary, (B) contingent value rights, “phantom” stock or similar securities or rights that are derivative
of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of, or other
equity securities of the Company or any Company Subsidiary, (C) obligations or binding commitments of the Company or any of the
Company Subsidiaries (x) to repurchase, redeem or otherwise acquire any capital stock or equity securities of the Company or any
of the Company Subsidiaries or (y) restricting the transfer of any capital stock or other equity securities, or (D) voting trusts,
stockholders agreements, proxies or similar agreements or arrangements to which the Company is a party or by which the Company
is bound with respect to the voting or transfer of any capital stock or other equity securities of the Company.
(c)
Section 3.02(c)
of the Company Disclosure Letter contains a correct and
complete list as of the close of business on the Specified Date of outstanding Company Options and RSUs, including for each award
(as applicable) the holder (the specific identity of whom may be redacted to the extent required by applicable Law), type of award,
number of Shares, grant date, vesting schedule and expiration date and exercise price with respect to Company Options.
(d)
All of the outstanding Shares are, and all the Shares that may be issued pursuant
to the Company Equity Incentive Plan and Company Stock Purchase Plan will be when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens (other than transfer and other
restrictions under applicable securities Laws) and not issued in violation of any preemptive rights, purchase option, call rights,
rights of first refusal or similar rights.
(e)
As
of the date of this Agreement, there are no outstanding bonds, debentures, notes or other Indebtedness of the Company or any
Company Subsidiary having the right to vote
(or convertible into, or exchangeable for, securities having the right to
vote) on any matter on which stockholders of the Company or any Company Subsidiary may vote.
(f)
The Company or another Company Subsidiary owns, directly or indirectly, all of the
issued and outstanding shares of capital stock or other equity securities of each of the Company Subsidiaries, free and clear of
any Liens (other than transfer and other restrictions under applicable federal and state securities Laws or applicable foreign
Laws), and all of such outstanding shares of capital stock or other equity securities have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, purchase option, call rights, rights of first refusal or similar
rights. As of the date of this Agreement, there are no accrued and unpaid dividends with respect to any outstanding Shares. No
Company Subsidiary owns any shares of capital stock or other securities of the Company. Other than with respect to the Company
Subsidiaries, the Company and the Company Subsidiaries do not own or hold the right to acquire any equity securities, or voting
interests (including any voting debt) of, or securities exchangeable or exercisable therefor, or investments in any other Person,
or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other Person
.
There are no outstanding obligations to which
the Company or any Company Subsidiary is a party (i) restricting the transfer of any capital stock or other equity
securities in any Company Subsidiary or (ii) limiting the exercise of voting rights with respect to any capital
stock or other equity securities in any Company Subsidiary.
Neither the Company
nor any Company Subsidiaries has adopted a stockholder rights agreement, rights plan, “poison pill” or other similar
agreement that is currently in effect. Since the Specified Date, there have been no dividends declared or paid on the Shares.
Section 3.03
Authority
.
(a)
The Company has the requisite corporate power and authority to execute and deliver
this Agreement and, subject to obtaining the Requisite Stockholder Approval, to consummate the Transactions. Assuming that the
Requisite Stockholder Approval is obtained and assuming the accuracy of the representations and warranties contained in
Section 4.06(b)
,
the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Transactions,
have been duly authorized by all necessary corporate action on the part of the Company’s board of directors and, other than
the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, no additional corporate proceedings
on the part of the Company are necessary to authorize the execution, delivery and performance by the Company of this Agreement
or the consummation by the Company of the Transactions. This Agreement has been duly executed and delivered by the Company and
(assuming the due authorization, execution and delivery of this Agreement by Parent and Sub and assuming the accuracy of the representations
and warranties contained in
Section 4.06(b)
) constitutes the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability (i) may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar Laws of general application, now or hereafter in effect, affecting
or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether
considered in a proceeding at law or in equity (the “
Bankruptcy and Equity Exception
”).
(b)
The Company’s board of directors has (i) adopted and declared advisable this
Agreement and the consummation by the Company of the Transactions, (ii) approved the execution, delivery and performance of
this Agreement and the consummation by the Company of the Transaction, (iii) determined that this Agreement and the Transactions,
including the Merger, are advisable and in the best interests of the Company and its stockholders and (iv) resolved to recommend
that the stockholders of the Company adopt this Agreement and to submit this Agreement to the stockholders of the Company for adoption,
in each case, by resolutions duly adopted unanimously at a duly called and held meeting of the Company’s board of directors,
which resolutions, subject to
Section 5.03
, have not been subsequently rescinded, withdrawn or modified in a manner
adverse to Parent.
Section 3.04
No Conflict; Required Filings and Consents
.
(a)
Assuming the accuracy of the representations and warranties contained in
Section
4.06(b)
, none of the execution, delivery or performance of this Agreement by the Company or the consummation by the Company
of the Transactions, including the Merger will: (i) conflict with or violate any provision of the Company Charter or Company By-laws
or any equivalent organizational or governing documents of any Company Subsidiary; (ii) assuming the Requisite Stockholder Approval
is obtained and assuming that all consents, approvals and authorizations described in
Section 3.04(b)
have been obtained
and all filings and notifications described in
Section 3.04(b)
have been made and any waiting periods thereunder have
terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary or any of their respective
properties or assets; or (iii) require any consent or approval under, violate, conflict with, result in any breach of or any
loss of any benefit under, or constitute a default under (with or without notice or lapse of time, or both), or result in termination
or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a
Lien (other than a Permitted Lien) upon any of the respective properties or assets of the Company or any Company Subsidiary pursuant
to, any Company Material Contract to which the Company or any Company Subsidiary is a party (or by which any of their respective
properties or assets are bound) or any Company Permit, except, with respect to
clause (iii)
, as contemplated by
Section 2.03
or for (A) any such consents, approvals and authorizations, the failure to obtain which would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect (disregarding clause (a) of the proviso of clause (i) of the definition
thereof) and (B) any such conflicts, violations, breaches, losses, defaults, terminations, rights of termination, vesting, amendment,
acceleration or cancellation or Liens that would not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect (disregarding clause (a) of the proviso of clause (i) of the definition thereof).
(b)
None
of the execution, delivery or performance of this Agreement by the Company or the consummation by the Company of the
Transactions will require (with or without notice or lapse of time, or both) any consent, approval, authorization or permit
of, or filing or registration with or notification to, any Governmental Entity with respect to the Company or any Company
Subsidiary or any of their respective properties or assets, other than (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) the filing of a premerger notification and report form under the HSR Act
and the receipt, termination or expiration, as applicable, of waivers, consents, approvals, waiting periods or
agreements required
under the HSR Act or any other applicable U.S. or foreign competition, antitrust, merger control
or investment Laws (together with the HSR Act, “
Antitrust Laws
”), (iii) compliance with, and such filings
as may be required under, Environmental Laws, (iv) compliance with the applicable requirements of the Securities Act or the
Exchange Act, including the filing with the SEC of a proxy statement relating to the Stockholders’ Meeting (as amended
or supplemented from time to time, the “
Proxy Statement
”), (v) filings as may be required under the rules
and regulations of the NASDAQ, (vi) compliance with any applicable international, federal or state securities or “blue
sky” Laws, (vii) such consents, approvals, authorizations, permits, filings, registrations or notifications as may be
required as a result of the identity of Parent or any of its affiliates and (viii) where the failure to obtain such consents,
approvals, authorizations or permits of, or to make such filings, registrations with or notifications to, any Governmental
Entity has not had and would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
Section 3.05
Permits; Compliance with Laws
.
(a)
The Com
pany and
each Com
pany Subsidiary is
in possession of all authorizations, licenses, permits, certificates, variances, exemptions, approvals, orders, registrations
and clearances of any Gov
ernmental Entity (ea
ch, a “
Per
mit
”)
necessary for the Com
pany and
each Com
pany Subsidiary
to
own, lease and operate its properties and assets, and to carry on and operate its businesses as currently conducted (the
“
Com
pany Permits
”),
and all such
Com
pany Permits are
in full force and effect, except where the failure to possess, or the
failure to be in full force and effect of, any Com
pany Permits would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(b)
S
ince
January 1, 2016, t
he Com
pany
and
each of the Com
pany Subsidiaries has
been in compliance with all Law
s
app
licable to the Com
pany, t
he Com
pany Subsidiaries
and
their respective businesses and activities, except for such non-compliance that has not had, and
would
not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
(c)
To the knowledge of the Company, neither the Company, nor the Company Subsidiaries, nor any of their respective employees,
representatives or agents (in each case, acting in the capacity of an employee or representative of the Company or the Company
Subsidiaries) has (i) used any funds (whether of the Company, the Company Subsidiaries or otherwise) for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity, (ii) made any unlawful payment to foreign
or domestic government officials or employees or to foreign or domestic political parties or campaigns or (iii) violated any
provision of any Anti-Corruption Laws or any rules or regulations promulgated thereunder, anti-money laundering laws or any rules
or regulations promulgated thereunder or any applicable Law of similar effect. Since January 1, 2016, the Company has not
received any communication that alleges any of the foregoing.
Section 3.06
Co
mpany
SEC Documents; Financial Statements
. Since January 1, 2016, the Company has filed with or furnished to (as applicable)
the SEC all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and documents
required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, together with all
certifications required pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “
Sarbanes-Oxley Act
”)
(such documents and any other documents filed or furnished by the Company with the SEC, as have been supplemented, modified
or amended since the time of filing, collectively, the “
Company SEC Documents
”). As of their respective
filing dates or, if supplemented, modified or amended since the time of filing, as of the date of the most recent supplement,
modification or amendment, the Company SEC Documents (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading and (ii) complied as to form in all material respects with all
applicable requirements of the Exchange Act or the Securities Act, as the case may be, in each case as in effect on the date
each such document was filed with or furnished to the SEC. None of the Company Subsidiaries is currently required to file
periodic reports with the SEC. As of the date of this Agreement, there are no material outstanding or unresolved comments
received from the SEC with respect to any of the reports filed by the Company with the SEC. Since January 1, 2016,
the Company has been and is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act
and the applicable listing and corporate governance rules and regulations of the NASDAQ. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the Company (including, in each case, any notes
thereto) and the consolidated Company Subsidiaries included in or incorporated by reference into the Company SEC Documents
(collectively, the “
Company Financial Statements
”) (x) were, except as may be indicated in the notes
thereto, prepared in accordance with GAAP (as in effect in the United States on the date of such Company Financial Statement)
applied on a consistent basis during the periods involved except, in the case of unaudited statements, as permitted by SEC
rules and regulations and (y) present fairly, in all material respects, the financial position of the Company and the
consolidated Company Subsidiaries and the results of their operations and their cash flows as of the dates and for the
periods referred to therein (except as may be indicated in the notes thereto or, in the case of interim financial statements,
for normal year-end adjustments that were not or will not be material in amount or effect). There are no unconsolidated
Subsidiaries of the Company.
Section 3.07
In
formation Supplied
. None of the information supplied or
to be supplied by or on behalf of the Company or any of the Company Subsidiaries expressly for inclusion or incorporation by reference
in the Proxy Statement will, at the time filed with the SEC, at any time such the Proxy Statement is amended or supplemented or
at the time such the Proxy Statement is first published, sent or given to the holders of Shares, as applicable, 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 under which they are made, not misleading. The the Proxy Statement, insofar as
it relates to the Company or the Company Subsidiaries or other information supplied by the Company expressly for inclusion or incorporation
by reference therein, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder and other applicable Law. Notwithstanding the foregoing, no representation or warranty is made by the Company
with respect to statements made or incorporated by reference in the the Proxy Statement based on information supplied by Parent
or Sub or any of their representatives specifically for inclusion (or incorporation by reference) therein.
Section 3.08
Internal Controls and Disclosure Controls
. The Company has designed and maintains a system of internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) as required by Rule
13a-15 promulgated under the Exchange Act and sufficient to provide reasonable assurances regarding the reliability of financial
reporting for the Company and the Company Subsidiaries. The Company has designed disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) to provide reasonable assurance that material information
required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated
to the Company’s management as appropriate to allow timely decisions regarding required disclosure.
Section 3.09
Absence of Certain Changes
.
(a)
Except as set forth in
Section 3.09(a)
of the Com
pany Disclosure Letter,
e
xcept as otherwise expressly contemplated by this Agr
eement, f
rom April 1, 2017
thr
ough the date of this Agr
eement, t
he businesses
of the Com
pany and
the Com
pany Subsidiaries hav
e
been conducted in the ordinary course of business in all material respects.
(b)
Except as set forth in
Section 3.09(b)
of the Com
pany Disclosure Letter,
f
rom
April 1, 2017 thr
ough the date of this Agr
eement,
t
here have not been any changes, circumstances, events or effects that, ind
ividually or
in the aggregate, have had or would reasonably be expected to have a Company Material Adverse Effect.
Section 3.10
U
ndisclosed Liabilities
. Neither the Company nor any of
the Company Subsidiaries has, or is subject to, any liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated balance sheet of the Company and the Company Subsidiaries or in
the notes thereto, other than liabilities and obligations (a) disclosed, reserved against or provided for in the unaudited consolidated
balance sheet of the Company as of April 1, 2017 or in the notes thereto, (b) incurred in the ordinary course of business since
April 1, 2017, (c) incurred or permitted to be incurred under this Agreement or incurred in connection with the Transactions, (d)
that have been discharged or paid in full or (e) that otherwise would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
Section 3.11
Li
tigation
. As of the date of this Agreement, there is no
suit, claim, action, proceeding or arbitration (collectively, “
Proceeding
”) to which the Company or any Company
Subsidiary is a party pending or, to the knowledge of the Company, threatened in writing that, individually or in the aggregate,
would reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is subject
to any outstanding order, writ, injunction, judgment or decree of any Governmental Entity or arbitrator unrelated to this Agreement
that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect. As of the date
of this Agreement, there is no Proceeding to which the Company or any Company Subsidiary is a party pending or, to the knowledge
of the Company, threatened seeking to prevent, hinder, modify, delay or challenge the Merger or any of the other Transactions.
Section 3.12
Em
ployee Benefits
.
(a)
Section 3.12(a)
of
the Com
pany
Disclosure Letter set
s forth, as of the date of this Agreement, a true and complete list of each material “emp
loyee
benefit plan” a
s defined in Sec
tion 3(3
) of the Emp
loyee
Retirement Income Security Act of 1974, a
s amended (“
ERI
SA
”),
and each other material employee benefit plan, policy, program or arrangement, in each case, maintained by the Com
pany
or
any Com
pany Subsidiary, o
ther than any plan, policy, program, or arrangement which
is required to be maintained by applicable Law
(ea
ch a “
Com
pany
Benefit Plan
”).
Ea
ch Company Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has received a favorable determination, notification or opinion
letter, and, to the knowledge of the Company, there are no circumstances that would reasonably be expected to result in the revocation
of such letter.
(b)
Ex
ce
pt as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (
i) each Com
pany
Benefit Plan has
been administered in substantial compliance with its terms and all applicable Law
s,
i
nc
luding ERISA and
the Cod
e and
(ii) there
are no material Pro
ceedings (ot
her than for routine claims for benefits) pending or, to
the kno
wledge of
the Com
pany, t
hreatened with respect
to any Com
pany Benefit Plan.
Each Com
pany Benefit Plan whi
ch
is intended to qualify under Sec
tion 401
(a) of the Cod
e
has
either received a favorable determination letter from the Internal Revenue Service as to its qualified status or has
timely filed an application for a favorable determination letter, or may rely upon an opinion letter for a prototype or volume
submitter plan.
(c)
Section 3.12(c)
of
the Com
pany
Disclosure Letter lis
ts, as of the date of this Agreement, each Com
pany Benefit Plan tha
t
provides health benefits after retirement or other termination of employment, other than (i) as required by Law
,
(
ii) coverage or benefits the full cost of which is borne by the employee or former employee (or any beneficiary of the
employee or former employee) or (iii) benefits provided for a period of not more than 18 months following termination of employment
or during any period during which the former employee is receiving severance pay.
(d)
At no time during the six-year period prior to the date of this Agr
eement has
the Com
pany, a
ny Com
pany Subsidiary or
any
of
their respective ERISA Affiliates mai
ntained, contributed to or had any obligations or liabilities under any employee benefit
subject to Sec
tion 302
or Tit
le IV of ERISA or
Sec
tion 412
of the Cod
e, o
r any multiemployer pension plan (as defined in Section 3(37) of ERI
SA).
(e)
Exce
pt as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, e
ach Com
pany Benefit Plan tha
t is required
to be registered under the Law
s of
a jurisdiction outside the United States has been registered
and has been maintained in good standing with the appropriate regulatory authorities.
Section 3.13
Lab
or
. As of the date of this Agreement, there is no labor strike
or lockout, or, to the knowledge of the Company, threat thereof, against the Company or any Company Subsidiary. As of the date
of this Agreement, neither the Company nor any Company Subsidiary is a party to, or bound by, any collective bargaining agreement
or similar agreement or arrangement with any labor union.
Section 3.14
Ta
x
Mat
ters
.
(a)
The Com
pany and
each Com
pany Subsidiary has
timely filed (taking into account any extension of time within which to file) all Tax
Returns req
uired
to be filed by it on or prior to the date of this Agr
eement and
all such filed Tax
Returns
are
correct, complete and accurate in all material respects, and has paid all Tax
es tha
t
are shown as due on such filed Tax
Returns, s
ubject in each case to such exc
eptions
as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
All Tax
es
whi
ch the Com
pany or
any Com
pany Subsidiary has
been required by Law
to
withhold or to collect for payment on or prior to the date of this
Agr
eement hav
e been duly withheld and collected and have been paid to the appropriate Gov
ernmental
Entity, s
ubject to such exc
eptions as would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
(b)
As of the date of this Agr
eement the
re is no Pro
ceeding
pending or
t
hreatened in writing with respect to Tax
es
for
which the Com
pany or
any Com
pany Subsidiary may
be liable that, if determined adversely, would, individually or in the aggregate with all other such Pro
ceedings,
reasonably be expected to have a C
om
pany Material Adverse Effect.
(c)
Neither the Com
pany nor
any Com
pany Subsidiary
has
any liability for Tax
es of
another per
son (ot
her
than the Com
pany or
a Com
pany Subsidiary) u
nder Tre
asury
Regulation § 1.1502-6 (or any similar provision of state, local or foreign Law) as
a result of filing Tax
Returns
on
a consolidated, combined, or unitary basis with such per
son, w
hich to the extent
unpaid would, individually or in the aggregate with all other such liabilities, constitute a Com
pany
Material Adverse Effect.
Since
January 1, 2016, n
either the Com
pany
or
any Com
pany Subsidiary con
stituted either a “dis
tributing
corporation” o
r a “con
trolled corporation” w
ithin the meaning of
Sec
tion 355(a)(1)(A) of the Code.
(d)
T
he Com
pany and
each Com
pany
Subsidiary tha
t has participated in a “rep
ortable transaction” a
s defined
in Tre
asury Regulation Section 1.6011-4(b)
has, to the extent and in the manner required
by Tre
asury Regulation Section 1.6
011-4(b), properly disclosed such participation.
(e)
Except as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, there are no material Liens with respect to any Taxes, other than Permitted Liens, on the
assets of the Company or any Company Subsidiary.
(f)
T
he Com
pany is
not and has not been
a United States real property holding corporation within the meaning of Sec
tion 897
(c)(2)
of the Cod
e dur
ing the applicable period described in Sec
tion
897
(c)(1)(A)(ii) of the Cod
e.
Notwithstanding any other provisions of this Agreement to the
contrary, the representations and warranties made in
Section 3.12
and in this
Section 3.14
are the sole
and exclusive representations and warranties made by the Company in this Agreement with respect to Taxes.
Section 3.15
P
roperties
. Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company or a Company Subsidiary has a valid leasehold
estate in all real property leased, subleased, licensed or otherwise occupied by the Company or any Company Subsidiary in each
case free and clear of all Liens except for Permitted Liens.
Section 3.16
Environmental Matters
. Except as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect:
(a)
Th
e Com
pany and
each Com
pany
Subsidiary are
in material compliance with those Env
ironmental Laws app
licable to
their respective operations (inc
luding pos
sessing and complying with any required Env
ironmental
Permits),
and there are no administrative or judicial Pro
ceedings pen
ding or, to
the kno
wledge of
the Com
pany, t
hreatened against
the Com
pany or
any Com
pany Subsidiary and
in the
three years preceding the date of this Agr
eement non
e of the Com
pany
or
any Com
pany Subsidiary has
received any written notice, demand, letter or claim,
in either case, alleging that the Com
pany or
such Com
pany
Subsidiary is
in violation of, or liable under, any Env
ironmental Law.
(b)
Neither the Com
pany nor
any Com
pany Subsidiary
has
received any written notice of Haz
ardous Substances pre
sent in, at, on, under
any of the real property leased by the Com
pany or
any Com
pany
Subsidiary, e
ither as a result of the operations of the Com
pany or
any Com
pany
Subsidiary
that, in either case, would reasonably be expected to result in a material liability under Env
ironmental
Laws on
the part of the Com
pany or
any Com
pany Subsidiary.
Notwithstanding any other provisions of this Agreement to the
contrary, the representations and warranties made in this
Section 3.16
are the sole and exclusive representations and
warranties made by the Company in this Agreement with respect to Hazardous Substances, Environmental Laws, Environmental Permits
and any other matter related to the environment or the protection of human health and worker safety.
Section 3.17
Intellectual Property
.
(a)
Section 3.17(a)
of the Company Disclosure Letter
lists all Company
Intellectual Property Rights issued by, filed with, registered with, renewed by or the subject of a pending application before
any Governmental Entity.
(b)
Exce
pt as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, (
i) to the Com
pany’s
kno
wledge,
the
Com
pany and
the Com
pany Subsidiaries: (x) own
the Company Intellectual Property Rights free and clear of Liens other than Permitted Liens; and (y) have the right to use
in the manner currently used all other Intellectual Property Rights that are material to the business of the Com
pany
and
the Com
pany Subsidiaries as
currently conducted
;
and (ii) neither the Com
pany nor
any of the Com
pany
Subsidiaries has
received, in the 12 months preceding the date of this Agr
eement, a
ny
written charge, complaint, claim, demand or notice challenging the validity or enforceability of any of the Com
pany
Intellectual Property Rights tha
t has not been settled or otherwise fully resolved.
(c)
To
the Company’s knowledge, the Company and each Company Subsidiary have taken commercially reasonable measures to
maintain and protect the secrecy of all owned Trade Secrets, except as would not, individually or in the aggregate, have
a Company Material Adverse Effect. To the Company’s knowledge, no owned Trade Secret has been actually disclosed by the
Company or any Company Subsidiary to any of their former employees or any third person other than pursuant to a
non-disclosure agreement and/or license agreement, except as would not, individually or in the aggregate, have a Company
Material Adverse Effect. To the Company’s knowledge, the Company and each Company Subsidiary have policies generally
requiring each employee and individual independent contractor who is involved in the development of any Company Intellectual
Property Right that is included in or used to make a Company product to execute one or more agreements with provisions
relating to the ownership of Intellectual Property Rights developed within the scope of the individual’s employment or
independent contractor relationship with the Company or any Company Subsidiary, except as would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(d)
To the Com
pany’s
kno
wledge, t
he
conduct of the business of the Com
pany and
the Com
pany Subsidiaries
as
currently conducted does not infringe upon any Int
ellectual Property Rights of
any
other per
son, e
xcept for any such infringement tha
t would
not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
None of the Com
pany
or
any of the Com
pany Subsidiaries has
received, in the 12 months preceding the date
of this Agr
eement, a
ny written charge, complaint, claim, demand or notice alleging any such
infringement by the Com
pany or
any of the Com
pany Subsidiaries
tha
t has not been settled or otherwise fully resolved, except for any such infringement tha
t
would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
To the Company’s
knowledge, no third person as of the date of this Agreement, is infringing, any Company Intellectual Property Rights, except as
would not, individually or in the aggregate, have a Company Material Adverse Effect.
(e)
To the Company’s knowledge, the execution and delivery of this Agreement will not affect ownership of the Company
Intellectual Property Rights by the Company and the Company Subsidiaries, except as would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(f)
To the Company’s knowledge, the Company and the Company Subsidiaries own or have a right to access and use
all computer systems, networks, hardware, information technology, software, databases, and websites material to the business of
the Com
pany and
the Com
pany Subsidiaries as
currently
conducted (the “
IT Systems
”), as such IT Systems are currently used by the Company and the Company Subsidiaries,
except as would not, individually or in the aggregate, have a Company Material Adverse Effect. To the Company’s knowledge,
the IT Systems, except as would not, individually or in the aggregate, have a Company Material Adverse Effect, (i) are reasonably
adequate for the current operation of the Company and each Company Subsidiary; (ii) have not suffered any malfunction, failure
or security breach in the 12 months preceding the date of this Agr
eement;
and (iii) do not
contain any viruses, trojan horses, bugs, or faults that materially and adversely disrupt their functionality or security.
(g)
The
Company and the Company Subsidiaries have materially complied with those Privacy Laws applicable to their operation with
respect to the collection, use, and disclosure of Personal Information collected by any public website owned or operated by
the Company or the Company Subsidiaries since January 1, 2016. The Company and the Company Subsidiaries have taken measures
materially consistent with any applicable Privacy Laws to protect the security, operation, and integrity of Personal
Information in the possession of the Company and the Company Subsidiaries and, to the knowledge of the Company, neither the
Company nor any
Company Subsidiary has been required by any applicable Privacy Law to provide notice to an
individual or business entity regarding unauthorized access to or acquisition of Personal Information in the possession of
the Company or the Company Subsidiaries.
Notwithstanding any other provisions of this Agreement to the
contrary, the representations and warranties made in this
Section 3.17
are the sole and exclusive representations and
warranties made by the Company in this Agreement with respect to intellectual property matters.
Section 3.18
M
aterial Con
tracts
.
(a)
All Con
tracts, i
nc
luding ame
ndments
thereto, required to be filed as an exhibit to any report of the Com
pany fil
ed pursuant
to the Exc
hange Act of
the type described in Item 601(b)(10) of Regulation S-K promulgated
by the SEC
hav
e been filed. All such filed Con
tracts sha
ll
be deemed to have been made available to Par
ent.
(b)
Other than the Contracts described in
Section 3.18(a)
and any Contracts,
including amendments thereto, required to be filed as an exhibit to any report of the Company filed pursuant to the Exchange Act
of the type described in Item 601(b)(10) of Regulation S-K promulgated by the SEC,
Section 3.18(b)
of the Company Disclosure
Letter sets forth a complete list, and the Company has made available to Parent true and complete copies, of each Contract to which
the Company or any of the Company Subsidiaries is a party or by which it is bound or to which any of their respective assets are
subject (other than any of the foregoing between the Company and any of the Company Subsidiaries or between any wholly-owned Company
Subsidiaries), as of the date of this Agreement, that:
(i)
constitutes a partnership, joint venture or similar arrangement that is material
to the Company and the Company Subsidiaries, taken as a whole;
(ii)
evidences the creation, incurrence, assumption or guarantee of Ind
ebtedness of
the
Com
pany or
any Com
pany Subsidiary in an amount in excess
of $
1,000,000
(ex
cept for such Ind
ebtedness bet
ween
the Com
pany and
any of the Com
pany Subsidiaries or
between
the Com
pany Subsidiaries, g
uarantees by the Com
pany of
Ind
ebtedness
of
any of the Com
pany Subsidiaries and
guarantees by any of the Com
pany
Subsidiaries of
Ind
ebtedness of
the Com
pany or
any
other Com
pany Subsidiary);
(iii)
is a Con
tract wit
h an aff
iliate tha
t
would be required to be disclosed under Item 404(a) of Regulation S-K promulgated under the Exc
hange
Act;
(iv)
g
rants any rights of first refusal, rights of first negotiation or other similar
rights to any per
son wit
h respect to the sale of any material operating unit of the Com
pany
and
the Com
pany Subsidiaries, t
aken as a whole;
(v)
would materially restrict the ability of Parent or its Subsidiaries (other than the
Surviving Corporation and its Subsidiaries) following the Effective Time to compete in any line of business that is material to
Parent or its Subsidiaries or in any geographic territory that is material to Parent and its Subsidiaries; or
(vi)
is a mortgage, pledge, security agr
eement, d
eed of trust or other Con
tract
gra
nting a Lie
n, o
ther than a Per
mitted Lien, o
n
any material property or asset of the Com
pany or
any Com
pany
Subsidiary (ot
her than any such item that relates to Ind
ebtedness tha
t is not required
to be listed by
Section 3.18(b)(ii)
).
Each Contract described in
Section 3.18(a)
or
Section 3.18(b)
that is not terminable by the other party or parties thereto on 90 days’ or less notice is referred to in this Agreement
as a “
Company Material Contract
.”
(c)
N
either the Com
pany nor
any Com
pany
Subsidiary is
in breach of or default under the terms of any Com
pany Material Contract,
a
nd, to the kno
wledge of
the Com
pany, n
o event
has occurred that with notice or lapse of time or both would constitute a breach or default thereunder by the Com
pany
or
any Com
pany Subsidiary, w
here such breach or default, individually or together
with other such breaches or defaults, has had or
would reasonably be expected to have a C
om
pany
Material Adverse Effect.
To the kno
wledge of
the Com
pany,
n
o other party to any Com
pany Material Contract is
in breach of or default under
the terms of any Com
pany Material Contract whe
re such breach or default, individually or
together with other such breaches or defaults, has had or
would reasonably be expected to have
a C
om
pany Material Adverse Effect.
As of the date of this Agr
eement,
e
ach Company Material Contract is a valid and binding obligation of the Com
pany or
a
Com
pany Subsidiary tha
t is a party thereto and, to the kno
wledge
of
the Com
pany, i
s in full force and effect, except for such fai
lures
as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, s
ubject
to the Ban
kruptcy and Equity Exception.
Section 3.19
I
nsurance
. Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (a) all Insurance Policies maintained by the Company and the
Company Subsidiaries are in full force and effect and provide insurance in such amounts and against such risks as the management
of the Company reasonably has determined to be prudent or as is required by Law or regulation, and all premiums due and payable
thereon have been paid; (b) neither the Company nor any Company Subsidiary is in material breach of or default under any of the
Insurance Policies; and (c) neither the Company nor any Company Subsidiary has taken any action or failed to take any action which,
with notice or the lapse of time or both, would constitute such a breach or default or permit termination or material modification
of any of the Insurance Policies.
Section 3.20
Opinion of Financial Advisor
. On or prior to the date of this Agreement,
the Company’s board of directors has received the opinion of Guggenheim Securities, LLC, to the effect that, as of the date
of such opinion and subject to the assumptions and limitations set forth therein, the Merger Consideration to be paid to the holders
of Shares pursuant to this Agreement is fair, from a financial point of view, to such holders. An executed copy of such opinion
will be delivered to Parent solely for informational purposes after the execution of this Agreement, and it is agreed and understood
that such opinion may not be relied on by Parent or Sub.
Section 3.21
Takeover
Statutes
. Assuming the accuracy of the representation contained in
Section 4.06(b)
, either no
“control share acquisition,” “fair price,” “moratorium,” “business
combination” or other anti-takeover Law (a “
Takeover Statute
”) or none of the restrictions on
business combinations contained in any such Takeover Statute is applicable to this Agreement or any of the Transactions.
Section 3.22
Requisite Stockholder Approval
. The adoption of this Agreement
by the affirmative vote (in person or by proxy) of the holders of a majority of the outstanding Shares entitled to vote at the
Stockholders’ Meeting (the “
Requisite Stockholder Approval
”)
is the only vote or approval of the holders of any class or series of capital stock of the Company necessary to adopt this Agreement,
and approve and consummate the Transactions.
Section 3.23
Brokers
. No broker, finder or investment banker other than Guggenheim
Securities, LLC is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based
on arrangements made by or on behalf of the Company or any of the Company Subsidiaries.
Section 3.24
Ack
nowledgement of No Other Representations or Warranties
.
Each of the Company and Company Subsidiaries acknowledges and agrees that, except for the representations and warranties contained
in
Article IV
and the Limited Guarantee, none of the Parent or Sub or any of their respective affiliates or representatives
makes or has made any representation or warranty, either express or implied, concerning the Parent or Sub or the transactions contemplated
by this Agreement.
Article IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as disclosed in the separate disclosure
letter that is being delivered by Parent and Sub to the Company on the date of this Agreement, including the documents attached
to or incorporated by reference in such disclosure letter (the “
Parent Disclosure Letter
”) (it being agreed
that disclosure of any item in any section or subsection of the Parent Disclosure Letter shall also be deemed to be disclosed with
respect to any other section or subsection in this Agreement to which the relevance of such item is reasonably apparent on the
face of such disclosure), Parent and Sub hereby jointly and severally represent and warrant to the Company:
Section 4.01
Organization
. Each of Parent and Sub is a corporation or other
legal entity duly incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation
or organization. Each of Parent and Sub has requisite corporate or other legal entity, as the case may be, power and authority
to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, except where any
such failure to be so organized, existing, in good standing or have such power or authority, individually or in the aggregate,
would not reasonably be expected to prevent or materially delay the consummation of the Transactions.
Section 4.02
Authority
.
Each of Parent and Sub has the requisite corporate or other legal entity power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and performance of this Agreement by Parent and Sub and
the consummation by them of the Transactions have been duly authorized by all necessary corporate or other legal entity
action on the part of Parent and Sub, and no other corporate or other legal entity proceedings on the part of Parent or Sub
are necessary to authorize the execution, delivery and performance by Parent and Sub of this Agreement or the consummation by
Parent or Sub of the Transactions other than the adoption of this Agreement by Parent in its capacity as sole stockholder of
Sub (which adoption shall occur immediately following the execution of this Agreement). This Agreement has been duly executed
and delivered by Parent and Sub and (assuming the due authorization, execution and delivery of this Agreement by the Company)
constitutes the valid and binding obligation of Parent and Sub enforceable against each of them in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
Section 4.03
No Conflict; Required Filings and Consents
.
(a)
None of the execution, delivery or performance of this Agreement by Parent and Sub
or the consummation by Parent and Sub of the Transactions will: (i) conflict with or violate any provision of the certificate of
incorporation, by-laws or any equivalent organizational or governing documents of Parent or Sub; (ii) assuming that all consents,
approvals and authorizations described in
Section 4.03(b)
have been obtained and all filings and notifications described
in
Section 4.03(b)
have been made and any waiting periods thereunder have terminated or expired, conflict with or violate
any Law applicable to Parent or Sub or any of their respective properties or assets; or (iii) require any consent or approval under,
violate, conflict with, result in any breach of or any loss of any benefit under, or constitute a default under (with or without
notice or lapse of time, or both), or result in termination or give to others any right of termination, vesting, amendment, acceleration
or cancellation of, or result in the creation of a Lien (other than a Permitted Lien) upon any of the respective properties or
assets of Parent or Sub pursuant to, any Contract to which Parent or Sub is a party (or by which any of their respective properties
or assets is bound) or any Permit held by it or them, except, with respect to
clauses (ii)
and
(iii)
, for (A) any
such consents and approvals, the failure to obtain which would not, individually or in the aggregate, reasonably be expected to
prevent or materially delay the ability of Parent and Sub to consummate the Transactions and (B) any such conflicts, violations,
breaches, losses, defaults, terminations, rights of termination, vesting, amendment, acceleration or cancellation of Liens that
would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Parent and Sub
to consummate the Transactions.
(b)
None of the execution, delivery or performance of this Agreement by or on behalf
of Parent or Sub or the consummation by Parent or Sub or any of their respective affiliates of the Transactions will require (with
or without notice or lapse of time, or both) any consent, approval, authorization or permit of, or filing or registration with
or notification to, any Governmental Entity, other than (i) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (ii) the filing of a premerger notification and report form under the HSR Act and the receipt, termination
or expiration, as applicable, of waivers, consents, approvals, waiting periods or agreements required under any Antitrust Laws,
(iii) compliance with, and such filings as may be required under, Environmental Laws, (iv) compliance with the applicable requirements
of the Securities Act or the Exchange Act; (v) compliance with any applicable international, federal or state securities “blue
sky” Laws; and (vi) where the failure to obtain such consents, approvals, authorizations or permits of, or to make such filings,
registrations with or notifications to, any Governmental Entity would not, individually or in the aggregate, reasonably be expected
to prevent or materially delay the ability of Parent and Sub to consummate the Transactions.
Section 4.04
Information Supplied
. None of the information supplied or to be supplied by or on behalf of Parent or Sub or
any of their respective affiliates expressly for inclusion or incorporation by reference in the Proxy Statement will, at the time
the Proxy Statement is filed with the SEC, at any time the Proxy Statement is amended or supplemented or at the time the Proxy
Statement is first published, sent or given to the holders of Shares, as applicable, 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 under which they are made, not misleading.
Section 4.05
Litigation
. As of the date of this Agreement, there is no Proceeding
to which Parent or Sub is a party pending or, to the knowledge of Parent, threatened against Parent or Sub that would reasonably
be expected to prevent or materially delay the consummation of the Transactions. As of the date of this Agreement, none of Parent
or Sub is subject to any outstanding order, writ, injunction, judgment or decree that, individually or in the aggregate, would
reasonably be expected to prevent or materially delay the consummation of the Transactions.
Section 4.06
Capitalization and Operations of Sub; No Ownership of Company Common Stock
.
(a)
As of the date of this Agreement, the authorized share capital of Sub consists of
1,000 shares, par value
$0.01
per share, 100
of which are validly issued and outstanding. All of the issued and outstanding share capital of Sub is, and at the Effective Time
will be, owned by Parent or a direct or indirect wholly-owned Subsidiary of Parent. Sub was formed solely for the purpose of engaging
in the Transactions, and it has not conducted any business prior to the date of this Agreement and has no, and prior to the Effective
Time will have no, assets, liabilities or obligations of any nature other than those incidental to its formation and pursuant to
this Agreement and the Transactions (including, for the avoidance of doubt, as contemplated by the Equity Commitment Letter or
any other agreements or arrangements entered into in connection with this Agreement).
(b)
As of the date of this Agreement, none of Parent, Sub or any of their respective
Subsidiaries beneficially owns (as defined in Rule 13d-3 promulgated under the Exchange Act) any Shares or any securities that
are convertible into or exchangeable or exercisable for Shares, or holds any rights to acquire or vote any Shares, other than pursuant
to this Agreement. None of Parent, Sub, any of their respective Subsidiaries, or the “affiliates” or “Associates”
of any such entity is, and at no time during the last three years has been, an “Interested Stockholder” of the Company,
in each case as defined in Section 203 of the DGCL.
Section 4.07
Financing.
(a)
As
of the date of this Agreement, Parent has delivered to the Company a true and complete copy of (i) an executed equity
commitment agreement, dated as of the date hereof (the “
Equity Commitment Agreement
”), among Parent, Sub
and Guarantor, pursuant to which Guarantor has agreed, according to the terms and subject to the conditions therein, to fund
an amount sufficient to satisfy the Financing Uses no later than immediately prior to the Closing (the
“
Equity Financing
”), (ii) the Limited Guarantee and (iii) t
he Debt Financing Commitment Letters
(the Equity Commitment Agreement and the Debt Financing Commitment Letters, collectively, the “
Financing
Letters
”) (and corresponding fee letters relating to the Debt Financing Commitment Letters redacted only in respect
of specific fee amounts and specific “flex” terms, none of which affect the conditionality, availability or
amount of the Debt Financing available on the Closing Date or remedies available with respect thereto) 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, the Debt Financing (such Debt Financing, together with the Equity Financing, collectively
referred to as the “
Financings
”)
. The Company is an express third-party
beneficiary with respect to, and is entitled to specifically enforce, the Equity Commitment Agreement.
(b)
On the Closing Date
, assuming receipt of the proceeds of the Financings in
accordance with the terms of the Financing Letters, Parent will have
sufficient available funds
to pay the Aggregate Merger Consideration and any other cash amounts payable pursuant to, or in connection with the Transaction,
including any obligations of the Surviving Corporation or its Subsidiaries that become due or payable by the Surviving Corporation
and the Company Subsidiaries in connection with, or as a result of, the Transactions, and payment of all fees and expenses related
to the foregoing (collectively, the “
Financing Uses
”).
(c)
The Financing Letters and Limited Guarantee
have not been terminated or otherwise
amended, supplemented or modified in any respect as of the date of this Agreement. The Equity Commitment Agreement and the Limited
Guarantee are legal, valid and binding obligations of each of the parties thereto (other than the Company), enforceable against
such parties in accordance with their terms, subject to the Bankruptcy and Equity Exception.
The Debt Financing Commitment
Letters represent valid, binding and enforceable obligations of Parent and, to the knowledge of Parent, each other party thereto,
to provide the Debt Financing, enforceable against such party in accordance with its terms, s
ubject
to the Bankruptcy and Equity Exception.
As of the date of this Agreement,
there are no side
letters or other Contracts or arrangements relating to the Financings o
ther than as expressly contained in the Financing
Letters and delivered to the Company prior to the date hereof, in each case, that would affect the availabiltiy of the Debt Financing
or make the Debt Financing materially less likely to occur
.
As of the date of this Agreement,
no event has occurred which, with or without notice, lapse of time or both, could constitute a
default or breach on the part of Parent, Sub or Guarantor under any term of, or a failure of any condition under, the Financing
Letters or otherwise result in any portion of the Financings contemplated thereby to be unavailable on the Closing Date.
There are no conditions precedent or other contingencies to the availability of the Financings, other than the conditions set forth
in this Agreement (with respect to the Equity Financing) and those explicitly set forth in the Debt Financing Commitment Letters
(the “
Financing Conditions
”) with respect to the Debt Financing. No event has occurred which, with or without
notice, lapse of time or both, would constitute a breach or default on the part of Parent or, to the knowledge of Parent, any other
party thereto under the Financing Letters or the Limited Guarantee or would result in the failure of a Financing Condition. Each
of Parent and Sub has no reason to believe that it or any other party to the Financing Letters will be unable to satisfy on a timely
basis any term thereof. There are no conditions precedent or other contingencies related to the funding of the full amount of the
Financings other than as expressly set forth in the Financing Letters.
(d)
Neither Parent nor Sub has, directly or indirectly, entered into an exclusivity,
lock-up or other similar agreement, arrangement or binding understanding with any bank or investment bank or other potential provider
of debt or equity financing that prohibits such provider from providing or seeking to provide services, including debt or equity
financing, to any third person in connection with a transaction relating to the Company or the Company Subsidiaries (including
in connection with the making of any Competing Proposal) in connection with the Transactions.
Section 4.08
Guarantee
. Concurrently with the execution of this Agreement, Parent and Sub have caused the Guarantor
to deliver the Limited Guarantee, dated as of the date hereof, to the Company. The Limited Guarantee is in full force and effect
and has not been withdrawn or terminated or otherwise amended, supplemented or modified in any respect. The Limited Guarantee is
a legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject
to the Bankruptcy and Equity Exception. No event has occurred which, with or without notice, lapse of time or both, could constitute
a default or breach on the part of the Guarantor under such Limited Guarantee.
Section 4.09
Brokers
. No broker, finder or investment banker other than Jefferies
LLC is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based on arrangements
made by or on behalf of Parent, Sub or any of their respective affiliates.
Section 4.10
Solvency
. Assuming that (a) the conditions to the obligation of
Parent and Sub to consummate the Merger have been satisfied or waived, (b) any estimates, projections or forecasts prepared by
the Company or the Company Representatives that have been provided to Parent, Sub or their representatives have been prepared in
good faith based upon reasonable assumptions as of the date of preparation thereof, (c) the most recent financial statements included
in a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K filed by the Company with the SEC present fairly in all material
respects that consolidated financial condition of the Company and its consolidated Subsidiaries at the end of the periods covered
thereby and the consolidated results of operations of the Company and its consolidated Subsidiaries for the periods covered there,
and (d) the representations and warranties of the Company set forth in
Article III
are accurate, then and immediately following
the Effective Time and after giving effect to all of the Transactions, any alternative financing incurred in accordance with Section
5.08(a) and the payment of the aggregate Merger Consideration, any other repayment or refinancing of debt contemplated in this
Agreement or the Financing Letters and the payment of the Aggregate Merger Consideration, Parent, the Surviving Corporation and
each Subsidiary of the Surviving Corporation will be solvent. Parent and Sub are not entering into the Transactions with the intent
to hinder, delay or defraud either present or future creditors.
Section 4.11
Absence of Certain Arrangements
. Other than this Agreement and
as set forth on
Section 4.11
of the Parent Disclosure Letter, as of the date of this Agreement, there are no Contracts
or any commitments to enter into any Contract between Parent, Sub or any of their respective controlled affiliates, on the one
hand, and any director, officer, employee or stockholder of the Company, on the other hand, relating to the transactions contemplated
by this Agreement or the operations of the Surviving Corporation after the Effective Time.
Section 4.12
Acknowledgement of No Other Representations or Warranties
.
(a)
Each of Parent and Sub acknowledges that it has conducted 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 Subsidiaries and that it and its representatives have received access to such books and records,
facilities, equipment, Contracts and other assets of the Company and the Company Subsidiaries that it and its representatives have
desired or requested to review for such purpose and that it and its representatives have had an opportunity to meet with the management
of the Company and the Company Subsidiaries and to discuss the business, operations, assets, liabilities results of operations,
condition (financial or otherwise) and prospects of the Company and the Company Subsidiaries. Each of Parent and Sub acknowledges
and agrees that, except for the representations and warranties contained in
Article III
and the certificate to be delivered
pursuant to
Section 6.02(d)
, (i) none of the Company, the Company Subsidiaries or any of their respective affiliates
or representatives makes or has made any representation or warranty, either express or implied, concerning the Company or the Company
Subsidiaries or any of their respective businesses, operations, assets, liabilities, results of operations, condition (financial
or otherwise) or prospects or the Transactions, or the accuracy or completeness of any memoranda, documents, projections, or information
(financial or otherwise) regarding the Company or any Company Subsidiary furnished to Parent, Sub or their affiliates or representatives
an made available to Parent, Sub or their affiliates or representatives, including in any “data rooms,” “virtual
data rooms,” management presentations or in any other form, in expectation of, or in connection with, the Transactions and
(ii) no person has been authorized, expressly or impliedly, by the Company to make any representation or warranty relating to itself,
any Company Subsidiary, or any of the other matters set forth in the foregoing
subclause (i)
in connection with the Merger.
Parent and Sub each specifically disclaims that it is relying upon or has relied upon any representations or warranties (other
than those set forth in
Article III
and the certificate to be delivered pursuant to
Section 6.02(d)
) or
other statements or omissions that may have been made by any person or otherwise occurred, and acknowledges and agrees that the
Company has specifically disclaimed and does hereby specifically disclaim reliance upon any such representation or warranty (other
than those set forth in
Article III
and the certificate to be delivered pursuant to
Section 6.02(d)
) or
other statement or omission. Parent and Sub each specifically disclaims any obligation or duty by the Company to make any disclosures
of fact not required to be disclosed pursuant to the specific representations and warranties set forth in
Article III
.
To the fullest extent permitted by applicable Law, except with respect to the representations and warranties contained in
Article III
and the certificate to be delivered pursuant to
Section 6.02(d)
or any breach of any covenant or other agreement of
the Company contained in this Agreement, except with respect of fraud, none of the Company, the Company Subsidiaries or any of
their respective affiliates or representatives shall have any liability to Parent or Sub or their respective affiliates or representatives
on any basis (including in contract or tort, under federal or state securities Laws or otherwise) based upon any information or
statements (or any omissions therefrom) provided or made available by the Company, the Company Subsidiaries or their respective
affiliates or representatives to Parent, Sub or their respective affiliates or representatives in connection with the Transactions.
(b)
Neither
Parent nor any of its affiliates has entered into any Contract or any commitments to enter into any Contract 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 against, or not to tender
Shares in any offer in connection with, any Superior Proposal.
Section 4.13
Investment Intention
. Parent is acquiring through the Merger the
shares of capital stock of the Surviving Corporation for its own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities Act) thereof. Parent understands that the shares of capital
stock of the Surviving Corporation have not been registered under the Securities Act and cannot be sold unless subsequently registered
under the Securities Act or an exemption from such registration is available.
Article V
COVENANTS
Section 5.01
Conduct of Business by the Company Pending the Merger
. The Company
agrees that between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement in accordance
with its terms, except as set forth in
Section 5.01
of the Company Disclosure Letter, as expressly contemplated or
required by any other provision of this Agreement or as required by applicable Law, any Governmental Entity of competent jurisdiction
or the rules or regulations of the NASDAQ, unless Parent shall otherwise agree in writing (which agreement shall not be unreasonably
withheld, delayed or conditioned), the Company will, and will cause each Company Subsidiary to, conduct its operations in all material
respects in the ordinary course of business in substantially the same manner as heretofore conducted and in compliance with applicable
Law. Without limiting the foregoing, except as set forth in
Section 5.01
of the Company Disclosure Letter, as expressly
contemplated or required by any other provision of this Agreement or as required by applicable Law, any Governmental Entity of
competent jurisdiction or the rules or regulations of the NASDAQ, the Company shall not, and shall cause each Company Subsidiary
not to, between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement in accordance
with its terms, do any of the following without the prior written consent of Parent (which consent shall not be unreasonably withheld,
delayed or conditioned):
(a)
amend or modify the Company Charter, the Company By-laws or any
Subsidiary Organizational
Document
;
(b)
issue or authorize the issuance of any equity securities in the Company or any Company
Subsidiary, or securities convertible into, or exchangeable or exercisable for, any such equity securities, or any rights of any
kind to acquire any such equity securities or such convertible or exchangeable securities or RSUs or other common stock equivalents,
other than (i) as contemplated by
Section 2.03(d)(ii)
and (ii) the issuance of Shares upon the exercise of Company Options
and options granted under the Company Stock Purchase Plan and the vesting of RSUs, in each case outstanding as of the date of this
Agreement or upon exercise of SPP Options that may be exercised pursuant to
Section 2.03(d)(ii)
;
(c)
sell
or otherwise encumber or dispose of any properties or non-cash assets with a value in excess of $1,000,000 in the aggregate,
except (i) sales or dispositions made in connection with any transaction between or among the Company and any of the Company
Subsidiaries
or between or among the Company Subsidiaries or (ii) sales or dispositions made in the ordinary course of business;
(d)
declare, set aside, make or pay any dividend or other distribution with respect to
the capital stock of the Company, whether payable in cash, stock, property or a combination thereof, or offer to redeem, repurchase
or acquire, any shares of its capital stock except for the acquisition of shares of its capital stock from (x) holders of Company
Options in full or partial payment of the exercise price (or full or partial payment of Taxes) payable by such holder upon exercise
of Company Options to the extent required or permitted under the terms of such Company Options or (y) holders of RSUs in full or
partial payment of Taxes payable by such holder upon the settlement of RSUs to the extent required or permitted under the terms
of such RSUs;
(e)
other than (i) in the case of Company Subsidiaries, (ii) in connection with the exercise
of any outstanding Company Options permitted by the terms of such Company Options, or the payment of related withholding Taxes,
by net exercise or by the tendering of shares, or Tax withholdings on the vesting or payment of RSUs or (iii) the purchase of shares
pursuant to existing “10b5-1” plans, reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase
or otherwise acquire, directly or indirectly, any of its equity securities or any options, warrants, securities or other rights
exercisable for or convertible into any such equity securities or amend any term of any equity securities (in each case, whether
by merger, consolidation or otherwise);
(f)
merge or consolidate the Company or any Company Subsidiary with any person or adopt
a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization of the Company, other than the merger of one or more Company Subsidiaries with or into
one or more other Company Subsidiaries;
(g)
make or offer to make any acquisition of a material business (including by merger,
consolidation or acquisition of stock or assets) or enter into a new business unrelated to the Company’s current business;
(h)
incur any Indebtedness for borrowed money or issue any debt securities, or assume
or guarantee the obligations of any person (other than a wholly-owned Company Subsidiary) for borrowed money, except (i) Indebtedness
among the Company and the Company Subsidiaries or among the Company Subsidiaries, and (ii) with respect to any Indebtedness not
in accordance with
clauses (i)
and
(ii)
, for any Indebtedness not to exceed $500,000 in the aggregate principal amount
outstanding at any one time;
(i)
make any loans, advances or capital contributions to, or investments in, any other
Person (other than any Company Subsidiary) other than (i) loans made in the ordinary course of business not to exceed $250,000
in the aggregate and (ii) travel and business expense advances to employees of the Company made in the ordinary course of business
consistent with past practices;
(j)
except to the extent required by Law or the terms of any Company Benefit Plan or
as set forth in
Section 5.01(j)
of the Company Disclosure Letter
: (i)
other
than as required by any Contract made available to Parent prior to the date hereof and in effect as of the date hereof,
increase
the compensation, bonus, severance or benefits payable or to become payable to any current or former directors, officers or employees,
consultants, independent contractors or other individual service providers; (ii) grant any severance, retention, transaction, change
in control or termination pay or other similar benefit to any current or former directors, officers, employees, consultants, independent
contractors or other individual service providers of the Company or any Company Subsidiary, or enter into any employment, other
than in the ordinary course of business to fill a newly opened position whose annual compensation does not exceed $250,000, or
enter into any employment, consulting, independent contractor, individual service provider or severance agreement; (iii) establish,
adopt, enter into or amend any Company Benefit Plan (or any arrangement that, if in effect on the date of this Agreement, would
be a Company Benefit Plan), collective bargaining, bonus, profit sharing, thrift, pension, retirement, deferred compensation, employment,
termination, severance or other plan or agreement; (iv) accelerate the payment, right to payment, funding or vesting of any compensation
or benefits, including any outstanding Company Options or RSUs, other than as contemplated by this Agreement, (v) hire any employee
with an expected annual compensation in excess of $250,000 or terminate any employee with an annual compensation in excess of $250,000,
other than terminations for cause; or (vi) take any action to amend or waive any performance or vesting criteria or accelerate
vesting, exercisability or funding under any Company Benefit Plan, other than as expressly contemplated by this Agreement;
(k)
except in each case to the extent required by Law, make, revoke or change any material
Tax election inconsistent with past practice, surrender any claim for a refund of Taxes, enter into a closing agreement with respect
to any material amount of Taxes, amend any material Tax Return or settle or compromise any material Tax Proceeding or assessment
by any Governmental Entity;
(l)
make any material change in accounting policies or procedures, other than as required
by GAAP, applicable Law or any Governmental Entity with competent jurisdiction;
(m)
make any capital expenditures
except for capital expenditures reflected on
Section 5.01(m)
of the Company Disclosure Letter;
(n)
enter into, modify or amend or terminate (other than through the expiration of its
term in the ordinary course) any (i) Material Company Contract, (ii) any Contract that, if existing on the date of this Agreement,
would have been a Material Company Contract, or (iii) any Contract with a supplier except, in each case, for (A) entering into
purchase orders in the ordinary course of business, (B) renewals of Contracts for a term or renewal term of one year or less cancellable
by the Company or its Subsidiaries upon notice of 90 days or less and without penalty or other liability of the Company or its
Subsidiaries and (C) new Contracts with suppliers entered into in the ordinary course of business that do not require an expenditure
of $250,000 annually individually or $500,000 annually in the aggregate;
(o)
settle
or compromise any Proceeding or series of Proceedings other than settlements or compromises of Proceedings that do not,
individually or in the aggregate, involve
the payment of more than $5,000,000 (net of any amount covered by insurance
or indemnification) in excess of the amount reserved on the latest consolidated balance sheet of the Company in respect of
the Proceedings, as set forth in the Company SEC Documents, and do not involve any material injunction or non-monetary
relieve on the Company or any of the Company Subsidiaries; or
(p)
authorize or enter into any Contract to do any of the foregoing.
Nothing contained in this Agreement shall give Parent or Sub,
directly or indirectly, the right to control or direct the operations of the Company prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete unilateral control
and supervision over its business operations.
Section 5.02
Agreements Concerning Parent and Sub
.
(a)
During the period from the date of this Agreement through the Effective Time, neither
Parent nor Sub shall engage in any activity of any nature except for activities related to or in furtherance of the Transactions
(including enforcement of its rights under this Agreement) and the Financings or as provided in or contemplated by this Agreement.
(b)
Parent hereby guarantees the due, prompt and faithful payment, performance and discharge
by Sub of, and the compliance by Sub with, all of the covenants, agreements, obligations and undertakings of Sub under this Agreement
in accordance with the terms of this Agreement, and covenants and agrees to take all actions necessary or advisable to ensure such
payment, performance and discharge by Sub hereunder. Parent shall, immediately following execution of this Agreement, approve this
Agreement in its capacity as sole stockholder of Sub in accordance with applicable Law and the certificate of incorporation and
by-laws of Sub.
Section 5.03
No Solicitation; Change of Company Recommendation
.
(a)
Except as permitted by this
Section 5.03
, (i) the Company shall, and
shall cause the Company Subsidiaries and its and their respective directors, officers, employees, managers, consultants, accountants,
advisors, investment bankers and counsel (collectively, the “
Company Representatives
”) to, cease any solicitations,
discussions or negotiations with any persons that may be ongoing with respect to any Competing Proposal and shall terminate “data
room” access for such persons and their representatives and request the prompt return or destruction of all non-public information
regarding the Company or the Company Subsidiaries furnished to such persons and their representatives and (ii) the Company shall
not, shall cause the Company Subsidiaries and the Company Representatives not to, (A) initiate, solicit, facilitate, or knowingly
encourage the submission of any Competing Proposal, (B) furnish any non-public information regarding the Company or any Company
Subsidiary to any third person in connection with or in response to a Competing Proposal, (C) participate in any discussions or
negotiations with any third person with respect to any Competing Proposal, (D) terminate, waive, amend or modify any provision
of, or grant permission under, any confidentiality agreement or standstill agreement to which the Company or any Company Subsidiary
is party, (E) waive the applicability of all or any portion of any Takeover Statute in respect of any person, or (F) resolve to
agree to take any of the foregoing actions.
(b)
Notwithstanding anything to the contrary contained in this Agreement, but subject
to the last sentence of this
Section 5.03(b)
, if prior to the Stockholders’ Meeting (i) the Company receives
a
bona fide
written Competing Proposal from a person that did not result from a material breach of
Section 5.03(a)
,
which Competing Proposal is made on or after the date of this Agreement and prior to the Stockholders’ Meeting, and (ii)
the Company’s board of directors or a duly authorized committee thereof (the “
Company Board
”) determines
in good faith, after consultation with its financial advisors and outside counsel, that such Competing Proposal constitutes or
would reasonably be expected to lead to a Superior Proposal and that failure to take such action would reasonably be expected to
be inconsistent with the directors’ fiduciary duties under Law, then the Company may (A) furnish information with respect
to the Company and the Company Subsidiaries to the person making such Competing Proposal and its representatives and (B) participate
in discussions or negotiations with the person making such Competing Proposal and its representatives regarding such Competing
Proposal;
provided
,
however
, that the Company (w) will not, will not permit the Company Subsidiaries to, and will
not authorize the Company Representatives to, disclose any non-public information regarding the Company to such person without
first entering into an Acceptable Confidentiality Agreement with such person; (x) will promptly (and in any event within 48 hours)
advise Parent in writing of the receipt of any Competing Proposal that constitutes or would reasonably be expected to lead to a
Superior Proposal and shall disclose to Parent the material terms of any such Competing Proposal (but shall have no obligation
to disclose to Parent the identity of any person making such Competing Proposal or the terms thereof) (such notice, including the
material terms of such Competing Proposal, a “
Competing Proposal Notice
”), (y) will keep Parent informed in
all material respects on a prompt basis of any material developments, discussions or negotiations regarding such Competing Proposal,
including by updating the Competing Proposal Notice to reflect any updated terms of the Competing Proposal, and (z) will as promptly
as practicable (and in any event within 24 hours thereafter) provide to Parent any information concerning the Company or the Company
Subsidiaries provided or made available to such other person (or its representatives) that was not previously provided or made
available to Parent. So long as the Company and the Company Representatives have otherwise complied with this
Section 5.03
,
none of the foregoing shall prohibit the Company or the Company Representatives from contacting any person or group of persons
that has made a Competing Proposal after the date of this Agreement solely to request the clarification of the terms and conditions
thereof so as to determine whether the Competing Proposal constitutes or would reasonably be expected to lead to a Superior Proposal,
and any such actions shall not be a breach of this
Section 5.03
.
(c)
Except
as set forth in
Section 5.03(d)
or
Section 5.03(e)
, neither the Company’s board of directors
nor any committee thereof shall (i) adopt, authorize, approve, endorse, recommend or otherwise declare advisable the adoption
of any Competing Proposal, (ii) following the public announcement of a Competing Proposal, at the written request of Parent,
fail to reaffirm publicly the Company Recommendation within ten (10) Business Days after Parent’s written request to do
so (
provided
,
however
, that Parent shall be entitled to make such written request for reaffirmation only once
as to each Competing Proposal unless the price contemplated by such Competing Proposal is increased), (iii) following the
commencement of a tender offer or exchange relating to the Shares by a person unaffiliated with Parent, fail to reaffirm
the Company Recommendation and recommend that the Company’s stockholders reject such tender offer or exchange offer
within ten (10) Business Days after the commencement of such tender offer or exchange offer, or (iv) withhold, change,
modify, amend or otherwise
propose publicly to withdraw, change, modify, amend, in each case, in a manner adverse to
Parent, the Company Recommendation or fail to include the Company Recommendation in the Proxy Statement (any action set forth
in the foregoing
clauses (i)
through
(iv)
, a “
Change of Company Recommendation
”) or
(v) allow the Company or any of the Company Subsidiaries to enter into any letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement relating to any
Competing Proposal (other than an Acceptable Confidentiality Agreement) or requiring the Company to abandon, terminate or
fail to consummate the Transactions.
(d)
Notwithstanding anything to the contrary contained in this Agreement, at any time
prior to the receipt of the Requisite Stockholder Approval, the Company Board may make a Change of Company Recommendation if:
(i)
(A) a Competing Proposal (that did not result from a material breach of
Section 5.03(a)
)
is made to the Company after the date hereof by a third person and such Competing Proposal is not withdrawn and (B) the Company
Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that such Competing Proposal
constitutes a Superior Proposal;
(ii)
the Company provides Parent prior written notice of the Company’s intention
to make a Change of Company Recommendation (a “
Notice of Change of Recommendation
”) no less than three (3) Business
Days prior to the Company Board making a Change of Company Recommendation, which notice shall identify the person making such Superior
Proposal and include the material terms and conditions of such Superior Proposal (it being agreed that neither the delivery of
the Notice of Change of Recommendation by the Company nor the public announcement that the Company Board has received or is evaluating
a Competing Proposal, in and of itself, shall constitute a Change of Company Recommendation);
(iii)
the Company has (to the extent requested by Parent) negotiated in good faith with
Parent with respect to any changes to the terms of this Agreement proposed by Parent during such three (3) Business Days prior
to making such Change of Company Recommendation (it being understood and agreed that any amendment to any material term of such
Superior Proposal shall require a new Notice of Change of Recommendation and an additional two-day period from the date of such
notice); and
(iv)
taking into account any changes to the terms of this Agreement offered by Parent
in writing to the Company, the Company Board has determined in good faith, after consultation with its financial advisors and outside
legal counsel, that such Competing Proposal would continue to constitute a Superior Proposal even if such changes offered in writing
by Parent were to be given effect.
(e)
Not
withstanding anything to the contrary contained in this Agree
ment,
at
any time prior to the Effective Time, the Compa
ny Bo
ard may make a Chang
e
of Company Recommendation if
:
(i)
there
shall occur or arise after the date of this Agreement a material development or material change in circumstances (or if such
material development or material change in circumstances occurred or arose on or prior to the date of this Agreement, the
material consequences of which are not known to the Company Board as of the date of this Agreement and only become known
to the Company Board prior to the Effective Time), in each case, that was not reasonably foreseeable and that relates to the
Company or the Company Subsidiaries but does not relate to any Competing Proposal (as to which
Section 5.03(d)
shall apply) (any such material development or material change in circumstances unrelated to an Competing Proposal being
referred to as an “
Intervening Event
”);
(ii)
the Company Board determines in good faith,
after consultation with
its financial
advisors and outside legal counsel, that, in light of such Intervening Event, the failure to withdraw or modify the Company Recommendation
in a manner adverse to Parent would, if this Agreement were not amended or an alternative transaction with Parent were not entered
into, be inconsistent with the Company Board’s fiduciary obligations to the Company’s stockholders under applicable
Law;
(iii)
th
e Compa
ny provi
des Paren
t
a N
otic
e of Change of Recommendation, w
hich notice shall describe the Intervening
Event
(it b
eing agreed that neither the delivery of the Notic
e
of Change of Recommendation by th
e Compa
ny nor t
he public announcement that the Compa
ny
Bo
ard is considering making a Chang
e of Company Recommendation under
applicable Law
s
hall
constitute a Chang
e of Company Recommendation);
(iv)
t
he Compa
ny has (to the extent requested by
Parent) n
egotiated in good faith with Paren
t with
respect to any changes to the terms
of this Agree
ment propo
sed by Paren
t for a
t least
three Business Days following receipt by Paren
t of su
ch Notic
e
of Change of Recommendation; and
(v)
taking into account any changes to the terms of this Agree
ment offer
ed by
Paren
t in wr
iting to the Compa
ny, the
C
ompany
Board has determined in good faith, after consultation with
its financial advisors and outside legal counsel, that the failure
to withdraw or modify the Company Recommendation would be inconsistent with the Company Board’s fiduciary obligations to
the Company’s stockholders under applicable Law in light of such Intervening Event.
(f)
Nothing contained in this
Section 5.03
shall prohibit the Company or the Company Board from (i) taking
and disclosing to the stockholders of the Company a position
contemplated by Rule 14e-2(a),
Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or (ii) issuing a “stop, look
and listen” statement pending disclosure of its position, as contemplated by Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act
;
provided
,
however
, that a position disclosed pursuant to
clause (i)
shall not be
deemed a Change of Company Recommendation if it includes either an express rejection of any applicable Competing Proposal or an
express reaffirmation of the Company Recommendation and
provided further
that the Company or the Company Board may not effect
a Change of Recommendation except as permitted by Section 5.03(d) or (e).
Section 5.04
Access
to Information
. From the date of this Agreement to the Effective Time, the Company shall, and shall cause each
Company Subsidiary to: (a) provide to Parent and Sub and their respective representatives reasonable access during normal
business hours in such a manner as not to interfere with the operation of any business conducted by the Company or any
Company Subsidiary, upon prior written notice to the Company, to the officers, employees, properties, offices and other
facilities of the Company and the Company Subsidiaries and to the books and records thereof; and (b) furnish promptly such
information concerning the business, properties, Contracts, assets and liabilities of the Company and Company Subsidiaries as
Parent or its representatives may reasonably request;
provided
,
however
, that the Company shall not be
required to (or to cause any Company Subsidiary to) afford such access or furnish such information to the extent that the
Company believes in good faith after consultation with legal counsel that doing so would: (i) result in the loss of
attorney-client privilege (provided that the Company shall use its reasonable best efforts to allow for such access or
disclosure in a manner that does not result in a loss of attorney-client privilege); (ii) violate any confidentiality
obligations of the Company or any Company Subsidiary to any third person or otherwise breach, contravene or violate any then
effective Contract to which the Company or any Company Subsidiary is party (provided that the Company shall use commercially
reasonable efforts to obtain the consent of such third party to share such information with Parent); (iii) result in a
competitor of the Company or any Company Subsidiary receiving information that is competitively sensitive; or (iv) breach,
contravene or violate any applicable Law (including the HSR Act or any other Antitrust Law). Parent shall, and shall cause
each of its Subsidiaries and its and their respective representatives, to hold all information provided or furnished pursuant
to this
Section 5.04
confidential in accordance with the terms of the Confidentiality Agreement. During any visit
to the business or property sites of the Company or any of the Company Subsidiaries, each of Parent and Sub shall, and shall
cause their respective representatives accessing such properties to, comply with all applicable Laws and all of the
Company’s and the Company Subsidiaries’ safety and security procedures. Notwithstanding anything to the contrary
contained in this
Section 5.04
, from the date of this Agreement to the Effective Time, none of Parent, Sub or any
of their respective affiliates shall conduct, without the prior written consent of the Company, any invasive
subsurface environmental site investigation at any real property owned or leased by the Company, and in no event may any such
invasive subsurface environmental site investigation include any sampling or other intrusive investigation of air, surface
water, groundwater, soil or anything else at or in connection with any of such real property.
Section 5.05
Appropriate Action; Consents; Filings
.
(a)
Subject
to
Section 5.03
, each of Parent and the Company shall (and Parent shall cause each of its affiliated investment
funds to) use its reasonable best efforts to consummate the Transactions and to cause the conditions set forth in
Article VI
to be satisfied. Without limiting the generality of the foregoing, Parent shall (and shall cause Sub and each of
Parent’s or Sub’s affiliated investment funds to) and the Company shall (and shall cause each of the Company
Subsidiaries to) use its reasonable best efforts to (i) promptly obtain all actions or nonactions, consents, Permits
(including Environmental Permits), waivers, approvals, authorizations and orders from Governmental Entities or other persons
necessary or advisable in connection with the consummation of the Transactions, (ii) as promptly as practicable, and in any
event within ten Business Days after the date of this Agreement, make and not withdraw (without the Company’s consent)
all registrations and filings with any Governmental Entity or other persons necessary or advisable in connection with the
consummation of the Transactions, including the filings required of the parties or their “ultimate parent
entities” under the HSR Act or any other
Antitrust Law, and promptly make any further filings pursuant thereto
that may be necessary or advisable, (iii) defend all lawsuits or other legal, regulatory, administrative or other Proceedings
to which it or any of its affiliates is a party challenging or affecting this Agreement or the consummation of the
Transactions, in each case until the issuance of a final, non-appealable order with respect to each such lawsuit or other
Proceeding, (iv) seek to have lifted or rescinded any injunction or restraining order which may adversely affect the ability
of the parties to consummate the Transactions, in each case until the issuance of a final, non-appealable order with respect
thereto, (v) seek to resolve any objection or assertion by any Governmental Entity challenging this Agreement or the
Transactions and (vi) execute and deliver any additional instruments necessary or advisable to consummate the
Transactions.
(b)
In furtherance of the obligations set forth in
Section 5.05(a)
, Parent
shall (and shall cause its affiliated investment funds to) use reasonable best efforts to promptly take any and all actions necessary
or advisable in order to avoid or eliminate each and every impediment to the consummation of the Transactions and obtain all approvals
and consents under any Antitrust Laws that may be required by any foreign or U.S. federal, state or local Governmental Entity,
in each case with competent jurisdiction, so as to enable the parties to consummate the Transactions as promptly as practicable.
Neither Parent nor Sub, directly or indirectly, through one or more of their respective affiliated investment funds, shall take
any action, including acquiring or making any investment in any person or any division or assets thereof, that would reasonably
be expected to cause a material delay in the satisfaction of the conditions contained in Article VI or the consummation of the
Transactions.
(c)
Without limiting the generality of anything contained in this Section 5.05, each
party hereto shall: (i) give the other parties prompt notice of the making or commencement of any request, inquiry, investigation
or legal Proceeding by or before any Governmental Entity with respect to the Transactions; (ii) keep the other parties informed
as to the status of any such request, inquiry, investigation or legal Proceeding; and (iii) promptly inform the other parties of
any communication to or from the FTC, the Antitrust Division or any other Governmental Entity regarding the Transactions. Each
party hereto will consult and cooperate with the other parties and will consider in good faith the views of the other parties in
connection with any filing, analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted
to any Governmental Entity in connection with the Transactions. In addition, except as may be prohibited by any Governmental Entity
or by any Law, in connection with any such request, inquiry, investigation or legal Proceeding, each party hereto will permit authorized
representatives of the other parties to be present at each meeting or conference relating to such request, inquiry, investigation
or legal Proceeding and to have access to and be consulted in connection with any document, opinion or proposal made or submitted
to any Governmental Entity in connection with such request, inquiry, investigation or legal Proceeding.
Section 5.06
Public
Announcements
. The initial press release issued by Parent and the Company concerning this Agreement and the
Transactions shall be a joint press release, and thereafter, except with respect to any Change of Company Recommendation,
Parent and the Company shall consult with each other before issuing any press release or otherwise making any public
statements with respect to the Transactions and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable Law, fiduciary duties or by obligations pursuant to any
listing agreement with any national securities exchange.
Section 5.07
Directors & Officers Indemnification and Insurance
.
(a)
Indemnification
. From and after the Effective Time, Parent shall, and shall
cause the Surviving Corporation to, to the fullest extent permitted by applicable Law, to the extent provided in the organizational
documents of the Company and the Company Subsidiaries in effect as of the date hereof, indemnify, defend and hold harmless each
current or former director or officer of the Company or any of the Company Subsidiaries (each an “
Indemnified Party
”
and collectively, the “
Indemnified Parties
”) against (i) all losses, expenses (including reasonable attorneys’
fees and expenses), judgments, fines, claims, damages or liabilities or, subject to the proviso of the next succeeding sentence,
amounts paid in settlement, arising out of actions or omissions occurring at or prior to the Effective Time (and whether asserted
or claimed prior to, at or after the Effective Time) to the extent that they are based on or arise out of the fact that such person
is or was a director or officer of the Company or any of its Subsidiaries (the “
Indemnified Liabilities
”), and
(ii) all Indemnified Liabilities to the extent they are based on or arise out of or pertain to the Transactions, whether asserted
or claimed prior to, at or after the Effective Time, and including any expenses incurred in enforcing such person’s rights
under this
Section 5.07
. In the event of any such loss, expense, claim, damage or liability (whether or not asserted
before the Effective Time), the Surviving Corporation shall pay the reasonable fees and expenses of counsel selected by the Indemnified
Parties promptly after statements therefor are received and otherwise advance to such Indemnified Party upon request, reimbursement
of documented expenses reasonably incurred (
provided
that the person to whom expenses are advanced provides an undertaking
to repay such advance if it is determined by a final and non-appealable judgment of a court of competent jurisdiction that such
person is not legally entitled to indemnification under Law).
(b)
Insurance
. The Company shall be permitted to, prior to the Effective Time,
and if the Company fails to do so, Parent shall cause the Surviving Corporation to, obtain and fully pay the premium for an insurance
and indemnification policy that provides coverage for a period of six years from and after the Effective Time for events occurring
prior to the Effective Time (the “
D&O Insurance
”) that is substantially equivalent to and in any event not
less favorable in the aggregate to the intended beneficiaries thereof than the Company’s existing directors’ and officers’
liability insurance policy. If the Company and the Surviving Corporation for any reason fail to obtain such “tail”
insurance policy as of the Effective Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to,
continue to maintain in effect for a period of at least six years from and after the Effective Time (and for so long thereafter
as any claims brought before the end of such six-year period thereunder are being adjudicated) the D&O Insurance in place as
of the date of this Agreement with terms, conditions, retentions and limits of liability that are at least as favorable as provided
in the Company’s existing policies as of the date of this Agreement, or the Surviving Corporation shall, and Parent shall
cause the Surviving Corporation to, purchase comparable D&O Insurance for such six-year period (and for so long thereafter
as any claims brought before the end of such six-year period thereunder are being adjudicated) with terms, conditions, retentions
and limits of liability that are at least as favorable as provided in the Company’s existing policies as of the date of this
Agreement.
(c)
Successors
. In the event the Surviving Corporation, Parent 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 all or substantially all of its properties and assets to
any person, then and in either such case, proper provisions shall be made so that the successors, assigns or transferees of the
Surviving Corporation or Parent shall assume the obligations set forth in this
Section 5.07
.
(d)
Continuation
. For not less than six years from and after the Effective Time,
the certificate of incorporation and by-laws of the Surviving Corporation and the certificate of incorporation and by-laws (or
other similar documents) of each Company Subsidiary shall contain provisions no less favorable with respect to exculpation, indemnification
and advancement of expenses for periods at or prior to the Effective Time than are currently set forth in the Company Charter,
the Company By-Laws or the equivalent organizational documents of any Company Subsidiary. The contractual indemnification rights
set forth in the indemnification agreements, the form of which is filed as an exhibit to the Company’s annual report on Form
10-K for the fiscal year ended December 31, 2016, with any of the directors, officers or employees of the Company or any Company
Subsidiary shall be assumed by the Surviving Corporation, without any further action, and shall continue in full force and effect
in accordance with their terms following the Effective Time.
(e)
Benefit
. The provisions of this
Section 5.07
are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, each Indemnified Party’s heirs, executors or administrators
and each Indemnified Party’s representatives, shall be binding on all successors and assigns of Parent, the Company and the
Surviving Corporation and shall not be amended in a manner that is adverse to any Indemnified Parties (including their successors,
assigns and heirs) without the consent of the Indemnified Party (including the successors, assigns and heirs) affected thereby.
(f)
Non-Exclusivity
. The provisions of this
Section 5.07
are in addition
to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract
or otherwise. Nothing in this Agreement, including this
Section 5.07
, is intended to, shall be construed to or shall
release, waive or impair any rights to directors’ and officers’ insurance claims under any policy that is or has been
in existence with respect to the Company, any of the Company Subsidiaries or the Indemnified Parties, it being understood and agreed
that the indemnification provided for in this
Section 5.07
is not prior to, or in substitution for, any such claims
under any such policies.
Section 5.08
Financing
(a)
Financing
.
(i)
Parent and Sub shall not agree to any amendments or modifications to, or grant any waivers of, any provision under
the Equity Commitment Agreement without the prior written consent of the Company. Parent and Sub acknowledge and agree that their
obligations hereunder, including their obligations to consummate the Transactions, are not subject to, or conditioned on, receipt
of the Equity Financing or any other financing.
(ii)
Each of Parent and Sub shall use its reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things reasonably necessary, proper or advisable to obtain the Financings on the terms and conditions
set forth in the Financing Letters, including by using reasonable best efforts to (i) maintain in effect the Debt Financing and
the Debt Financing Commitment Letters, (ii) negotiate and enter into definitive financing agreements with respect to the Debt Financing
that are on terms and conditions (including the market “flex” provisions) no less favorable to Parent and Sub than
those contained in the Debt Financing Commitment Letters, or, if available, on other terms that are acceptable to Parent and would
not (A) reasonably be expected to adversely affect Parent’s or Sub’s ability to consummate the transactions contemplated
by this Agreement, (B) reduce the aggregate amount of the Debt Financing to fund the amounts required to be paid by Parent and
Sub under this Agreement below the amount required to consummate the transactions contemplated by this Agreement, (C) impose new
or additional conditions or expand upon (or amend or modify in any manner adverse to the interests of the Company) the conditions
precedent to the Debt Financing as set forth in the Debt Financing Commitment Letters, (D) reasonably be expected to delay the
Closing or (E) amend any remedies available in respect of the Debt Financing, (iii) satisfy on a timely basis all conditions applicable
to Parent and Sub contained in the Debt Financing Commitment Letters (other than any condition where the failure to be so satisfied
is a direct result of the Company’s failure to provide the cooperation described in
Section 5.08(c)
), including
the payment of any commitment, engagement, or placement fees required as a condition to the Debt Financing, (iv) consummate or
cause to be consummated the Debt Financing at or prior to the date that the Closing is required to be effected in accordance with
Section 1.02
(Parent and Sub acknowledge and agree that it is not a condition to Closing under this Agreement, nor
to the consummation of the Merger, for Parent and Sub to obtain the Debt Financing or any alternative financing), and (v) comply
with its obligations under the Financing Letters. Subject to the terms and upon satisfaction of the Financing Conditions, Parent
and Sub shall use their reasonable best efforts to cause the Debt Financing Sources to provide the Debt Financing on the Closing
Date. Parent shall make available to the Company copies of all documents relating to the Debt Financing upon the Company’s
reasonable request (subject to the confidentiality provisions therein) and shall keep the Company reasonably informed on a current
basis and in reasonable detail of material developments in respect of the financing process relating thereto upon the Company’s
reasonable request. The documents relating to the Debt Financing will not contain any conditions to the availability of the Debt
Financing on the Closing Date other than the Financing Conditions.
(iii)
Prior to the Closing, Parent shall not, without the prior written consent of the Company, agree to, or permit, any
amendment or modification of, or waiver or consent under, the any Commitment Letter or other documentation relating to the Financings
which would (i) reasonably be expected to adversely affect Parent or Sub’s ability to consummate the transactions contemplated
by this Agreement, (ii) reduce the aggregate amount of the Financing to fund the amounts required to be paid by Parent and Sub
under this Agreement below the amount required to consummate the transactions contemplated by this Agreement, (iii) impose
new or additional conditions or expand upon (or amend or modify in any manner adverse to the interests of the Company) the conditions
precedent to the Financings as set forth in the Financing Letters, or (iv) reasonably be expected to delay the Closing;
(b)
Financing Assistance
. In connection with the Debt Financing, prior to the
Closing, the Company shall use commercially reasonable efforts to provide, or cause its representatives to provide, to Parent and
Sub, at Parent’s sole expense, customary cooperation reasonably requested by Parent and Sub that is necessary in connection
with the arrangement, and consummation of the Debt Financing, including using commercially reasonable efforts to (in each case,
to the extent reasonably requested):
(i)
participate in a reasonable number of meetings, due diligence sessions, drafting
sessions and sessions between senior management and prospective lenders and provide financial and other information customarily
required in connection with bank debt financings;
(ii)
provide reasonable and customary assistance with the preparation, execution and delivery of documents customarily
required in connection with bank debt financings, including the solvency certificate, guarantee and collateral documents, and facilitating
the pledging of collateral;
(iii)
provide all documentation and other information relating to the Company or any of
the Company Subsidiaries reasonably required by bank regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including the U.S.A. Patriot Act of 2001 at least three (3) Business Days prior to
the Closing Date, in each case as reasonably requested by Parent at least seven (7) Business Days prior to the Closing Date;
(iv)
assist Parent in obtaining surveys, legal opinions from local outside counsel and
title insurance as reasonably requested by Parent or Sub for the Debt Financing;
(v)
(1) permit the prospective lenders involved in the Debt Financing to evaluate the
Company and the Company Subsidiaries’ current assets, and cash management and accounting systems, policies and procedures
relating thereto, for the purpose of establishing collateral arrangements to the extent reasonable and customary, (2) establish
customary bank and other accounts and blocked account agreements and lock box arrangements in connection with the foregoing and
(3) permit representatives of the prospective lenders to (A) conduct customary commercial field examinations, customary inventory
appraisals and a customary appraisal of the Owned Real Property, and (B) make audits and appraisals delivered for purposes of any
credit facility available to Parent for purposes of the Financings;
(vi)
to the extent timely requested by Parent and required under the Debt Financing Commitment
Letters, obtain documents reasonably requested by Parent or its Debt Financing Sources relating to the repayment of the existing
indebtedness of the Company and the Company Subsidiaries and the release of related liens, including customary payoff letters in
form and substance satisfactory to Parent;
(vii)
cause the taking of corporate and other actions by the Company and its Subsidiaries reasonably necessary to permit
the consummation of the Debt Financing on the Closing Date, it being understood that no such corporate or other action will take
effect prior to the Closing and the Company Board will not approve the Financing prior to the Closing Date;
(viii)
provide
financial statements for quarter ended on July 1, 2017 as promptly as possible after the date thereof, but in no event later
than July 24, 2017;
(ix)
prevent the issuance, offer, placement, or arrangement of any debt securities or commercial bank or other credit
facilities (excluding the indebtedness and/or obligations contemplated by or otherwise permitted under the Debt Financing Commitment
Letters) by or on behalf of the Company or any of its Subsidiaries; and
(x)
supplement the written information (other than information of a general economic or industry-specific nature) concerning
the Company, its Subsidiaries or the transactions contemplated hereby to the extent that any such information contains any material
misstatement of fact or omits to state any material fact necessary to make such information, taken as a whole, not misleading in
any material respect promptly after gaining knowledge thereof.
(c)
Notwithstanding anything to the contrary contained in
Section 5.08(a)(i)
,
(i) nothing in this Agreement shall require any cooperation or other action to the extent it would materially interfere with the
business or operations of the Company or any of the Company Subsidiaries; (ii) neither the Company nor any of the Company Subsidiaries
shall be required to commit to take any action that is not contingent upon the Closing (including the entry into any agreement
or instrument) or that would be effective at or prior to the Effective Time; and (iii)
the Company Board and the board of
directors (or other governing body) of any of the Company Subsdiaries shall not be required to
approve
any financing or agreements related thereto (or any alternative financing) at or prior to the Effective Time
.
(d)
Notwithstanding anything to the contrary contained in
Section 5.08(a)(i)
,
none of the Company or any of the Company Subsidiaries shall be required to pay any commitment or other similar fee or make any
other payment (other than for minimal reasonable out-of-pocket costs that are reimbursed by Parent as provided below in this
Section 5.08(d)
)
or incur any other liability or obligation or provide or agree to provide any indemnity in connection with the Financings or any
action taken in accordance with
Section 5.08(a)(i)
at or prior to the Effective Time. Parent shall indemnify and hold
harmless the Company, the Company Subsidiaries and the Company Representatives from and against any and all liabilities, losses,
damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with the
Financings (including any action taken in accordance with
Section 5.08(a)(i)
) and any information utilized in connection
therewith (other than historical information provided by the Company or the Company Subsidiaries). Notwithstanding anything to
the contrary contained in this Agreement, the condition set forth in
Section 6.02(b)
, as it applies to the Company’s
obligations under this
Section 5.08
, shall be deemed satisfied regardless of any breach by the Company or any of the
Company Subsidiaries of their obligations under this
Section 5.08
unless the Company has materially breached this
Section 5.08
and the
result of
such breach is that Parent is unable to obtain the Debt Financing. Parent
shall, promptly upon request by the Company, reimburse the Company for all documented and reasonable out-of-pocket costs incurred
by the Company or any of the Company Subsidiaries in connection with this
Section 5.08
.
Section 5.09
Takeover
Statutes
. The parties shall use all reasonable efforts (a) to take all action necessary so that no Takeover
Statute is or becomes applicable to restrict or prohibit the Transactions and (b) if any Takeover Statute is or becomes
applicable to restrict or prohibit any of the Transactions, to take all action necessary so that such Transaction may be
consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise act to eliminate or minimize
(to the greatest extent practicable) the effects of such Takeover Statute on such Transaction.
Section 5.10
Employee Benefit Matters
.
(a)
From and after the Effective Time and for a period ending on the first anniversary of the Effective Time (the “
Benefit
Protection Period
”), Parent shall provide or cause its Subsidiaries, including the Surviving Corporation, to provide
(i) base salary, wages and cash-based commission opportunities (excluding, for the avoidance of doubt, equity incentive compensation)
to each individual who is an employee of the Company or a Company Subsidiary immediately prior to the Effective Time and who continues
such employment immediately thereafter (each, a “
Company Employee
”) at a rate that is substantially comparable
in the aggregate to the rate of base salary, wages or commission opportunities provided to such Company Employee immediately prior
to the Effective Time, (ii) an annual bonus opportunity to each Company Employee that is substantially comparable in the aggregate
to the annual cash-based bonus opportunity provided to such Company Employee immediately prior to the Effective Time, (iii) severance
benefits to each Compa
ny Employee that
are substantially comparable in the aggregate to
the severance benefits provided under the severance plan, policy or agree
ment in ef
fect
for the benefit of su
ch Company Employee immediately prior to the Effective Time,
and (iv)
other benefits (including paid-time off, but excluding, for the avoidance of doubt, equity incentive compensation) to each Company
Employee that are substantially comparable, in the aggregate, to the other compensation and benefits provided to such Company Employee
immediately prior to the Effective Time under the Company Benefit Plans.
(b)
Without limiting the generality of
Section 5.10(a)
, from and after the
Effective Time, Parent shall, or shall cause its Subsidiaries, including the Surviving Corporation, to, assume, honor and continue
all of the Company’s and the Company Subsidiaries’ employment, severance, retention and termination plans, policies,
programs, agreements and arrangements (provided that any change in control, severance, retention and termination plans, policies
and agreements between the Company or any Company Subsidiary and any Company Employee are set forth in
Section 5.10(b)
of the Company Disclosure Letter), in each case, in accordance with their terms as in effect immediately prior to the Effective
Time, including with respect to any payments, benefits or rights arising as a result of the Transactions (either alone or in combination
with any other event) and, for the duration of the Benefit Protection Period shall do so without any amendment or modification,
other than any amendment or modification required to comply with applicable Law or as permitted pursuant to the terms of the applicable
plans, policies, programs, agreements and arrangements.
(c)
For
the purposes of eligibility to participate, vesting and, with respect to vacation and severance only, determination of level
of benefits (under any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA, but without
regard to whether the applicable plan is subject to ERISA) and any other employee benefit plan, program, policy or
arrangement maintained by Parent or any of its Subsidiaries, including the Surviving Corporation, (other than any equity
based compensation plan, long-term incentive plan, defined benefit pension plan or
retiree health or welfare plan)
each Company Employee’s service with or otherwise credited by the Company or any Company Subsidiary shall be treated as
service with Parent or any of its Subsidiaries, including the Surviving Corporation to the same extent such service was
recognized under the analogous Company Benefit Plan as of the Effective Time;
provided
,
however
, that such
service need not be recognized to the extent that such recognition would result in any duplication of benefits.
(d)
Parent shall, or shall cause its Subsidiaries, including the Surviving Corporation,
to use commercially reasonable efforts to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively
at work requirements and waiting periods under any welfare benefit plan maintained by Parent or any of its Subsidiaries, including
the Surviving Corporation, in which Company Employees (and their eligible dependents) will be eligible to participate from and
after the Effective Time, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements
and waiting periods would not have been satisfied or waived under the comparable Company Benefit Plan immediately prior to the
Effective Time. Parent shall, or shall cause its Subsidiaries, including the Surviving Corporation, to recognize, or cause to be
recognized, the dollar amount of all co-payments, deductibles and similar expenses incurred by each Company Employee (and his or
her eligible dependents) during the calendar year in which the Effective Time occurs for purposes of satisfying such year’s
deductible and co-payment limitations under the relevant welfare benefit plans in which such Company Employee (and dependents)
will be eligible to participate from and after the Effective Time.
(e)
Not
withstanding the foregoing, nothing contained in this Agree
ment
shall
(i) be treated as the establishment of or an amendment of any Compa
ny Benefit Plan
or any other employee benefit plan, program or arrangement, (ii
) give any employee or former employee or any other individual
associated therewith or any employee benefit plan or trustee thereof or any other third perso
n
any r
ight to enforce the provisions of this
Section 5.10
or (i
ii) obligate
Paren
t, the
Surviving Corporation or any of their affiliates to (A) maintain any particular
benefit plan, except in accordance with the terms of such plan, or (B) retain the employment of any particular employee for
any duration
.
Section 5.11
Expenses; Transfer Taxes
. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement and the Merger and the other Transactions, shall be
paid by the party incurring such expense. Parent shall, or shall cause the Surviving Corporation to, pay all charges and expenses,
including those of the Paying Agent, in connection with the transactions contemplated in
Article II
. All Transfer Taxes
incurred in connection with the Transactions shall be paid when due by Parent, Sub or, after the Closing, the Surviving Corporation.
Section 5.12
Rule 16b-3 Matters
. Notwithstanding anything to the contrary contained
in this Agreement, the Company shall be permitted to take such actions as may be reasonably necessary or advisable to ensure that
the dispositions of equity securities of the Company (including derivative securities) by any officer or director of the Company
who is subject to Section 16 of the Exchange Act pursuant to the Transactions are exempt under Rule 16b-3 promulgated under the
Exchange Act.
Section 5.13
Securityholder Litigation
. The Company shall promptly advise Parent of any litigation commenced after the date
of this Agreement against the Company or any of its directors by any Company stockholders (on their own behalf or on behalf of
the Company) to the extent relating to this Agreement or the Transactions contemplated hereby (including the Merger) and shall
keep Parent reasonably and regularly informed regarding any such litigation. The Company shall not settle any such litigation
without the prior written consent of Parent, such consent not to be unreasonably withheld, delayed or conditioned.
Section 5.14
Preparation of the Proxy Statement: Stockholders’ Meeting
.
(a)
As
promptly as reasonably practicable following the date of this Agreement, but in no event later than July 21, 2017 (as long as
Parent has complied with its obligation to cooperate with the Company set forth in this Section 5.14(a)), the Company
shall prepare and file with the SEC the Proxy Statement, and Parent shall cooperate with the Company with the preparation of
the foregoing. The Company, with Parent’s cooperation, shall use commercially reasonable efforts to respond as
promptly as reasonably practicable to and resolve all comments received from the SEC or its staff concerning the Proxy
Statement. The Company will cause the Proxy Statement in definitive form to be mailed to the Company’s stockholders, in
each case as promptly as reasonably practicable after the SEC confirms that it has no further comments on the Proxy
Statement. No filing of, or amendment or supplement to, or correspondence with the SEC with respect to the Proxy Statement
will be made by the Company without providing Parent a reasonable opportunity to review and comment thereon;
provided
,
however
,
that the foregoing shall not apply with respect to an Competing Proposal, a Superior Proposal, a Change of Company
Recommendation or any matters relating thereto. Each of Parent and Sub shall cooperate with the Company in connection with
the preparation and filing of the Proxy Statement, including promptly furnishing to the Company in writing upon request any
and all information relating to it as may be required to be set forth in the Proxy Statement under applicable Law. Parent
agrees that such information supplied by it in writing for inclusion (or incorporation by reference) in the Proxy Statement
will not, on the date it is first mailed to stockholders of the Company and at the time of the Stockholders’ Meeting,
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 under which they were made, not misleading. If, at any
time prior to the Effective Time, any information relating to Parent or its Affiliates, officers or directors, should be
discovered by Parent which should be set forth in an amendment or supplement to the Proxy Statement so that the Proxy
Statement would not include 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, Parent shall promptly notify
the Company so that it may file with the SEC an appropriate amendment or supplement describing such information and, to the
extent required by Law, disseminate such amendment or supplement to the stockholders of the Company. The Company agrees that
the Proxy Statement will not, on the date it is first mailed to stockholders of the Company and at the time of the Company
Stockholders Meeting, 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 under which they
were made, not misleading. If, at any time prior to the Effective Time, any information relating to Company or its
Affiliates, officers or directors, should be discovered by the Company which should be set forth in an amendment or
supplement to the Proxy Statement so that the Proxy Statement would not include 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 Company shall promptly notify Parent and subsequently file with the SEC an appropriate amendment or
supplement describing such information and, to the extent required by Law, disseminate such amendment or supplement to the
stockholders of the Company.
(b)
The Company shall, as soon as reasonably practicable after the SEC confirms that it has no further comments on the
Proxy Statement, in accordance with applicable Law, the Company Charter and NASDAQ rules, duly give notice of, convene and hold
a meeting of its stockholders to consider the adoption of this Agreement (including any adjournment or postponement thereof, the
“
Stockholders’ Meeting
”);
provided
,
however
, that the Company shall be permitted to delay
or postpone convening the Stockholders’ Meeting (i) with the consent of Parent, (ii) for the absence of a quorum, (iii) to
allow reasonable additional time for any supplemental or amended disclosure which the Company has determined in good faith (after
consultation with outside legal counsel) is necessary under applicable Law and for such supplemental or amended disclosure to be
disseminated and reviewed by the Company’s stockholders prior to the Stockholders’ Meeting or (iv) to allow additional
solicitation of votes in order to obtain the Requisite Stockholder Approval.
(c)
The Company Board shall, subject to the right of the Company Board to make a Change of Company Recommendation pursuant
to
Section 5.03
, recommend to its stockholders that the Requisite Stockholder Approval be given (the “
Company
Recommendation
”). The Company shall include the Company Recommendation in the Proxy Statement.
Article VI
CONDITIONS TO THE MERGER
Section 6.01
Conditions to Obligations of Each Party to Effect the Merger
.
Notwithstanding any other term of this Agreement, the respective obligations of Parent, Sub and the Company to effect the Closing
shall be subject to the satisfaction (or to the extent permitted by Law, mutual waiver by both the Company and Parent) at or prior
to the Closing of each of the following conditions:
(a)
the Company shall have obtained the Requisite Stockholder Approval at the Stockholders’ Meeting;
(b)
no Governmental Entity of competent jurisdiction shall have issued, enacted, entered, promulgated or enforced any
Law, order, injunction or decree that is in effect and renders the consummation of the Merger illegal, or prohibits, enjoins or
otherwise prevents the Merger;
provided
,
however
, that the condition in this
Section 6.01(b)
shall not
be available to any party (i) whose failure to fulfill its obligations pursuant to
Section 5.05
results in the failure
of the condition to be satisfied or (ii) in connection with or as a result of any Law by any non-U.S. Governmental Entity pursuant
to or under any Antitrust Law; and
(c)
any
waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall
have expired and any other approval or waiting period under any other applicable competition, merger control, Antitrust Law
shall have been obtained or terminated or shall have expired.
Section 6.02
Conditions
to Obligations of Parent and Sub
. The obligations
of Parent and Sub to consummate the Merger shall be further subject to the satisfaction or waiver (where permissible pursuant to
applicable Law) prior to the Closing of each of the following conditions, any of which may be waived exclusively by Parent:
(a)
all of the representations and warranties of the Company contained in this Agreement (other than the representations
and warranties of the Company set forth in Section 3.01,
Section 3.02(a)
,
Section 3.02(b)
,
Section 3.03
,
Section 3.09(b)
,
Section 3.21
,
Section 3.22
and
Section 3.23
), without regard to
materiality or Company Material Adverse Effect qualifiers contained within such representations and warranties, shall be true and
correct except for any failure of such representations and warranties to be true and correct that would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect; (ii) the representations and warranties of the
Company set forth in
Section 3.01
,
Section 3.03
,
Section 3.21
,
Section 3.22
and
Section 3.23
shall be true and correct in all material respects; (iii) the representations and warranties of the Company
set forth in
Section 3.09(b)
shall be true and correct in all respects; and (iv) the representations and warranties
of the Company contained in
Section 3.02(a)
and
Section 3.02(b)
shall be true and correct in all respects
except for any failure of such representations and warranties to be true and correct would not increase the aggregate consideration
payable by Parent to the holders of Shares, Company Options and RSUs by more than a
de minimus
amount; in the case of each
of
clause (i)
,
(ii)
,
(iii)
and
(iv)
, as of immediately prior to the Closing as though made as of the
date of this Agreement and as of such date (except to the extent expressly made as of a specific date, in which case as of such
specific date, which need only be true and correct as of such date or time);
(b)
the Company shall have performed or complied in all material respects with all obligations,
agreements and covenants required by this Agreement to be performed or complied with by it prior to or at the Closing;
(c)
since the date of this Agreement, there shall not have occurred a Company Material
Adverse Effect; and
(d)
the Company shall have delivered to Parent a certificate signed on behalf of the
Company by an executive officer of the Company as to the satisfaction of the conditions in
Sections 6.02(a)
,
(b)
and
(c)
.
Section 6.03
Conditions to Obligations of the Company
. The obligations of the Company to consummate the Merger shall
be further subject to the satisfaction or waiver (where permissible pursuant to applicable Law) prior to the Closing of each of
the following conditions:
(a)
the
representations and warranties of Parent and Sub set forth in
Article IV
shall be true and correct in all
material respects as of immediately prior to the Closing as if made on and as of immediate
ly
prior to the Closing, except for (A) any failure to be so true and correct that would not, individually or in the aggregate,
prevent or materially delay the consummation of the Merger or the ability of Parent and Sub to fully perform their respective
covenants and obligations
pursuant to this Agreement and (B) those representations and warranties that expressly
relate to a specific date or time (which need only be true and correct as of such date or time);
(b)
Parent and Sub shall have performed or complied with in all material respects all
obligations and agreements contained in this Agreement to be performed or complied with by each of them prior to or at the C
losing;
and
(c)
Parent and Sub shall have delivered to the Company a certificate signed on behalf
of Parent and Sub by an executive officer of Parent as to the satisfaction of the conditions in
Sections 6.03(a)
,
(b)
and
(c)
.
Article VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01
Termination
. This Agreement may be terminated at any time prior
to the Closing, as follows:
(a)
by mutual written consent of Parent and the Company (upon the recommendation of the
Company Board);
(b)
by either the Company (upon the recommendation of the Company Board) or Parent, if
the Closing shall not have occurred on or before the date that is six (6) months after the date of this Agreement (such date, the
“
Outside Date
”);
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section 7.01(b)
shall not be available to any party whose material breach of any representation, warranty or covenant
under this Agreement has caused the failure of the Closing to occur on or before the Outside Date;
(c)
by either the Company or Parent, if the Requisite Company Vote shall not have been
obtained at the Stockholders’ Meeting duly convened therefor and concluded or at any adjournment thereof;
(d)
by either the Company or Parent, if any Governmental Entity of competent jurisdiction
shall have issued, enacted, entered, promulgated or enforced any Law permanently enjoining, restraining or prohibiting the Merger,
and such Law shall have become final and non-appealable, if applicable;
(e)
by Parent, if the Company Board shall have failed to include the Company Recommendation
in the Proxy Statement or shall have effected a Change of Company Recommendation;
(f)
by the Company, prior to the receipt of the Requisite Stockholder Approval, if (i)
the Company Board shall have effected a Change of Company Recommendation pursuant to
Section 5.03(d)
, (ii) the Company
has complied with
Section 5.03
, (iii) concurrently with, or immediately after, the termination of this Agreement, the
Company enters into a definitive acquisition agreement with respect to a Superior Proposal and (iv) the Company has previously
paid or substantially concurrently pays the Company Termination Fee to Parent;
(g)
by Parent, if: (i)(A) there is an inaccuracy in the Company’s representations
contained in this Agreement or (B) the Company has failed to perform its covenants contained in this Agreement, in either case,
such that the conditions set forth in
Section 6.02(a)
or
(b)
would not be satisfied; (ii) Parent shall have
delivered to the Company written notice of such inaccuracy or failure to perform; and (iii) either such inaccuracy or failure to
perform is not capable of cure prior to the Outside Date or at least 30 days shall have elapsed since the date of delivery of such
written notice to the Company and such inaccuracy or failure to perform shall not have been cured;
provided
,
however
,
that Parent shall not be permitted to terminate this Agreement pursuant to this
Section 7.01(g)
if the inaccuracy of
the representations of Parent or Sub contained in this Agreement or Parent’s or Sub’s failure to perform its covenants
contained in this Agreement is such that a condition set forth in
Section 6.03(a)
or
(b)
would not be satisfied;
(h)
by the Company, if (i)(A) there is an inaccuracy in Parent’s or Sub’s
representations contained in this Agreement or (B) Parent or Sub fails to perform its covenants contained in this Agreement, in
either case that has prevented or would reasonably be expected to prevent Parent or Sub from consummating the Transactions; (ii)
the Company shall have delivered to Parent written notice of such inaccuracy or failure to perform; and (iii) either such inaccuracy
or failure to perform is not capable of cure prior to the Outside Date or at least 30 days shall have elapsed since the date of
delivery of such written notice to Parent and such inaccuracy or failure to perform shall not have been cured;
provided
,
however
, that the Company shall not be permitted to terminate this Agreement pursuant to this
Section 7.01(h)
if the inaccuracy of the representations of the Company contained in this Agreement or the Company’s failure to perform its
covenants contained in this Agreement is such that a condition contained in
Section 6.02(a)
or
(b)
would not
be satisfied; or
(i)
by the Company, (i) if all of the conditions set forth in
Section 6.01
and
Section 6.02
have
been satisfied or waived (other than those conditions which, by their nature, are to be satisfied by actions taken at Closing,
but each of which is capable of being satisfied at the Closing and is reasonably expected to be satisfied as of the Closing), (ii)
Parent and Sub fail to consummate the Closing on the date the Closing is required to have occurred pursuant to
Section 1.02
,
(iii) the Company has irrevocably confirmed by written notice to Parent that (A) all conditions set forth in
Section 6.01
and
Section 6.03
have been satisfied or irrevocably waived (other than those conditions which, by their nature, are
to be satisfied by actions taken at Closing) and (B) it stands ready, willing and able to consummate the Closing pursuant to
Section 1.02
(and it has not delivered written notice purporting to revoke such notice), and (iv) Parent and Sub fail to consummate the Closing
on the third Business Day following delivery of such written notice described in
clause (iii)
above.
Section 7.02
Effect of Termination
.
(a)
In
the event of valid termination of this Agreement by either the Company or Parent as provided in
Section 7.01
,
this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Sub or the
Company or their respective Subsidiaries, officers or directors or any Affiliate of any of the foregoing, in either case,
except (i)
Section 3.24
,
Section 4.12
, the second sentence of
Section 5.04
, this
Section 7.02
and
Article VIII
shall survive the termination of this Agreement and remain in full force and effect
and
(ii) subject to
Section 3.24, Section 4.12
and this
Section 7.02
, the termination of this
Agreement shall not relieve any party from any liabilities or damages incurred or suffered by another party as a result of
such first party’s intentional fraud or willful and material breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
(b)
In the event that this Agreement is terminated:
(i)
by (A) Parent pursuant to
Section 7.01(e)
or (B) the Company pursuant
to
Section 7.01(f)
, then the Company shall pay to Parent or its designee, within two Business Days following the date
of such termination by Parent pursuant to clause (A), or prior to or concurrently with such termination by the Company pursuant
to clause (B), the Company Termination Fee; or
(ii)
(A) by (i) either Parent or the Company pursuant to
Section 7.01(b)
or
Section 7.01(c)
or (ii) Parent pursuant to
Section 7.01(g)
based on the Company’s failure to perform
its covenants contained in this Agreement, (B) prior to the Company Stockholder’s Meeting, a Competing Proposal shall
have been publicly disclosed, and (C) within twelve (12) months after the termination of this Agreement, the Company shall have
entered into a definitive agreement with respect to any Competing Proposal and any Competing Proposal is subsequently consummated,
then the Company shall pay to Parent or its designee, within two Business Days after the consummation of any Competing Proposal,
the Company Termination Fee;
provided
that for purposes of this
Section 7.02(b)(ii)
, the term “Competing
Proposal” shall have the meaning assigned to such term, except that all percentages therein shall be changed to “50%”.
(c)
Reverse Termination Fee; Effect of Certain Terminations
.
(i)
In the event that this Agreement is validly terminated (A) by the Company pursuant to
Section 7.01(i)
, or (B)
by the Company or Parent pursuant to
Section 7.01(b)
at a time when the Company had the right to terminate this Agreement
pursuant to
Section 7.01(i)
, then, Parent shall within two Business Days after the date of such termination, pay or
cause to be paid to the Company or its designees the Reverse Termination Fee by wire transfer of immediately available funds.
(ii)
In the event this Agreement is validly terminated by the Company pursuant to
Section 7.01(h)
based upon an intentional
breach by Parent of its covenants set forth in
Article V
hereof, then, the Company shall have the right to seek damages
for such alleged intentional breach of Parent’s covenants set forth in
Article V
hereof; provided, however, that notwithstanding
anything to the contrary in this Agreement, under no circumstances will the Company or any of its Affiliates be entitled to receive
damages for such alleged intentional breach of Parent’s covenants set forth in
Article V
hereof in excess of $15,000,000
(the “
IB Cap
”).
(d)
Notwithstanding
anything to the contrary contained in this Agreement (including this
Section 7.02
), but subject to the
Company’s rights set forth in
Section 8.10
, the parties agree that the Company’s right to terminate
this agreement and receive payment of the Reverse Termination Fee or seek damages pursuant to Section 7.02(c)(ii) subject to
the IB Cap, as applicable, in accordance with this
Section 7.02(c)
shall be the
sole and exclusive monetary
remedy for any and all losses or damages suffered or incurred by the Company or its
affiliates or any other person in connection with this Agreement (and the termination of this Agreement), the Merger and the
Transactions (and the abandonment thereof) or any matter forming the basis for such termination, and the Company, on behalf
of itself and each Company Related Party hereby waives any claim or other remedy against Parent, Sub and their respective
Affiliates and their respective members, partners, controlling persons, stockholders, affiliated funds, management companies
and investment vehicles and each of the foregoing person’s directors, officers, employees, stockholders and
representatives. For the avoidance of doubt, (i) in no event shall Parent be required to pay the Reverse Termination Fee on
more than one occasion and (ii) in no event shall Parent be required to pay more than one of (A) the Reverse Termination Fee,
(B) damages pursuant to
Section 7.02(c)(ii)
, and (C) damages pursuant to
Section 8.10(d)
. If Parent is
obligated to pay the Reverse Termination Fee but such Reverse Termination Fee is not paid within the two (2) Business Day
period specified in
Section 7.02(c)(i)
, the Company shall retain all of its rights pursuant to this Agreement
(including, prior to the termination of this Agreement, pursuant to
Section 8.10
). So long as this Agreement
shall not have been terminated, the Company shall be entitled to pursue both a grant of specific performance under
Section 8.10
and the payment of the Reverse Termination Fee under
Section 7.02(c)
, but under no circumstances shall the
Company be permitted or entitled to receive more than one of (i) a grant of specific performance
under
Section 8.10
, (ii) the Reverse Termination Fee, (iii) damages payable pursuant to
Section
7.02(c)(ii)
, or (iv) damages pursuant to
Section 8.10(d)
.
(e)
Each of the Company, Parent and Sub acknowledges that (i) the agreements contained
in this
Section 7.02
are an integral part of the Transactions and (ii) without these agreements, Parent, Sub and the
Company would not enter into this Agreement. In no event shall the Company be required to pay to Parent more than one Company Termination
Fee pursuant to
Section 7.02(b)
. In the event that Parent receives full payment of the Company Termination Fee pursuant
to
Section 7.02(b)
under circumstances where a Company Termination Fee was payable, the receipt of the Company Termination
Fee shall be the sole and exclusive monetary remedy for any and all losses or damages suffered or incurred by Parent, Sub, any
of their respective affiliates or any other person in connection with this Agreement (and the termination of this Agreement), the
Merger and the Transactions (and the abandonment thereof) or any matter forming the basis for such termination.
Section 7.03
Amendment
. Subject to
Section 5.07(e)
, this Agreement
may be amended by the Company, Parent and Sub by action taken by or on behalf of their respective boards of directors at any time
prior to the Effective Time;
provided
,
however
, that, after the receipt of the Requisite Stockholder Approval, no
amendment may be made which, by Law or in accordance with the rules of any relevant stock exchange, requires approval by the holders
of Shares without obtaining such approval. This Agreement may not be amended except by an instrument in writing signed by each
of the parties. Notwithstanding the foregoing,
Section 5.08
,
7.02
,
7.03
,
8.06
,
8.08
and
8.10
of this Agreement (and any other provision of this Agreement to the extent a modification, waiver or termination of
such provision would modify the substance of the foregoing as it applies to any Debt Financing Source Related Party) and the definitions
related thereto (solely as used in such sections) (collectively, the “
Lender Designated Sections
”) may not be
amended in a manner adverse to the interests of any Debt Financing Sources Related Party without the written consent of Debt Financing
Sources.
Section 7.04
Waiver
. At any time prior to the Effective Time, Parent and Sub, on the one hand, and the Company, on the other
hand, may (a) extend the time for the performance of any of the obligations or other acts of the other, (b) waive any breach or
inaccuracy of the representations and warranties of the other contained in this Agreement or in any document delivered pursuant
hereto and (c) waive compliance by the other with any of the covenants or conditions contained in this Agreement;
provided
,
however
, that after the receipt of the Requisite Stockholder Approval, there may not be any extension or waiver of this
Agreement that decreases the Merger Consideration or that adversely affects the rights of the holders of Shares hereunder without
the approval of the holders of Shares at a duly convened meeting of the holders of Shares called to obtain approval of such extension
or waiver. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties
to be bound thereby, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
Article VIII
GENERAL PROVISIONS
Section 8.01
Non-Survival of Representations and Warranties
. None of the representations
and warranties contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective
Time. Except for any covenant or agreement that by its terms contemplates performance after the Effective Time, which shall survive
until such covenant is performed in accordance with their terms, none of the covenants and agreements of the parties contained
this Agreement shall survive the Effective Time.
Section 8.02
Notices
. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered or sent if delivered in person or
sent by facsimile transmission or e-mail (provided that telephonic confirmation of facsimile or e-mail transmission is obtained),
(b) on the fifth Business Day after dispatch by registered or certified mail or (c) on the next Business Day if transmitted by
national overnight courier, in each case as follows (or at such other address for a party as shall be specified by like notice):
If to Parent or Sub:
c/o Monomoy Capital Partners III, L.P.
142 West 57th Street, 17th Floor
New York, NY 10019
E-mail: dcollin@mcpfunds.com
lmlotek@mcpfunds.com
Attention: Daniel Collin
Lee Mlotek
with a copy to (for information purposes only):
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Fax: (212) 446-6460
E-mail: michael.weisser@kirkland.com
david.feirstein@kirkland.com
Attention: Michael Weisser, P.C.
David Feirstein
If to the Company:
West Marine, Inc.
500 Westridge Drive
Watsonville, California 95076
Email: As previously provided
Attention: General Counsel
with copies to (for information purposes only):
Sidley Austin LLP
1001 Page Mill Road, Building 1
Palo Alto, California 94304
Fax: (650) 565-7100
Email: jfitchen@sidley.com
Attention: Jennifer F. Fitchen, Esq.
Section 8.03
Severability
. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions
is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to
the extent possible.
Section 8.04
Entire Agreement
. This Agreement (together with the Annexes, Exhibits,
Company Disclosure Letter, Parent Disclosure Letter and the other documents delivered pursuant hereto), the Guarantee and the Confidentiality
Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter of this Agreement.
Section 8.05
Assignment
. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned or transferred, in whole or in part, by operation of Law or otherwise by
any of the parties without the prior written consent of the other parties. Any assignment or transfer in violation of the preceding
sentence shall be void.
Section 8.06
Parties
in Interest
. Except for (a) the Lender Designated Sections (which shall be for the benefit of the Debt Financing
Source Related Parties) and (b) after the Closing,
Article II
which shall be for the benefit of any person
entitled to payment thereunder and (c)
Section 5.07
, which shall be for the benefit of each Indemnified Party,
such Indemnified Party’s heirs, executors or administrators and each Indemnified Party’s representatives, Parent,
Sub and the Company hereby agree that their respective representations, warranties and covenants set forth in this Agreement
are solely for the benefit of the other parties, in accordance with and subject to the terms of this Agreement, and this
Agreement is not intended to, and does not, confer upon any person other than the parties any rights or remedies hereunder,
including the right to rely upon the representations and warranties set forth in this Agreement; provided, that the persons
named in
clauses (b)
and
(c)
of this sentence shall be entitled to enforce their rights under this Agreement.
The parties further agree that the rights of third-party beneficiaries under
clauses (b)
and
(c)
of
the preceding sentence shall not arise unless and until the Effective Time occurs. The representations and warranties in this
Agreement are the product of negotiations among the parties and are for the sole benefit of the parties. Any inaccuracies in
such representations and warranties may be subject to waiver by the parties in accordance with
Section 7.04
without notice or liability to any other person. In some instances, the representations and warranties in this Agreement may
represent an allocation among the parties of risks associated with particular matters regardless of the knowledge of any of
the parties. Consequently, persons other than the parties may not rely upon the representations and warranties in this
Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 8.07
Mutual Drafting; Interpretation; Headings
. Each party hereto has
participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the
parties. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provision. For purposes of this Agreement, whenever the context requires: (a) the singular number shall include the plural,
and vice versa; (b) the masculine gender shall include the feminine and neuter genders; (c) the feminine gender shall include the
masculine and neuter genders; and (d) the neuter gender shall include masculine and feminine genders. As used in this Agreement,
the words “include” and “including,” and words of similar meaning, shall not be deemed to be terms of limitation,
but rather shall be deemed to be followed by the words “without limitation.” Except as otherwise indicated, all references
in this Agreement to “Sections,” “Annexes” and “Exhibits” are intended to refer to Sections
of this Agreement and the Annexes and Exhibits to this Agreement. All references in this Agreement to “$” are intended
to refer to U.S. dollars. The term “or” shall not be deemed to be exclusive. The words “hereof,” “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. In this Agreement, references to “as of the date of this Agreement”
or words of similar import shall be deemed to mean “as of immediately prior to the execution and delivery of this Agreement.”
The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
Section 8.08
Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury
.
(a)
This Agreement shall be governed by, and construed in accordance with, the Laws of
the State of Delaware, without giving effect to the principles of conflicts of Law thereof.
(b)
Each of the parties irrevocably agrees that any legal Proceeding arising out of or
relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in the Court
of Chancery of the State of Delaware (or, to the extent such court does not have subject matter jurisdiction, the Superior Court
of the State of Delaware or the United States District Court for the District of Delaware), and each of the parties hereby irrevocably
submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally,
with regard to any such Proceeding arising out of or relating to this Agreement or the Transactions. Each of the parties agrees
not to commence any Proceeding relating thereto except in the courts described above in Delaware, other than actions in any court
of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described in this
Agreement. Each of the parties further agrees that service of process upon such party in any such Proceeding shall be effective
if given in accordance with
Section 8.02
or such other manner as may be permitted by applicable Law, and the parties
further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives,
and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any Proceeding arising out of or relating
to this Agreement or the Transactions, (i) any claim that it is not personally subject to the jurisdiction of the courts in
Delaware as described in this Agreement for any reason, (ii) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) that (A) the Proceeding in any such court
is brought in an inconvenient forum, (B) the venue of such Proceeding is improper or (C) this Agreement, or the subject matter
of this Agreement, may not be enforced in or by such courts.
(c)
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT AND
THE DEBT FINANCING COMMITMENT LETTERS
IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
, THE DEBT FINANCING COMMITMENT LETTERS
OR ANY OF THE TRANSACTIONS HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) 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, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THE
FOREGOING WAIVER, (III) IT MAKES THE FOREGOING WAIVER VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS
Section 8.08(
c)
.
(d)
Notwithstanding
anything to the contrary herein, each of the parties hereto: (a) agrees that it will not bring or support any Person in any
Proceeding 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 Source Related Parties in any way relating to this Agreement or any of the transactions contemplated by
this Agreement, including, but not limited to, any dispute arising out of or relating in any way to the Debt
Financing Commitment Letters or the performance thereof or the financings contemplated thereby, in any forum other than the
federal and New York state Courts located in the Borough of Manhattan within the City of New York and (b) agrees that, except
as specifically set forth in the Debt Financing Commitment Letters, all Actions (whether at Law, in equity, in contract, in
tort or otherwise) against any of the Debt Financing Source Related Parties in any way relating to this Agreement, the Debt
Financing or the performance thereof or the transactions contemplated hereby or 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.
Section 8.09
Counterparts
. This Agreement may be executed in two or more counterparts,
and by the different parties in separate counterparts, each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement. The exchange of a fully executed Agreement (in counterparts or
otherwise) by facsimile or by electronic delivery in .pdf format shall be sufficient to bind the parties to the terms and conditions
of this Agreement.
Section 8.10
Specific Performance
.
(a)
The parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed, or were threatened to be not performed, in accordance with their specific terms
or were otherwise breached. Accordingly, subject to
Section 7.02
, the parties acknowledge and agree that (i) the parties
shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches or threatened breaches
of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy
to which they are entitled at law or in equity, and (ii) the provisions set forth in
Section 7.02
are not intended
to and do not adequately compensate for the harm that would result from a breach of this Agreement and shall not be construed to
diminish or otherwise impair in any respect any party’s right to specific performance or other equitable relief. If on the
Outside Date, there is a pending Proceeding that has been brought by a party hereto seeking the remedies provided for in this
Section 8.10
,
then, without further action, the Outside Date shall be automatically extended until the date that is five Business Days after
the dismissal, settlement or entry of a final non-appealable order with respect to such Proceeding or such other time period established
by the court presiding over such Proceeding.
(b)
Notwithstanding
anything in this Agreement to the contrary (including
Section 8.10(a)
), it is acknowledged and agreed that, prior
to a valid termination of the Agreement in accordance with
Section 7.01
, the Company shall be entitled to obtain
specific performance to cause Parent and Sub to cause the Equity Financing to be funded and to consummate the Closing in
accordance with
Section 1.02
only if: (i) all of the conditions set forth in
Section 6.01
and
Section 6.02
have been satisfied or waived (other than those conditions that, by their nature, are to be satisfied at the Closing, but
each of which is capable of being satisfied at the Closing and is reasonably expected to be satisfied as of the Closing) on
the date the Closing is required to have occurred pursuant to
Section 1.02
, (ii) the Debt Financing contemplated
by clause (i) of the definition thereof has been funded or will be funded at the Closing if the Equity Financing is funded at
the Closing, (iii) the Company has irrevocably confirmed in a written notice to Parent (and shall not have purported to
revoke such notice) that (A) all conditions set forth in
Section 6.01
and
Section 6.02
have been
satisfied or irrevocably waived (other than those conditions which, by their nature, are to be satisfied by actions taken at
the Closing), and (B) if specific performance is granted and the Equity Financing and Debt Financing
contemplated
by clause (i) of the definition thereof
are funded, the Company stands ready, willing and able to consummate the
Closing pursuant to
Section 1.02
. For the avoidance of doubt, in no event shall the Company be entitled to
enforce or seek to enforce specifically Parent’s obligations to cause the Equity Financing to be funded or to
consummate the Transactions if the Debt Financing contemplated by clause (i) of the definition thereof has not been funded
(or will not be funded at the Closing if the Equity Financing is funded at the Closing).
(c)
Notwithstanding anything to the contrary in this Agreement, but subject to
Section
8.10(d)
and
Section 7.02
(solely in the case when this Agreement is terminated), the Company hereby agrees that, prior
to the Closing, specific performance as provided for in this
Section 8.10
shall be the sole and exclusive remedy with respect
to breaches by Parent or Sub in connection with this Agreement or the transactions contemplated by this Agreement (whether in contract,
tort or otherwise) and that it may not seek or accept any other form of relief that may be available for breach under this Agreement
or otherwise in connection with this Agreement or the transactions contemplated by this Agreement (including monetary damages).
(d)
If a court of competent jurisdiction has declined to specifically enforce the obligations
of Parent to cause the Equity Financing to be funded and to consummate the Closing in accordance with
Section 1.02
pursuant
to a claim for specific performance brought against Parent pursuant to
Section 8.10(b)
at a time when the conditions set
forth in the first sentence of
Section 8.10(b)
are satisfied and has instead granted an award of damages for such alleged
breach of Parent’s obligation to cause the Equity Financing to be funded and to consummate the Closing in accordance with
Section 1.02
, the Company may enforce such award and accept damages for such alleged breach only if, within ten (10) Business
Days following such determination (i) the Company confirms to the Parent in writing that the Company stands ready, willing and
able to consummate the Closing pursuant to
Section 1.02
(whether or not this Agreement has previously been terminated),
and (ii) Parent does not consummate the transactions contemplated by this Agreement within ten (10) Business Days of such written
confirmation in accordance with the terms and conditions of this Agreement; provided, however, that notwithstanding anything to
the contrary in this Agreement, under no circumstances will the Company or any of its Affiliates be entitled to enforce such an
award or accept damages for such alleged breach in excess of $25,000,000 (the “
Cap
”); provided, further, that
prior to enforcing any such award or accepting any such damages for such alleged breach, the Company on behalf of itself and the
Company Related Parties irrevocably waives any and all rights to receive or seek (i) payment of the Reverse Termination Fee and
(ii) damages pursuant to
Section 7.02(c)(ii)
.
(e)
Each
of the parties agrees that except as provided in
Section 7.02(d)
and
Section 8.10(d)
(i) the seeking of
remedies pursuant to this
Section 8.10
shall not in any way constitute a waiver by any party seeking such
remedies of its right to seek any other form of relief that may be available to it under this Agreement, including under
Section 7.02
,
in the event that this Agreement has been terminated or in the event that the remedies provided for in this
Section 8.10
are
not available or otherwise are not granted, (ii) nothing set forth in this Agreement shall require a party to institute any
Proceeding for (or limit a party’s right to institute any Proceeding for) specific performance under this
Section 8.10
prior, or as a condition, to exercising any termination right under
Article VII
, nor shall the commencement of
any Proceeding seeking remedies pursuant to this
Section 8.10
or anything set forth in this
Section 8.10
restrict or limit a party’s right to terminate this Agreement in accordance with the terms of
Article VII
or pursue any other remedies under this Agreement that may be available then or thereafter and (iii) no party shall require
the other to post any bond or other security as a condition to institute any Proceeding for specific performance under this
Section 8.10
.
While the Company may pursue both a grant of specific performance as and only to the extent permitted by this
Section 8.10
and the payment of the Reverse Termination Fee or damages as provided by
Section 7.02(c)(ii)
, under no circumstances
shall the Company be permitted or entitled to receive both such grant of specific performance (or damages contemplated
pursuant to
Section 8.10(d)
) and the payment of the Reverse Termination Fee or damages pursuant to
Section
7.02(c)(ii)
.
(f)
Notwithstanding anything to the contrary in this Agreement, the Company on behalf of itself and the Company Related
Parties hereby waives any rights or claims against any Debt Financing Source or any Debt Financing Source Related Party, whether
at law or equity, in contract, in tort or otherwise, and the Company on behalf of itself and the Company Related Parties agrees
not to commence (and if commenced agrees to dismiss or otherwise terminate) any Proceeding against any Debt Financing Source or
any Debt Financing Source Related Party in connection with this Agreement or the transactions contemplated hereby (including any
Proceeding related to the Debt Financing). In furtherance and not in limitation of the foregoing, it is agreed that no Debt Financing
Source or any Debt Financing Source Related Party shall have any liability for any losses to the Company or any Company Related
Party in connection with this Agreement or the transactions contemplated hereby, and in no event shall the Company or any Company
Related Party be entitled to seek the remedy of specific performance of this Agreement against any Debt Financing Source or any
Debt Financing Source Related Party. Nothing in this
Section 8.10
shall in any way limit or qualify the liabilities
of the Debt Financing Sources or the Debt Financing Source Related Parties and the other parties to the Debt Financing to each
other thereunder or in connection therewith.
Section 8.11
Attorneys’ Fees
. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled
to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or
suit.
[Signature
Page Follows]
IN WITNESS WHEREOF
, Parent, Sub and
the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first
written above.
|
RISING TIDE PARE
NT
INC.
|
|
|
|
|
By:
|
/s/
Daniel Collin
|
|
Name:
|
Daniel Collin
|
|
Title:
|
President
|
|
|
|
|
|
|
|
RISING TIDE MERGER
SUB INC.
|
|
|
|
|
By:
|
/s/
Daniel Collin
|
|
Name:
|
Daniel Collin
|
|
Title:
|
President
|
IN
WITNESS WHEREOF
, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto
duly authorized all as of the date first written above.
|
WEST MARINE, INC.
|
|
|
|
By:
|
/s/ Matthew L. Hyde
|
|
Name:
|
Matthew L. Hyde
|
|
Title:
|
Chief Executive Officer
|
Annex I
“
Acceptable Confidentiality Agreement
”
means a confidentiality agreement that contains substantially similar terms to those contained in the Confidentiality Agreement
(including a “standstill” or similar provision on terms not materially more favorable to such third party than the
terms of the “standstill” provision in the Confidentiality Agreement);
provided
,
however
, that such confidentiality
agreement shall not prohibit compliance by the Company with any of the provisions of
Section 5.03
.
“
affiliate
” means, with
respect to any person, any other person that directly or indirectly, through one or more intermediaries, controls, is controlled
by or is under common control with, the first-mentioned person.
“
Aggregate Common Stock Consideration
”
means the product of the Merger Consideration and the number of Shares issued and outstanding immediately prior to the Effective
Time (other than Shares to be cancelled in accordance with
Section 2.01(a)(ii)
and other than Dissenting Shares).
“
Aggregate Merger Consideration
”
means the sum of the Aggregate Common Stock Consideration, the aggregate Option Payments and the aggregate RSU Payments.
“
Agreement
” has the meaning
set forth in the Preamble.
“
Anti-Corruption Laws
”
means the Foreign Corrupt Practices Act of 1977, as amended, the Anti-Kickback Act of 1986, as amended, the UK Bribery Act of 2010,
and the Anti-Bribery Laws of the People’s Republic of China or any applicable Laws of similar effect, and the related regulations
and published interpretations thereunder.
“
Antitrust Division
”
means the Antitrust Division of the Department of Justice.
“
Antitrust Laws
” has
the meaning set forth in
Section 3.04(b)
.
“
Bankruptcy and Equity Exception
”
has the meaning set forth in
Section 3.03(a)
.
“
Benefit Protection Period
”
has the meaning set forth in
Section 5.10(a)
.
“
Book-Entry Shares
” has
the meaning set forth in
Section 2.01(a)(i)
.
“
Business Day
” means
any day, other than a Saturday or Sunday or a day on which banks are required or authorized by Law to close in New York, New York.
“
Cancelled Shares
” has
the meaning set forth in
Section 2.01(a)(ii)
.
“
Cash Replacement Company RSU Awards
”
has the meaning set forth in
Section 3.02(b)
.
“
Certificate
” has the
meaning set forth in
Section 2.01(a)(i)
.
“
Certificate of Merger
”
has the meaning set forth in
Section 1.03
.
“
Change of Company Recommendation
”
has the meaning set forth in
Section 5.03(c
).
“
Closing
” has the meaning
set forth in
Section 1.02
.
“
Code
” means the Internal
Revenue Code of 1986, as amended.
“
Company
” has the meaning
set forth in the Preamble.
“
Company Benefit Plan
”
has the meaning set forth in
Section 3.12(a)
.
“
Company Board
” has the
meaning set forth in Section 5.03(b).
“
Company By-laws
” has
the meaning set forth in
Section 3.01(b)
.
“
Company Charter
” has
the meaning set forth in
Section 3.01(b)
.
“
Company Common Stock
”
has the meaning set forth in the Recitals.
“
Company Disclosure Letter
”
has the meaning set forth in
Article III
.
“
Company Employees
” has
the meaning set forth in
Section 5.10(a)
.
“
Company Equity Incentive Plan
”
means the Company’s Amended and Restated Omnibus Equity Incentive Plan.
“
Company Financial Statements
”
has the meaning set forth in
Section 3.06
.
“
Company Intellectual Property
Rights
” means Intellectual Property Rights owned or purported to be owned by the Company or any Company Subsidiary.
“
Company Material Adverse
Effect
” means any change, circumstance, development, occurrence, state of facts, event or effect (each an
“
Effect
”) that has had, or would reasonably be expected to have, individually or in the aggregate together
with all other Effects, a material adverse effect on the business, financial condition or continuing results of operations of
the Company and the Company Subsidiaries, taken as a whole;
provided
,
however
, that for purposes of this clause
(i), none of the following shall constitute or be taken into account in determining whether there has been, a “Company
Material Adverse Effect”: (a) the entry into or the announcement or pendency of this Agreement or the Transactions or
the consummation of the Transactions, in each case, including (1) by reason of the identity of, or any facts or circumstances
relating to, Parent, Sub or any of their respective affiliates, (2) by reason of any communication by Parent or any of its
affiliates regarding the plans or intentions of Parent with respect to the conduct of the business of the Company and the
Company Subsidiaries following the Effective Time and (3) the impact of any of the foregoing on any relationships with
customers, suppliers, vendors, business partners, employees or regulators; (b) any Effect affecting the economy or the
financial, credit or securities markets in the United States or elsewhere in the world (including interest rates and exchange
rates) generally affecting the industries in which the Company or any of the Company Subsidiaries operates; (c) the
suspension of trading in securities generally on the NASDAQ; (d) any development or change in applicable Law, GAAP or
accounting standards or the interpretation of any of the foregoing; (e) any action taken by the Company or any of the Company
Subsidiaries that is expressly required by this Agreement or at Parent’s request or the failure by the Company or any
of the Company Subsidiaries to take any action that is prohibited by this Agreement (including under
Section 5.01(a)
to
the extent Parent fails to provide its consent to such action after receipt of a written request therefor); (f) the
commencement, occurrence, continuation or escalation of any armed hostilities or acts of war (whether or not declared) or
terrorism; (g) any actions or claims made or brought by any of the current or former stockholders of the Company (or on their
behalf or on behalf of the Company, but in any event only in their capacities as current or former stockholders) arising out
of this Agreement or any of the Transactions; (h) the existence, occurrence or continuation of any weather-related or force
majeure events, including any earthquakes, floods, hurricanes, tropical storms, fires or other natural disasters or any
national, international or regional calamity; or (i) any changes in the market price or trading volume of the Shares, any
changes in the ratings or the ratings outlook for the Company or any of the Company Subsidiaries by any applicable rating
agency, any changes in any analyst’s recommendations or ratings with respect to the Company or any of the Company
Subsidiaries or any failure of the Company to meet any internal or external projections, budgets, guidance, forecasts or
estimates of revenues, earnings or other metrics for any period ending on or after the date of this Agreement (it being
understood that the exceptions in this
clause (i)
shall not prevent or otherwise affect the underlying cause of any
such change or failure referred to therein (to the extent not otherwise falling within any of the exceptions provided by
clauses
(a)
through
(h)
) from being taken into account in determining whether a Company Material Adverse Effect has
occurred);
provided
, that with respect to
clauses (b)
,
(d)
,
(f)
and
(h)
, such Effects
shall be taken into account to the extent they materially and disproportionately adversely affect the Company and the Company
Subsidiaries, taken as a whole, compared to other companies operating primarily in the same industries in which the Company
and the Company Subsidiaries operate.
“
Company Material Contract
”
has the meaning set forth in
Section 3.18(b)
.
“
Company Options
” has
the meaning set forth in
Section 2.03(a)
.
“
Company Permits
” has
the meaning set forth in
Section 3.05(a)
.
“
Company Preferred Stock
”
has the meaning set forth in
Section 3.02(a)
.
“
Company Recommendation
”
has the meaning set forth in
Section 5.14(c)
.
“
Company Related Party
”
means the Company, the holders of Shares, the holders of Company Options, the holders of RSUs, the holders of SPP Options and each
of their respective current, former or future Affiliates, management companies, investment vehicles, controlling persons, and each
of the foregoing person’s respective officers, directors, stockholders, members, general and limited partners, managers,
agents, representatives, successors and assigns.
“
Company Representatives
”
has the meaning set forth in
Section 5.03(a)
.
“
Company SEC Documents
”
has the meaning set forth in
Section 3.06
.
“
Company Stock Purchase Plan
”
means the Company’s Amended and Restated Associates Stock Buying Plan.
“
Company Subsidiaries
”
means the Subsidiaries of the Company.
“
Company Termination Fee
”
means an amount in cash equal to $11,000,000.
“
Competing Proposal
”
means, other than the Transactions, any proposal, inquiry, indication of interest or offer, from any person or group of persons
(other than Parent, Sub or any of their respective affiliates) relating to, in a single transaction or a series of related transactions,
(a) the direct or indirect acquisition (whether by merger, consolidation, equity investment, joint venture, recapitalization, reorganization
or otherwise) by any person or group of persons of more than 20% of the consolidated assets of the Company and the Company Subsidiaries,
taken as a whole, (b) the acquisition in any manner, directly or indirectly, by any person or group of persons of more than 20%
of any class of equity securities of the Company or any Company Subsidiary or (c) any merger, consolidation, share exchange, recapitalization,
liquidation, dissolution or similar transaction that would result in any person or group of persons beneficially owning, directly
or indirectly, more than 20% of the voting power of the surviving entity in a merger involving the Company or any Company Subsidiary
or the resulting direct or indirect parent of the Company or such surviving entity (or any securities convertible into, or exchangeable
for, securities representing such voting power). As used in this Agreement, the term “group” shall have the meaning
set forth in Rule 13d-3 of the Exchange Act.
“
Competing Proposal Notice
”
has the meaning set forth in
Section 5.03(b)
.
“
Confidentiality Agreement
”
means the letter regarding confidentiality between the Company and Monomoy Capital Management, L.P. dated March 6, 2017.
“
Contract
” means any
written agreement, contract, lease (whether for real or personal property), power of attorney, note, bond, mortgage, indenture,
deed of trust, loan, evidence of Indebtedness, letter of credit, settlement agreement, franchise agreement, covenant not to compete,
employment agreement, license or other legal commitment (other than any purchase or sale order) to which a person is a party or
to which the properties or assets of such person are subject.
“
D&O Insurance
” has
the meaning set forth in
Section 5.07(b)
.
“
Debt Financing
”
means the debt financing incurred or intended to be incurred pursuant to the Debt Financing Commitment Letters (including any debt
securities contemplated by the Debt Financing Commitment Letters), comprised of (i) a senior secured asset-based credit facility
(the “
ABL Facility
”) and (ii) a second lien asset-based term loan facility.
“
Debt Financing
Commitment Letters
” means the (i) debt financing commitment letters, dated as of the date hereof, by and among Parent,
Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and (ii) debt financing commitment letters, dated
as of the date hereof, by and among Parent and Pathlight Capital LLC.
“
Debt Financing
Source Related Party
” means the Debt Financing Sources, together with their respective Affiliates, and their and their
respective Affiliates’ former, current and future officers, directors, employees, agents, general or limited partners, managers,
members, stockholders, controlling persons and representatives and, in each case, their respective successors and assigns.
“
Debt Financing
Sources
” means the financial institutions identified in the Debt Financing Commitment Letters, together with each other
Person that commits to provide or otherwise provides the Debt Financing, whether by joinder to the Debt Financing Commitment Letters
or otherwise.
“
DGCL
” has the meaning
set forth in the Recitals.
“
Dissenting Shares
” has
the meaning set forth in
Section 2.04
.
“
Dissenting Stockholder
”
has the meaning set forth in
Section 2.04
.
“
Effective Time
” has
the meaning set forth in
Section 1.03
.
“
Environmental Laws
”
means all Laws that (a) regulate or relate to the protection or clean up of the environment, occupational safety and health in
respect of Hazardous Substances or the use, treatment, storage, transportation, handling, exposure to, disposal or release of Hazardous
Substances or (b) impose liability (including for enforcement, investigatory costs, cleanup, removal or response costs, natural
resource damages, contribution, injunctive relief, personal injury or property damage) or standards of care with respect to any
of the foregoing.
“
Environmental Permits
”
means any permit, registration, identification number, license or other authorization required under any applicable Environmental
Law.
“
Equity Commitment Agreement
”
has the meaning set forth in
Section 4.07(a)
.
“
Equity Financing
” has
the meaning set forth in
Section 4.07(a)
.
“
ERISA
” has the meaning
set forth in
Section 3.12(a)
.
“
ERISA Affiliate
” means
any entity that, together with another entity, would be treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA.
“
Exchange Act
” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“
Exchange Fund
” has the
meaning set forth in
Section 2.02(a)
.
“
Financing
” has the meaning
set forth in
Section 4.07(a)
.
“
Financing Letters
” has
the meaning set forth in
Section 4.07(a)
.
“
Financing Uses
” has
the meaning set forth in
Section 4.07(b)
.
“
FTC
” means the Federal
Trade Commission.
“
GAAP
” means generally
accepted accounting principles as applied in the United States.
“
Governmental Entity
”
means any national, federal, state, county, municipal or local government, or other governmental or regulatory body or political
subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, taxing or administrative functions
of or pertaining to government.
“
Hazardous Substances
”
means any toxic, reactive, corrosive, ignitable or flammable chemical, or chemical compound, or hazardous substance, material or
waste, whether solid, liquid or gas, that is subject to regulation, control or remediation, or for which liability or standards
of care are imposed under any Environmental Law, including petroleum (including crude oil or any fraction thereof), asbestos, radioactive
materials and polychlorinated biphenyls.
“
HSR Act
” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
“
Indebtedness
” means
all (a) indebtedness of the Company or any of the Company Subsidiaries for borrowed money (including the aggregate principal amount
thereof and the aggregate amount of any accrued but unpaid interest thereon), other than indebtedness for borrowed money between
the Company and any of the Company Subsidiaries or between the Company Subsidiaries; (b) obligations of the Company or any of the
Company Subsidiaries evidenced by bonds, notes, debentures, letters of credit or similar instruments; (c) obligations of the Company
or any of the Company Subsidiaries under capitalized leases or leases required to be capitalized leases in accordance with GAAP;
(d) obligations in respect of interest rate and currency obligation swaps, hedges or similar arrangements; (e) letters of credit,
to the extent drawn, and (e) obligations of the Company or any of the Company Subsidiaries to guarantee any of the foregoing types
of payment obligations on behalf of any person other than the Company or any of the Company Subsidiaries.
“
Indemnified Liabilities
”
has the meaning set forth in
Section 5.07(a)
.
“
Indemnified Party
” has
the meaning set forth in
Section 5.07(a)
.
“
Insurance Policies
”
means all material insurance policies and arrangements held, as of the date of this Agreement, by or for the benefit of the Company,
any Company Subsidiary, or the business, assets or properties owned, leased or operated by the Company or any Company Subsidiary.
“
Intellectual Property Rights
”
shall mean all foreign, multinational and domestic (i) Trademarks; (ii) Patents; (iii) Trade Secrets; (iv) copyrights
and works of authorship in any media (including Software and all documentation related thereto, Internet site content, advertising
and marketing materials and art work); and (v) all disclosures, applications and registrations, extensions, substitutions,
modifications, renewals, divisionals, continuations, continuations-in-part, reissues, re-examinations, restorations and reversions
related to any of the foregoing.
“
Intervening Event
” has
the meaning set forth in
Section 5.03(e)(i)
.
“
IT Systems
” has the
meaning set forth in
Section 3.17(f)
.
“
knowledge
” means, (a)
with respect to the Company, the actual (but not constructive or imputed) knowledge of the individuals listed in
Section 1.1
of the Company Disclosure Letter (without independent investigation), and (b) with respect to Parent, the actual (but not constructive
or imputed) knowledge of Daniel Collin and Lee Mlotek (without independent investigation).
“
Law
” means any federal,
state, local or foreign law (including common law), statute, code, directive, ordinance, rule, regulation, act, order, judgment,
writ, stipulation, award, injunction or decree.
“
Lien
” means any lien,
mortgage, pledge, conditional or installment sale agreement, encumbrance, covenant, restriction, option, right of first refusal,
easement, security interest, deed of trust, right-of-way, encroachment, community property interest or other claim or restriction
of any nature, whether voluntarily incurred or arising by operation of Law.
“
Merger
” has the meaning
set forth in the Recitals.
“
Merger Consideration
”
has the meaning set forth in
Section 2.01(a)(i)
.
“
NASDAQ
” means the NASDAQ
Stock Market.
“
Notice of Change of Recommendation
”
has the meaning set forth in
Section 5.03(d)(ii)
.
“
Option Payments
” has
the meaning set forth in
Section 2.03(a)
.
“
Outside Date
” has the
meaning set forth in
Section 7.01(b)
.
“
Parent
” has the meaning
set forth in the Preamble.
“
Parent Disclosure Letter
”
has the meaning set forth in
Article IV
.
“
Patents
” means United
States and non-United States patents, provisional patent applications, patent applications, continuations, continuations-in-part,
divisions, reissues, patent disclosures, industrial designs, inventions (whether or not patentable or reduced to practice) and
improvements thereto.
“
Paying Agent
” has the
meaning set forth in
Section 2.02(a)
.
“
Payroll Agent
” means
UltiPro Services.
“
Permit
” has the meaning
set forth in
Section 3.05(a)
.
“
Permitted Liens
”
means (a) statutory Liens for Taxes, assessments or other charges by Governmental Entities not yet due and payable or the
amount or validity of which is being contested diligently and in good faith and for which appropriate reserves have been
established in accordance with GAAP, (b) mechanics’, materialmen’s, carriers’, workmen’s,
warehouseman’s, repairmen’s, landlords’ and similar Liens granted or that arise in the ordinary course of
business, (c) Liens securing Indebtedness or liabilities that (i) are reflected in the Company SEC Documents filed on or
prior to the date of this Agreement or (ii) the Company or any Company Subsidiary is permitted to incur under
Section 5.01
,
(d) with respect to real property easements whether or not shown by the public records, overlaps, encroachments and any
matters not of record that would be disclosed by an accurate survey or a personal inspection of the property (other than such
matters that, individually or in the aggregate, materially adversely impair the current use of the subject real property),
(e) with respect to real property title to any portion of the premises lying within the right of way or boundary of any
public road or private road, (f) with respect to real property rights of parties in possession, and (g) Liens imposed or
promulgated by Law with respect to real property and improvements, including zoning regulations.
“
person
” means an individual,
corporation, partnership, limited partnership, limited liability partnership, limited liability company, joint venture, association,
trust, unincorporated organization, Governmental Entity or other entity (including any person as defined in Section 13(d)(3)
of the Exchange Act).
“
Personal Information
”
means a natural person’s name, street address, telephone number, email address, photograph, social security number or other
similar governmental identifier, driver’s license number, health information, biometric data, passport number, or customer
or account number, user ID, or any other piece of information which on its own or in combination with any other piece of information
allows the identification of a natural person.
“
Privacy Laws
” means
all applicable U.S. Laws related to privacy, data security, and data protection, including but not limited to the Federal Trade
Commission Act, 15 U.S.C. § 45; Fair Credit Reporting Act, 15 U.S.C. § 1681; Children’s Online Privacy
Protection Act, 15 U.S.C. §§ 6501–6506; California Online Privacy Protection Act, Cal. Bus. & Prof. Code
§§ 22575-22579; other U.S. state and federal privacy and data security laws; and the requirements set forth in regulations
promulgated by the Federal Trade Commission, Federal Communications Commission, and other applicable U.S. state and federal regulatory
bodies.
“
Proxy Statement
” has
the meaning set forth in
Section 3.04(b)
.
“
Proceeding
” has the
meaning set forth in
Section 3.11
.
“
Requisite Stockholder Approval
”
has the meaning set forth in
Section 3.22
.
“
Reverse Termination Fee
”
means an amount in cash equal to $17,000,000.
“
RSU
” has the meaning
set forth in
Section 2.03(b)
.
“
RSU Award
” has the meaning
set forth in
Section 2.03(b)
.
“
RSU Payments
” has the
meaning set forth in
Section 2.03(c)
.
“
Sarbanes-Oxley Act
”
has the meaning set forth in
Section 3.06
.
“
SEC
” means the Securities
and Exchange Commission.
“
SEC Transaction Documents
”
has the meaning set forth in
Section 3.07
.
“
Securities Act
” means
the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“
Shares
” has the meaning
set forth in
Section 2.01(a)(i)
.
“
Software
” shall mean
any and all other computer programs, including any and all software implementations of algorithms, models and methodologies, whether
in source code or object code.
“
Specified Date
” has
the meaning set forth in
Section 3.02(a)
.
“
SPP Options
” has the
meaning set forth in
Section 2.03(e)(ii)
.
“
Stockholders’ Meeting
”
has the meaning set forth in
Section 5.14(b)
.
“
Sub
” has the meaning
set forth in the Preamble.
“
Subsidiary
” of any person
means another person, of which at least a majority of the securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons performing similar functions is owned or controlled directly
or indirectly by such first person or by one or more of its Subsidiaries.
“
Superior Proposal
” means
an unsolicited Competing Proposal (with all percentages in the definition of Competing Proposal increased to 50%) that was not
obtained or made as a result of a breach of the provisions of Section 5.03 made by any person on terms that the Company Board determines
in good faith, after consultation with the Company’s financial advisors and outside legal counsel, and considering such factors
as the Company Board considers to be appropriate, are (i) more favorable to the Company and its stockholders from a financial perspective
than the Transactions and (ii) reasonably capable of being completed in accordance with its terms.
“
Surviving Corporation
”
has the meaning set forth in
Section 1.01
.
“
Takeover Statute
” has
the meaning set forth in
Section 3.21
.
“
Tax
” and “
Taxes
”
means any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, stamp, franchise, employment, payroll, withholding, social security (or similar, including FICA),
alternative or add-on minimum or any other tax, levy, duty, governmental fee or other like assessment or charge, whether disputed
or not, together with any interest or penalty, addition to tax or additional amount imposed by any Governmental Entity.
“
Tax Return
” means any
return, report or similar statement (including schedules or attachments) filed or required to be filed with respect to any Tax
including any information return, claim for refund, amended return or declaration of estimated Tax.
“
Trade Secrets
” means
trade secrets and confidential information, including ideas, know-how, concepts, methods, processes, formulae, technology, algorithms,
models, reports, data, customer lists, supplier lists, mailing lists, business plans and other proprietary information, all of
which derive value, monetary or otherwise, from being maintained in confidence.
“
Trademarks
” means United
States, state and non-United States trademarks, service marks, trade names, designs, logos, slogans, Internet domain names and
general intangibles of like nature, and pending registrations and applications to register the foregoing.
“
Transactions
” has the
meaning set forth in the Recitals.
“
Transfer Taxes
” means
all sales, use, value added, documentary, stamp duty, registration, transfer, transfer gain, conveyance, excise, recording, license
and other similar taxes and fees, including any interest, penalties, additions to tax or additional amounts in respect of the foregoing.
“
Treasury Regulation
”
means any regulation promulgated under the Code.
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
[COMPANY]
(the “
Certificate of Incorporation
”)
First
. The
name of the corporation is [COMPANY] (the “
Corporation
”).
Second
. The
address of the Corporation’s registered office in the State of Delaware is [___________]. The name of the Corporation’s
registered agent at such address is [____________].
Third
. The
nature of the business and the objects and purposes to be conducted or promoted by the Corporation are to engage in any lawful
act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
Fourth
. The
total number of shares of stock which the Corporation shall have authority to issue is [__________] ([____]) with a par value of
$[__] per share.
Fifth
.
1.
A director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the
director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of the General Corporation Law of the State of
Delaware or (d) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law
of the State of Delaware, or any other applicable law, is amended to authorize corporation action further eliminating or limiting
the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law of the State of Delaware, or any other applicable law, as so amended. Any
repeal or modification of this Article
Fifth
, Section 1 by the stockholders
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.
2.
(a)
Each
person who has been or is made a party or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (hereinafter a “
proceeding
”), by
reason of the fact that he or she, or a person of whom he or she is the legal representative, is
or was a director
or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other enterprise, including, without limitation,
service with respect to employee benefit plans (hereinafter an “
Indemnitee
”), whether the basis of such
proceeding is an alleged action in an official capacity as a director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the General Corporation Law of the State of Delaware, or any other applicable law, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including, without limitation, attorneys’ fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such
Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators;
provided
,
however
,
that except as provided in paragraph (b) of this Article
Fifth
, Section 2
with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee
seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification
conferred in this Article
Fifth
, Section 2 shall be a contract right. In
addition to the right of indemnification, an Indemnitee shall have the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided
,
however
, that if the
General Corporation Law of the State of Delaware, or any other applicable law, requires, the payment of such expenses
incurred by an Indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such Indemnitee to repay all amounts so advanced if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under this Article
Fifth
,
Section 2 or otherwise.
(b)
If
a claim under paragraph (a) of this Article
Fifth
, Section 2 is not paid
in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or
in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not
met the standard of conduct which makes it permissible under the General Corporation Law of the State
of Delaware, or any other applicable law, for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including, without
limitation, its board of directors, stockholders or independent legal counsel) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, or any other applicable
law, nor an actual determination by the Corporation (including, without limitation, its board of directors, stockholders or
independent legal counsel) that the claimant has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable standard of conduct.
(c)
The right to indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in paragraph (b) of this Article
Fifth
,
Section 2 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision
of this Certificate of Incorporation, By–Laws, agreement, vote of stockholders or disinterested directors or otherwise.
(d)
The Corporation may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such
expense, liability or loss under the General Corporation Law of the State of Delaware, or any other applicable law.
(e)
The Corporation may, to the extent authorized from time to time by the board of directors,
grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article
Fifth
, Section 2 with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
(f)
Any repeal or modification of this Article
Fifth
,
Section 2 shall not adversely affect any right or protection of a director, officer, employee or agent of the Corporation
existing at the time of such repeal or modification.
Sixth
.
1.
The Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Fifth Amended and Restated Certificate of Corporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject to this reservation.
2.
In furtherance and not in limitation of the powers conferred by the laws of the State
of Delaware, the board of directors of the Corporation is expressly authorized to make, alter and repeal the by-laws of the Corporation.
Annex B
|
Guggenheim
Securities, LLC
330
Madison Avenue
New
York, New York 10017
GuggenheimPartners.com
|
June 29, 2017
The Board of Directors
West Marine, Inc.
500 Westridge Drive
Watsonville, CA
95076-4100
Members of the Board:
We
understand that West Marine, Inc. (“West Marine”), Rising Tide Parent Inc. (“Parent”), and Rising Tide
Merger Sub Inc. (“Merger Sub”), both of Parent and Merger Sub being affiliates of Monomoy Capital Partners, L.P. (“Monomoy”),
intend to enter into an Agreement and Plan of Merger to be dated as of June 29, 2017 (the “Agreement”), pursuant to
which Merger Sub will merge (the “Merger”) with and into West Marine, and West Marine will become a wholly owned subsidiary
of Parent. Pursuant to the Agreement, each of the issued and outstanding shares of West Marine common stock, par value $0.001
per share (the “Shares”),subject to certain exceptions, will be converted into the right to receive $12.97 in cash
(the “Merger Consideration”). The terms and conditions of the Merger are more fully set forth in the Agreement.
You
have asked us to render our opinion as to whether the Merger Consideration is fair, from a financial point of view, to holders
of the Shares (excluding (i) West Marine or any of its wholly owned subsidiaries or (ii) Parent or any of its wholly owned subsidiaries).
In
the course of performing our reviews and analyses for rendering our opinion, we have:
|
§
|
Reviewed
a draft of the Agreement dated as of June 29, 2017;
|
|
§
|
Reviewed
a draft of the Limited Guarantee dated as of June 29, 2017, made by Monomoy Capital Partners
III, L.P. in favor of West Marine;
|
|
§
|
Reviewed
copies dated as of June 29, 2017, of the debt commitment letters and the equity commitment
letter with respect to Monomoy’s contemplated financing of the Merger;
|
|
§
|
Reviewed
certain publicly available business and financial information regarding West Marine;
|
|
§
|
Reviewed
certain non-public business and financial information regarding West Marine’s business
and prospects, including certain financial projections for West Marine for the fiscal
years ended January 2018 through January 2022 (the “Projections”), all as
prepared and provided to us by West Marine’s senior management;
|
|
§
|
Discussed
with West Marine’s senior management their views of West Marine’s business,
operations, historical and projected financial results and future prospects, including
the commercial and competitive dynamics in the retail industry;
|
|
§
|
Reviewed
the historical prices, trading multiples and trading activity of the Shares;
|
|
§
|
Compared
the financial performance of West Marine and the trading multiples and trading activity
of the Shares with corresponding data for certain other publicly traded companies that
we deemed relevant in evaluating West Marine;
|
The Board of Directors
West Marine, Inc.
June 29, 2017
Page 2
|
§
|
Reviewed
the valuation and financial metrics of certain mergers and acquisitions that we deemed
relevant in evaluating the Merger;
|
|
§
|
Performed
discounted cash flow analyses based on the Projections;
|
|
§
|
Performed
illustrative sensitivity analyses to the foregoing discounted cash flow analysis based
on a range of growth and margin variables identified in consultation with West Marine’s
senior management;
|
|
§
|
Performed
illustrative leveraged buyout analyses based on the Projections; and
|
|
§
|
Conducted
such other studies, analyses, inquiries and investigations as we deemed appropriate.
|
With
respect to the information used in arriving at our opinion:
|
§
|
We
have relied upon and assumed the accuracy, completeness and reasonableness of all industry,
business, financial, legal, regulatory, tax, accounting, actuarial and other information
(including, without limitation, the Projections, other estimates and other forward-looking
information) furnished by or discussed with West Marine or obtained from public sources,
data suppliers and other third parties.
|
|
§
|
We
(i) do not assume any responsibility, obligation or liability for the accuracy, completeness,
reasonableness, achievability or independent verification of, and we have not independently
verified, any such information (including, without limitation, the Projections, any other
estimates and any other forward-looking information), (ii) express no view, opinion,
representation, guaranty or warranty (in each case, express or implied) regarding the
reasonableness or achievability of the Projections, any other estimates and any other
forward-looking information or the assumptions upon which they are based and (iii) have
relied upon the assurances of West Marine’s senior management that they are unaware
of any facts or circumstances that would make such information (including, without limitation,
the Projections, any other estimates and any other forward-looking information) incomplete,
inaccurate or misleading.
|
|
§
|
Specifically,
with respect to (i) the Projections, any other estimates and any other forward-looking
information furnished by or discussed with West Marine, (a) we have been advised by West
Marine’s senior management and we have assumed, that the Projections, other estimates
and other forward-looking information utilized in our analyses have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of West Marine’s
senior management as to the expected future performance of West Marine and the corporate
income tax rates applicable to the Projections and (b) we have assumed that such Projections,
other estimates and such other forward-looking information have been reviewed by West
Marine’s Board of Directors with the understanding that such information will be
used and relied upon by us in connection with rendering our opinion and (ii) any projections,
any other estimates and/or any other forward-looking information obtained by us from
public sources, data suppliers and other third parties, we have assumed that such information
is reasonable and reliable.
|
During
the course of our engagement, we were asked by West Marine’s Board of Directors to solicit indications of interest from
various potential strategic and private equity acquirors regarding a potential transaction with West Marine, and we have considered
the results of such solicitation process in rendering our opinion.
The Board of Directors
West Marine, Inc.
June 29, 2017
Page 3
In
arriving at our opinion, we have not performed or obtained any independent appraisal of the assets or liabilities (including any
contingent, derivative or off-balance sheet assets and liabilities) of West Marine or any other entity or the solvency or fair
value of West Marine or any other entity, nor have we been furnished with any such appraisals. We are not legal, regulatory, tax,
consulting, accounting, appraisal or actuarial experts and nothing in our opinion should be construed as constituting advice with
respect to such matters; accordingly, we have relied on the assessments of West Marine and its other advisors with respect to
such matters. West Marine's senior management has advised us that the Projections, all other estimates and all other forward-looking
information reflect the current US federal corporate income tax regime pursuant to the Internal Revenue Code of 1986, as amended;
at the direction of West Marine’s Board of Directors and senior management, we have not considered or analyzed the impacts
of any potential or proposed reform thereof in connection with our opinion and analyses. We are not expressing any view or rendering
any opinion regarding the tax consequences of the Merger to West Marine or its stockholders.
In
rendering our opinion, we have assumed that, in all respects meaningful to our analyses, (i) the final executed form of the Agreement
will not differ from the draft that we have reviewed, (ii) West Marine, Parent and Merger Sub will comply with all terms of the
Agreement and (iii) the representations and warranties of West Marine, Parent and Merger Sub contained in the Agreement are true
and correct and all conditions to the obligations of each party to the Agreement to consummate the Merger will be satisfied without
any waiver, amendment or modification thereof. We also have assumed that the Merger will be consummated in a timely manner in
accordance with the terms of the Agreement and in compliance with all applicable laws, documents and other requirements, without
any delays, limitations, restrictions, conditions, waivers, amendments or modifications (regulatory, tax-related or otherwise)
that would have an effect on West Marine or the Merger in any way meaningful to our analyses or opinion.
In
rendering our opinion, we do not express any view or opinion as to the price or range of prices at which the Shares or other securities
of West Marine may trade or otherwise be transferable at any time, including subsequent to the announcement or consummation of
the Merger.
We
have acted as a financial advisor to West Marine in connection with the Merger and will receive a customary fee for such services,
a substantial portion of which is contingent on successful consummation of the Merger. A portion of our compensation is payable
upon delivery of our opinion and will be credited against the fee payable upon consummation of the Merger. In addition, West Marine
has agreed to reimburse us for certain expenses and to indemnify us against certain liabilities arising out of our engagement.
As
previously disclosed to the Board of Directors, aside from our current engagement by West Marine, Guggenheim Securities has not
been previously engaged during the past two years by West Marine, nor has Guggenheim Securities been previously engaged during
the past two years by Monomoy, to provide financial advisory or investment banking services for which we received fees. Guggenheim
Securities may seek to provide West Marine and Monomoy and their respective affiliates with certain financial advisory and investment
banking services unrelated to the Merger in the future, for which services Guggenheim Securities would expect to receive compensation.
Guggenheim
Securities and its affiliates and related entities engage in a wide range of financial services activities for our and their own
accounts and the accounts of our and their customers, including: asset, investment and wealth management; insurance services;
investment banking, corporate finance, mergers and acquisitions and restructuring; merchant banking; fixed income and equity sales,
trading and research; and derivatives, foreign exchange and futures. In the ordinary course of these activities, Guggenheim Securities
or its affiliates and related entities may (i) provide such financial services to West Marine, Monomoy, other participants in
the Merger or their respective affiliates, subsidiaries, investment funds and portfolio companies, for which services Guggenheim
Securities or its affiliates and related entities has received, and may receive, compensation and (ii) directly or indirectly,
hold long or short positions, trade and otherwise conduct such activities in or with respect to certain bank debt, debt or equity
securities and derivative products of or relating to West Marine, Monomoy, other participants in the Merger or their respective
affiliates, subsidiaries, investment funds and portfolio companies. Furthermore, Guggenheim Securities or its affiliates and related
entities and our or their respective directors, officers, employees, consultants and agents may have investments in West Marine,
Monomoy, other participants in the Merger or their respective affiliates, subsidiaries, investment funds and portfolio companies.
The Board of Directors
West Marine, Inc.
June 29, 2017
Page 4
Consistent
with applicable legal and regulatory guidelines, Guggenheim Securities has adopted certain policies and procedures to establish
and maintain the independence of its research departments and personnel. As a result, Guggenheim Securities’ research analysts
may hold views, make statements or investment recommendations and publish research reports with respect to West Marine, Monomoy,
other participants in the Merger or their respective affiliates, subsidiaries, investment funds and portfolio companies and the
Merger that differ from the views of Guggenheim Securities’ investment banking personnel.
Our
opinion has been provided to West Marine’s Board of Directors (in its capacity as such) for its information and assistance
in connection with its evaluation of the Merger Consideration. Our opinion and any materials provided in connection therewith
may not be disclosed publicly, made available to third parties or reproduced, disseminated, quoted from or referred to at any
time, in whole or in part, without our prior written consent;
provided
,
however
, that this letter may be included
in its entirety in any proxy statement to be distributed to the holders of Shares in connection with the Merger.
Our
opinion and any materials provided in connection therewith do not constitute a recommendation to West Marine’s Board of
Directors with respect to the Merger, nor does our opinion and any materials provided in connection therewith constitute advice
or a recommendation to any holder of Shares as to how to vote or act in connection with the Merger or otherwise. Our opinion does
not address West Marine’s underlying business or financial decision to pursue the Merger, the relative merits of the Merger
as compared to any alternative business or financial strategies that might exist for West Marine, the financing of the Merger
or the effects of any other transaction in which West Marine might engage. Our opinion addresses only the fairness, from a financial
point of view and as of the date hereof, of the Merger Consideration to the holders of Shares (excluding (i) West Marine or any
of its wholly owned subsidiaries or (ii) Parent or any of its wholly owned subsidiaries). We do not express any view or opinion
as to (i) any other term, aspect or implication of (a) the Merger or the Agreement (including, without limitation, the form or
structure of the Merger) or (b) any other agreement, transaction document or instrument contemplated by the Agreement or to be
entered into or amended in connection with the Merger or (ii) the fairness, financial or otherwise, of the Merger to, or of any
consideration to be paid to or received by, the holders of any class of securities, creditors or other constituencies of West
Marine. Furthermore, we do not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature
of any compensation payable to or to be received by any of West Marine’s directors, officers or employees, or any class
of such persons, in connection with the Merger relative to the Merger Consideration or otherwise.
Our
opinion has been authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim Securities. Our opinion
is subject to the assumptions, limitations, qualifications and other conditions contained herein and is necessarily based on economic,
capital markets and other conditions, and the information made available to us, as of the date hereof. We assume no responsibility
for updating or revising our opinion based on facts, circumstances or events occurring after the date hereof.
The Board of Directors
West Marine, Inc.
June 29, 2017
Page 5
Based
on and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration is fair, from a financial
point of view, to the holders of the Shares, excluding (i) West Marine or any of its wholly owned subsidiaries or (ii) Parent
or any of its wholly owned subsidiaries.
Very truly yours,
GUGGENHEIM SECURITIES,
LLC
Annex C
APPRAISAL RIGHTS OF STOCKHOLDERS
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 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 ten 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 ten 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 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
ten 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 ten 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 ten days after such stockholder’s written request for such a statement is received by
the surviving or resulting corporation or within ten 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 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 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.
Annex D
VOTING
AND SUPPORT AGREEMENT
VOTING
AND SUPPORT AGREEMENT (this “
Agreement
”), dated as of June 29, 2017, is by and among Rising Tide Parent Inc.,
a Delaware corporation (“
Parent
”), Rising Tide Merger Sub Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent (“
Sub
”), and the Persons set forth on
Schedule I
attached hereto (“
Stockholder
”).
WHEREAS,
Stockholder is, as of the date hereof, the record and beneficial owner (for purposes of this Agreement, “beneficial owner”
(including “beneficially own” and other correlative terms) shall have the meaning set forth in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “
Exchange
Act
”)) of the number of Shares (as defined in the Merger Agreement) and Company Options (as defined in the Merger Agreement)
of West Marine, Inc., an Delaware corporation (the “
Company
”), as set forth opposite the name of Stockholder
on
Schedule I
hereto;
WHEREAS,
concurrently with the execution and delivery of this Agreement, Parent, Sub, and the Company are entering into an Agreement and
Plan of Merger, dated as of the date hereof (as may be amended, restated, supplemented or otherwise modified from time to time,
the “
Merger Agreement
”), which provides, among other things, for the merger of Sub with and into the Company
(the “
Merger
”), with the Company being the surviving entity of such Merger and a wholly-owned subsidiary of
Parent, upon the terms and subject to the conditions set forth in the Merger Agreement (capitalized terms used herein without
definition shall have the respective meanings specified in the Merger Agreement); and
WHEREAS,
as a condition to the willingness of Parent and Sub to enter into the Merger Agreement and as an inducement and in consideration
therefor, Parent and Sub have required that Stockholder, and Stockholder has agreed to, enter into this Agreement.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
SECTION
1.
Representations and Warranties of Stockholder.
Stockholder
hereby represents and warrants to Parent and Sub as follows:
|
(a)
|
As
of the time of execution of this Agreement, Stockholder (i) is the record or beneficial
owner of the Shares and/or the Company Options (together with any Shares, Company Options
or other equity securities of the Company which such Stockholder may acquire at any time
during the term of this Agreement, including pursuant to any exercise of Company Options,
the “
Stockholder Securities
”) set forth opposite Stockholder’s
name on
Schedule I
to this Agreement and (ii) except as set forth in
Schedule
I
to this Agreement, neither holds nor has any beneficial ownership interest in any
other Shares or Company Options, RSUs or other equity securities of the Company.
|
|
(b)
|
Stockholder
has the legal capacity to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
|
|
(c)
|
This
Agreement has been duly executed and delivered by Stockholder and, assuming this Agreement
constitutes a legal, valid and binding obligation of Parent and Sub, this Agreement constitutes
a legal, valid and binding obligation of Stockholder, enforceable against Stockholder
in accordance with its terms, subject to the Bankruptcy and Equity Exception.
|
|
(d)
|
Neither
the execution and delivery of this Agreement nor the consummation by Stockholder of the
transactions contemplated hereby will result in a violation of, or a default under, or
conflict with, any Contract of any kind to which Stockholder is a party or by which Stockholder
or Stockholder’s assets are bound, except for such violations, defaults or conflicts
as would not prevent or materially delay Stockholder’s performance of its obligations
under this Agreement. Assuming compliance with the applicable provisions of the HSR Act,
and assuming all notifications, filings, registrations, permits, authorizations, consents
or approvals to be obtained or made by the Company, Parent or Sub in connection with
the Merger Agreement and the transactions are obtained or made, the consummation by Stockholder
of the transactions contemplated hereby will not (i) violate any provision of any decree,
order or judgment applicable to Stockholder, (ii) require any consent, approval, or notice
under any legal requirements applicable to Stockholder, other than as required under
the Exchange Act, or (iii) if such Stockholder is an entity, violate any provision of
such Stockholder’s organizational documents, except in each case as would not prevent
or materially delay Stockholder’s performance of its obligations under this Agreement.
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(e)
|
The
Stockholder Securities and the Certificates representing the Stockholder Securities owned
by Stockholder are now, and, subject to Section 3(b), at all times during the term of
this Agreement will be, held by Stockholder or by a nominee or custodian for the benefit
of Stockholder, free and clear of all Liens, except for (i) any such Liens arising hereunder
or under the Merger Agreement and (ii) any applicable restrictions on transfer under
the Securities Act, the securities Laws of any state within the United States or pursuant
to any written policies of the Company with respect to restrictions upon the trading
of securities under applicable securities laws (collectively, “
Permitted Liens
”).
|
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(f)
|
Stockholder
has full voting power, with respect to the Shares that are Stockholder Securities, and
full power of disposition, full power to issue instructions with respect to the matters
set forth herein, and full power to agree to all of the matters set forth in this Agreement,
in each case with respect to all of the Stockholder Securities. The Stockholder Securities
are not subject to any proxy, voting trust or other agreement, arrangement or restriction
with respect to the voting of such Stockholder Securities, except as provided under this
Agreement.
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(g)
|
As
of the time of execution of this Agreement, there is no Proceeding of any nature pending
or, to the knowledge of Stockholder, threatened against Stockholder at law or equity
before or by any Governmental Entity that could reasonably be expected to prevent or
materially delay Stockholder’s performance of its obligations under this Agreement.
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(h)
|
Stockholder
has received and reviewed a copy of the Merger Agreement. Stockholder understands and
acknowledges that Parent and Sub are entering into the Merger Agreement in reliance upon
Stockholder’s execution, delivery and performance of this Agreement.
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SECTION
2.
Representations and Warranties of Parent and Sub
.
Each of Parent and Sub hereby, jointly and severally, represents and warrants to Stockholder as follows:
|
(a)
|
Each
of Parent and Sub is an entity duly organized, validly existing and in good standing
under the Laws of its jurisdiction of organization and each of Parent and Sub has the
corporate power and authority to execute and deliver and perform its obligations under
this Agreement and the Merger Agreement and to consummate the transactions contemplated
hereby and thereby, and each has taken all necessary action to duly authorize the execution,
delivery and performance of this Agreement and the Merger Agreement.
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(b)
|
This
Agreement and the Merger Agreement have been duly authorized, executed and delivered
by each of Parent and Sub, and, assuming this Agreement and the Merger Agreement constitute
legal, valid and binding obligations of the other parties hereto and thereto, constitute
the legal, valid and binding obligations of each of Parent and Sub, are enforceable against
each of them in accordance with their terms, subject to the Bankruptcy and Enforceability
Exception.
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SECTION
3.
Transfer of the Shares; Other Actions.
|
(a)
|
Prior
to the End Date, except as otherwise expressly provided herein (including pursuant to
this
Section 3
or
Section 4
) or in the Merger Agreement, Stockholder shall
not, and shall cause each of its Subsidiaries and affiliates not to: (i) directly or
indirectly transfer, assign, sell, gift-over, hedge, pledge or otherwise dispose (whether
by sale, liquidation, dissolution, dividend or distribution) of, enter into any derivative
arrangement with respect to, or create any Lien (other than Permitted Liens) on or enter
into any agreement with respect to (any of the foregoing, a “
Transfer
”),
any or all of its Stockholder Securities; (ii) enter into any contract, option or other
agreement, arrangement or understanding with respect to any Transfer; (iii) grant any
proxy, power-of-attorney or other authorization or consent with respect to any of the
Stockholder Securities with respect to any matter that is in contravention of the obligations
of Stockholder under this Agreement with respect to the Stockholder Securities; or (iv)
deposit any of the Stockholder Securities into a voting trust, or enter into a voting
agreement or arrangement with respect to any of such Stockholder Securities in contravention
of the obligations of Stockholder under this Agreement with respect to the Stockholder
Securities. Any action taken in violation of the foregoing sentence shall be null and
void
ab initio
. If any involuntary Transfer of any of the Stockholder Securities
shall occur (including, but not limited to, a sale by Stockholder’s trustee in
any bankruptcy, or a sale to a purchaser at any creditor’s or court sale), the
transferee (which term, as used herein, shall include any and all transferees and subsequent
transferees of the initial transferee) shall take and hold such Stockholder Securities
subject to all of the restrictions, liabilities and rights under this Agreement, which
shall continue in full force and effect until the End Date.
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(b)
|
Notwithstanding
the foregoing Section 3(a), any Stockholder may Transfer Stockholder Securities,
(i) if such Stockholder is an individual, (A) to any trust for the benefit of such Stockholder
or any spouse or descendant of such Stockholder for estate planning purposes and (B)
upon the death of such Stockholder, to such Stockholder’s estate, (ii) if such
stockholder is an entity, to any affiliate of such Stockholder and (iii) as Parent may
otherwise agree in writing in its sole discretion, so long as, in the case of each of
the foregoing clauses (i), (ii) and (iii), any such transferee shall agree in writing
to be bound by this Agreement as though such transferee were an original party hereto
in the capacity as a Stockholder prior to the consummation of any such Transfer.
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(c)
|
Stockholder
agrees that it will not exercise any appraisal rights available to Stockholder with respect
to the Merger in accordance with Section 262 of the DGCL.
|
SECTION
4.
Voting of Shares.
|
(a)
|
Without
in any way limiting Stockholder’s right to vote the Stockholder Securities in its
sole discretion on any other matters not set forth in
Section 4(a)(ii)
that may
be submitted to a Stockholder vote, consent or other approval, at any annual, special
or other meeting of the Company’s stockholders called or any action by written
consent in lieu of a meeting of stockholders of the Company with respect to any of the
following, and at any adjournment or postponement thereof, Stockholder (solely in Stockholder’s
capacity as a holder of the Stockholder Securities and not in any other capacity) shall,
or shall cause the holder of record on any applicable record date to, (i) appear at each
such meeting or otherwise cause all of Stockholder’s Stockholder Securities entitled
to vote to be counted as present thereat for purposes of calculating a quorum and (ii)
vote (or cause to be voted), in person or by proxy, all Stockholder Securities beneficially
owned by Stockholder and entitled to vote (A) in favor of (1) the approval of the Merger
Agreement and the approval of the Merger and the other transactions contemplated by the
Merger Agreement and (2) any other matter reasonably necessary to consummate the transactions
contemplated thereby (including the Merger), and (B) against (x) any action or agreement
which could reasonably be expected to impede, interfere with, prevent, delay or adversely
affect the Merger Agreement, the Merger or this Agreement, (y) any Competing Proposal
and (z) any action, proposal, transaction or agreement that could reasonably be expected
to result in a breach of any covenant, representation or warranty or any other obligation
or agreement of Stockholder under this Agreement.
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(b)
|
Notwithstanding
the foregoing, Stockholder shall retain at all times the right to vote the Stockholder
Securities held by it in its sole discretion and without any other limitation on those
matters other than those set forth in
Section 4(a)(ii)
that are at any time or
from time to time presented for consideration to the Company’s stockholders at
any annual, special or other meeting of the Company’s stockholders or any action
by written consent in lieu of a meeting of the Company’s stockholders.
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(c)
|
The
obligations set forth in this
Section 4
shall apply to Stockholder during the
period beginning on the date of this Agreement and ending on the End Date.
|
SECTION
5.
No Solicitation
. Subject to
Section 6
, Stockholder
covenants and agrees that, beginning on the date of this Agreement and ending on the End Date, Stockholder shall not and shall
cause its Representative not to directly or indirectly take any action that the Company is prohibited from taking under Section 5.03
of the Merger Agreement.
SECTION
6.
Directors and Officers
. Notwithstanding any provision
of this Agreement to the contrary, this Agreement shall apply to Stockholder solely in Stockholder’s capacity as a holder
of the Stockholder Securities and/or other Shares or Company Options and not in Stockholder’s or any partner, officer, employee
or affiliate of Stockholder’s capacity as a director, officer or employee of the Company or any of its Subsidiaries. Notwithstanding
any provision of this Agreement to the contrary, nothing in this Agreement shall limit or restrict any actions or omissions of
any such person in his or her capacity as a director and/or officer of the Company or any of its Subsidiaries or from fulfilling
the duties and obligations of such office, including in the exercise of his or her fiduciary duties as a director and/or officer
of the Company or any of its Subsidiaries.
SECTION
7.
Further Assurances
. Each party shall execute and
deliver any additional documents and take such further actions that are reasonably necessary to carry out all of its obligations
under the provisions hereof.
SECTION
8.
Termination.
|
(a)
|
This
Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately
and automatically, and be of no further force and effect, without any notice or other
action by any person, upon the earliest to occur of the following (the date of such termination,
the “
End Date
”):
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|
(i)
|
valid
termination of the Merger Agreement in accordance with its terms;
|
|
(iii)
|
the
mutual written consent of Parent and Stockholder; or
|
|
(iv)
|
any
change to the terms of the Merger Agreement without the prior written consent of Stockholder
that (A) reduces the Merger Consideration or any other consideration otherwise payable
with respect to the Company Options beneficially owned by Stockholder (subject to adjustments
in compliance with Section 2.01(b) of the Merger Agreement) or (B) changes the form of
consideration payable in the Merger or any consideration otherwise payable with respect
to the Shares or Company Options beneficially owned by Stockholder;
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|
(b)
|
Upon
termination of this Agreement, all obligations of the parties hereto under this Agreement
will terminate, without any liability or other obligation on the part of any party hereto
to any person in respect hereof or the transactions contemplated hereby, and no party
hereto shall have any claim against another (and no person shall have any rights against
such party), whether under contract, tort or otherwise, with respect to the subject matter
hereof,
provided however
, that the termination of this Agreement shall not relieve
any party hereto from liability for any willful misrepresentation or willful and material
breach of this Agreement, in each case prior to such termination.
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|
(c)
|
Sections
8(b)
,
9
and
12
hereof shall survive the termination of this Agreement.
|
SECTION
9.
Expenses
. All fees and expenses incurred in connection
with the negotiation and execution of 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.
SECTION
10.
Public Announcements
. Stockholder shall not make public announcements regarding
this Agreement and the transactions contemplated hereby that are inconsistent with the public statements made by the Company and
Parent in connection with this Agreement, the Merger Agreement and the transactions contemplated thereby, without the prior written
consent of Parent. Stockholder (i) consents to and authorizes (x) the publication and disclosure by the Company, Parent and their
respective affiliates of its identity and beneficial ownership of the Stockholder Securities and the nature of its commitments,
obligations, arrangements and understandings under this Agreement in the Proxy Statement, any current report of the Company on
Form 8-K and any other documents required to be filed with the SEC or other Governmental Entity; provided that, Parent shall provide
Stockholder and its counsel reasonable opportunity to review and comment thereon, and Parent shall give reasonable consideration
to any such comments and (y) the filing by the Company, Parent and their respective affiliates of this Agreement as an exhibit
to the extent required to be filed with the SEC or any Governmental Entity relating to the Merger, and (ii) agrees to promptly
give to the Company and Parent any information they may reasonably require for the preparation of any such disclosure documents.
Parent consents to and authorizes the publication and disclosure by Stockholder of the nature of its commitments and obligations
under this Agreement in connection with the Merger in any Form 4, Schedule 13D, Schedule 13G or other disclosure required by the
SEC or other Governmental Entity to be made by Stockholder in connection with the Merger.
SECTION
11.
Adjustments
. In the event (a) of reclassification, stock split (including
a reverse stock split), combination, stock dividend or distribution, recapitalization, subdivision, merger, issuer tender or exchange
offer, or other similar transaction or (b) that Stockholder shall become the beneficial owner of any additional Shares or Company
Options, then the terms of this Agreement shall apply to the Shares or Company Options held by Stockholder immediately following
the effectiveness of the events described in clause (a) or Stockholder becoming the beneficial owner thereof as described in clause
(b), as though, in either case, they were Stockholder Securities hereunder. In the event that Stockholder shall become the beneficial
owner of any other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in
Section
4(a)(ii)
hereof, then the terms of
Section 4
hereof shall apply to such other securities as though they were Stockholder
Securities hereunder.
SECTION
12.
Miscellaneous
.
(a)
Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given
(and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile or e-mail or by registered or certified
mail (postage prepaid, return receipt requested and providing proof of delivery) to the respective parties hereto at the following
addresses, facsimile numbers or email addresses as follows (or at such other address, facsimile number or email address for a
party as shall be specified by like notice):
If
to Stockholder, to
:
c/o West Marine, Inc.
500 Westridge Drive
Watsonville, California 95076
|
Attention:
|
Randolph K. Repass
|
|
Email:
|
As separately provided
|
If to Parent or
Sub, to
:
c/o
Monomoy Capital Partners III, L.P.
142
West 57th Street, 17th Floor
New
York, NY 10019
|
Attention:
|
Daniel Collin
|
|
|
Lee Mlotek
|
|
E-mail:
|
dcollin@mcpfunds.com
|
|
|
lmlotek@mcpfunds.com
|
with
a copy to (which shall not constitute notice):
Kirkland
& Ellis LLP
601 Lexington Avenue
New York, NY 10022
|
Attention:
|
Michael Weisser,
P.C.
|
|
|
David Feirstein
|
|
Facsimile:
|
(212) 446-6460
|
|
E-mail:
|
michael.weisser@kirkland.com
|
|
|
david.feirstein@kirkland.com
|
(b)
Headings
. The descriptive headings contained in this Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement.
(c)
Counterparts
. This Agreement may be executed and delivered (including by facsimile transmission, “.pdf,”
or other electronic transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
(d)
Entire Agreement, No Third-Party Beneficiaries
. This Agreement (i) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral,
among or between any of the parties hereto, with respect to the subject matter hereof and (ii) is not intended to, nor shall it,
confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.
(e)
Governing Law, Jurisdiction
. This Agreement shall be governed and construed in accordance with the Laws of the State
of Delaware, without regard to any conflicts of laws principles that would result in the application of the Law of any other state
or jurisdiction. Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related
to this Agreement, the Merger Agreement or the transactions contemplated hereby or thereby exclusively in the Delaware Court of
Chancery (or, if the Delaware Court of Chancery shall be unavailable, any other court of the State of Delaware or any Federal
court sitting in the State of Delaware) and, solely in connection with claims arising under this Agreement, the Merger Agreement
or the transactions contemplated hereby or thereby, (i) irrevocably submits to the exclusive jurisdiction of such court, (ii)
waives any objection to laying venue in any such action or proceeding in such court, (iii) waives any objection that such court
is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such party
in any such action or proceeding will be effective if notice is given in accordance with
Section 12(a)
.
(f)
Waiver of Jury Trial
. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT
OR THE MERGER AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY SUIT, ACTION OR OTHER PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 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 SUIT, ACTION
OR OTHER PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 12(f)
.
(g)
Assignment
. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent
of each of the other parties hereto, and any assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective
successors and permissible assigns.
(h)
Severability of Provisions
. If any term or other provision of this Agreement is found by a court of competent jurisdiction
to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party hereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties hereto as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent possible.
(i)
Specific Performance
. The parties hereto agree that irreparable damage for which monetary damages, even if available,
would not be an adequate remedy would occur in the event that the parties hereto do not perform the provisions of this Agreement
(including any party hereto failing to take such actions as are required of it hereunder in order to consummate the transactions
contemplated by this Agreement) in accordance with its specified terms or otherwise breach such provisions. The parties hereto
acknowledge and agree that, (i) the parties hereto will be entitled, in addition to any other remedy to which they are entitled
at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches)
of this Agreement and to enforce specifically the terms and provisions hereof; and (ii) the right of specific enforcement
is an integral part of the Agreement and without that right, Parent would not have entered into this Agreement. It is accordingly
agreed that each party hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity and any party hereto seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement will not be required to provide any bond or other security in connection
with such injunction or enforcement, and each party hereto irrevocably waives any right that it may have to require the obtaining,
furnishing or posting of any such bond or other security.
(j)
Amendment
. No amendment or modification of this Agreement shall be effective unless it shall be in writing and signed
by each of the parties hereto, and no waiver or consent hereunder shall be effective against any party unless it shall be in writing
and signed by such party.
(k)
Binding Nature
. This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit
of, the parties hereto and their respective successors and permitted assigns.
(l)
No Recourse
. Parent and Sub agree that Stockholder will not be liable for claims, losses, damages, expenses and
other liabilities or obligations resulting from or related to the Merger Agreement or the Merger (other than any liability for
claims, losses, damages, expenses and other liabilities or obligations solely to the extent arising under, and in accordance with
the terms of, this Agreement), including the Company’s breach of the Merger Agreement.
(m)
No Presumption
. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
(n)
No Agreement Until Executed
. This Agreement shall not be effective unless and until (i) the Merger Agreement is
executed by all parties thereto and (ii) this Agreement is executed by all parties hereto.
(o)
No Ownership Interest
. Except as otherwise specifically provided herein, nothing contained in this Agreement shall
be deemed to vest in Parent or Sub any direct or indirect ownership or incidence of ownership of or with respect to the Stockholder
Securities. All rights, ownership and economic benefits of and relating to the Stockholder Securities shall remain vested in and
belong to Stockholder, and neither Parent nor Sub shall have any authority to manage, direct, restrict, regulate, govern, or administer
any of the policies or operations of the Company or exercise any power or authority to direct Stockholder in the voting of any
of the Stockholder Securities, except as otherwise specifically provided herein.
[Signature
pages follow]
IN
WITNESS WHEREOF, Parent, Sub and Stockholder have caused this Agreement to be duly executed and delivered as of the date first
written above.
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RISING TIDE
PARENT INC.
|
|
|
|
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By:
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|
|
Name:
|
|
|
Title:
|
|
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|
|
|
|
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RISING TIDE
MERGER SUB INC.
|
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|
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By:
|
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Name:
|
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Title:
|
IN
WITNESS WHEREOF, Parent, Sub and Stockholder have caused this Agreement to be duly executed and delivered as of the date first
written above.
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