Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On January 7, 2017, VCA Inc., a
Delaware corporation (the Company), entered into an Agreement and Plan of Merger (the Merger Agreement) with MMI Holdings, Inc., a Delaware corporation (Acquiror), Venice Merger Sub Inc., a Delaware corporation
and wholly owned subsidiary of Acquiror (Venice Merger Sub), and, solely for purposes of Section 9.15 of the Merger Agreement, Mars, Incorporated, a Delaware corporation (Mars).
The Merger Agreement provides, among other things, that, subject to the terms and conditions set forth therein, at the effective time of the Merger (the
Effective Time), (1) Venice Merger Sub will be merged with and into the Company (the Merger), with the Company continuing as the surviving corporation and wholly owned subsidiary of Acquiror, and (2) each share of
common stock, par value $0.001 per share (Common Stock), of the Company issued outstanding immediately prior to the Effective Time (other than shares owned by the Company, any of the Companys subsidiaries, Mars, Acquiror or Venice
Merger Sub, or by stockholders who have properly exercised and perfected appraisal rights under Delaware law) will be cancelled and automatically converted into the right to receive $93.00 in cash, without interest (the Merger
Consideration).
Pursuant to the Merger Agreement, as of the Effective Time, (1) each option to purchase shares of the Companys Common
Stock (each, a Company Option) that is outstanding and unexercised as of the Effective Time (whether vested or unvested) shall be converted into the right to receive an amount in cash equal to the product of (i) the total number of
shares of Common Stock subject to such Company Option and (ii) the excess, if any, of the Merger Consideration over the exercise price per share of Common Stock set forth in such Company Option, (2) each award of restricted stock units
outstanding immediately prior to the Effective Time (whether subject to service-based or performance-based vesting or delivery requirements) shall fully vest as to the number of shares of Common Stock issuable pursuant to such restricted stock unit
(including, with respect to performance-based restricted stock units, upon attainment of any target level of performance applicable to such restricted stock unit) and become free of any vesting, forfeiture or other restriction and shall entitle the
holder thereof to receive an amount in cash equal to the product of (i) the number of shares of Common Stock issuable pursuant to such restricted stock unit and (ii) the Merger Consideration, and (3) each share of the Companys
restricted stock outstanding immediately prior to the Effective Time shall vest and become free of any vesting, forfeiture or other restrictions and shall entitle the holder thereof to receive an amount in cash equal to the Merger Consideration;
provided, however, that the restricted stock shares that were granted in 2016 and that do not vest by their terms on or prior to December 31, 2017 or, if later, the Effective Time (the Unvested Proceeds) will vest and be paid to
such holder, together with an additional amount equal to the Unvested Proceeds, on the first anniversary of the date of Closing (the Closing Date) if such holder satisfied the vesting conditions for the underlying award (determined as if
the vesting date was no earlier than the first anniversary of the Closing Date); provided, further, that any such holder who is employed as of the Closing Date, whose employment to the Company or any of its subsidiaries terminates as a result of his
or her death prior to the first anniversary of the Closing Date will be treated as having satisfied the vesting conditions for the underlying award and such holders surviving spouse or designated beneficiary will be entitled to payment of the
Unvested Proceeds, together with an additional amount equal to the Unvested Proceeds, no later than the first regularly scheduled payroll date that is at least three business days after the Company receives satisfactory proof of the holders
death.
The Board of Directors of the Company (the Board) has unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Merger.
The closing of the Merger (the Closing) is subject to the adoption of the Merger Agreement by the affirmative
vote of the holders of a majority of the issued and outstanding shares of common stock of the Company (the Company Stockholder Approval). The closing of the Merger is also subject to other customary conditions, including (1) the
absence of any order or law that prohibits, enjoins or makes illegal the consummation of the Merger, (2) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and receipt of all other clearances or approvals under other applicable antitrust laws, (3) the accuracy of the representations and warranties contained
in the Merger Agreement (subject to certain materiality and material adverse effect qualifications) and compliance with the covenants and agreements in the Merger Agreement in all material respects by the parties to the Merger Agreement, and
(4) in the case of Acquiror and Venice Merger Sub, the absence of a material adverse effect relating to the Company.
The closing of the Merger is
not subject to a financing condition. Acquiror and Venice Merger Sub represented to the Company in the Merger Agreement that they will have sufficient funds at the closing of the Merger to pay all cash amounts required to be paid by Acquiror and
Venice Merger Sub under, or in connection with, the Merger Agreement, including to fund the aggregate Merger Consideration. Pursuant to the terms of the Merger Agreement, Mars has provided a limited guarantee of the covenants, agreements and other
obligations of Acquiror and Venice Merger Sub (including the obligation to fund the aggregate Merger Consideration).
The Company has made customary
representations, warranties and covenants in the Merger Agreement, including, among others, covenants (1) to conduct its business in the ordinary course and consistent with past practice during the period between the execution of the Merger
Agreement and the closing of the Merger, (2) not to engage in specified types of transactions (subject to specified exceptions) during this period unless agreed to in writing by Acquiror, (3) to convene and hold a meeting of its
stockholders for the purpose of obtaining the Company Stockholder Approval and (4) subject to certain exceptions, not to change, qualify, withhold, withdraw or modify in a manner adverse to Acquiror the recommendation of the Board that the
Companys stockholders adopt the Merger Agreement.
The Merger Agreement also requires the Company to abide by customary
no-shop
restrictions on its ability to solicit alternative acquisition proposals from third parties or to provide
non-public
information to, and enter into
discussions or negotiations with, third parties regarding alternative acquisition proposals.
Each of the Company, Acquiror and Venice Merger Sub has
agreed to use their respective reasonable best efforts to take all necessary action to (1) submit all notifications and obtain all clearances, consents, approvals, orders or authorizations of any governmental entity under applicable antitrust
laws, necessary for the Closing, (2) provide to any governmental entity information requested by such entity in connection with the Merger Agreement and (3) contest and defend any objections that may be asserted by any governmental entity
to avoid entry of an order that would prevent the Closing.
The Merger Agreement contains certain termination rights, including the right of the Company
to terminate the Merger Agreement to accept a superior acquisition proposal from a third party, and provides that, upon termination of the Merger Agreement by the Company or Acquiror under certain circumstances (including, among other circumstances,
a change of the Boards recommendation to stockholders in favor of the Merger), a termination fee of $275,000,000 will be payable by the Company.
Each of the Company and Acquiror will be permitted to terminate the Merger Agreement if the closing conditions set forth therein have not been satisfied as of
October 6, 2017 (the Outside Date). However, such Outside Date may be extended by either party to January 5, 2018, and may be further extended by Acquiror to April 6, 2018, in each case, if all closing conditions (other
than the closing conditions that (x) all clearances and approvals under applicable antitrust laws have been received and (y) there be no order by any governmental authority, or pending litigation by any governmental authority seeking an order, to
prohibit, enjoin or make illegal the Merger under applicable antitrust laws) have been satisfied prior to the Outside Date (as extended, if applicable); provided, that the closing condition that there be no pending litigation by any governmental
authority seeking an order to prohibit, enjoin or make illegal the Merger under applicable antitrust laws will be deemed to have been satisfied 10 business days prior to the Outside Date (as extended, if applicable).
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this Current Report on Form
8-K
and is incorporated herein by reference.
The Merger Agreement has been included as an exhibit to this Current Report on Form
8-K
to provide investors with
information regarding its terms. It is not intended to provide any other factual information about the Company. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement as of
the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of
allocating contractual risk among the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to
investors. Stockholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or
affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Companys public
disclosures.
Indemnification Agreement
On
January 7, 2017, the Board approved a form of indemnification agreement (the Indemnification Agreement) and authorized the Company to enter into the Indemnification Agreement with each of its directors and certain of its executive
officers (each, an Indemnitee).
The Indemnification Agreement clarifies and supplements the indemnification rights and obligations of the
Indemnitee and Company already included in the Companys Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (as defined below). Under the terms of the Indemnification Agreement, the Company, among other things,
will indemnify each director and officer for certain losses or expenses including attorneys fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding (other than certain proceedings against the
Company or securities laws claims), including any action by or in the Companys right, arising out of the persons services as the Companys director or officer or any other company or enterprise, including the Companys
subsidiaries, to which the person provides services at the Companys request.
The foregoing description of the Indemnification Agreement does not
purport to be complete and is qualified in its entirety by reference to the form of Indemnification Agreement, which is filed as Exhibit 10.1 to this Current Report on Form
8-K
and is incorporated herein by
reference.