THE MERGER (PROPOSAL 1)
General
If the merger agreement is adopted by AquaVenture's shareholders and all other conditions to the closing of the merger are either satisfied or
waived, Merger Sub will be merged with and into the Company with the Company being the surviving company in the merger and continuing as a subsidiary of Parent. Upon the completion of the merger, each
ordinary share of issued and outstanding immediately prior to the effective time of the merger (other than shares held by
AquaVenture in treasury, or owned by Parent or Merger Sub or held by shareholders who are entitled to dissent and who properly exercise dissenter's rights in accordance with the BVI Act) will be
converted into the right to receive $27.10 in cash, without interest and less any applicable withholding taxes.
Our
ordinary shares are currently registered under the Exchange Act and are quoted on the NYSE under the symbol "WAAS." As a result of the merger, the Company will cease to be a
publicly-traded company and will become a subsidiary of Parent. Following the completion of the merger, the registration of our ordinary shares and our reporting obligations under the Exchange Act
will be terminated. In addition, upon the completion of the merger, our ordinary shares will no longer be listed on any stock exchange or quotation system, including the NYSE.
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. The
following chronology does not purport to catalogue every conversation among the board of directors, the special committee, members of Company management or the representatives of the Company and other
parties.
AquaVenture
is a multinational provider of WAAS solutions that provide its customers with a reliable and cost-effective source of clean drinking water, process water and wastewater
treatment and water reuse solutions primarily under long term contracts that minimize capital investment by the customer. The Company delivers its WAAS solutions through two operating platforms: Seven
Seas Water and Quench. Seven Seas Water is a multinational provider of desalination, wastewater treatment and water reuse solutions to governmental, municipal (including utility districts),
industrial, property developer and hospitality customers. Quench is a U.S. based provider of POU filtered water systems and related services through direct and indirect sales channels to approximately
55,000 institutional and commercial customers, including more than half of the Fortune 500, throughout the United States and Canada.
The
board of directors and management periodically review and revise the Company's long-term strategy and objectives in light of developments in the markets in which it operates. As part
of these reviews, the directors consider the Company's business, including developments and the opportunities and challenges associated with implementing its long-term strategic plans.
Over
the past several years, the Company has from time to time been approached by other operating businesses and financial sponsors who were interested in discussing a potential
acquisition of the Company or either its Seven Seas Water or Quench business. In certain situations, the Company entered into confidentiality agreements, provided information and held discussions
regarding potential
transactions. In each case, the board of directors considered the approaches in the context of the Company's long-term strategy and developments in the markets in which it operates.
On
July 20, 2019, management was contacted by representatives of Party A, a financial sponsor, that indicated that it might have an interest in pursuing a strategic transaction
with the Company and that it wanted access to certain information to better understand the Company's businesses and strategies. On July 25, 2019, management had an introductory call with
representatives of Party A,
24
Table of Contents
during
which management informed Party A that it would need to enter into a confidentiality agreement before it would be provided access to additional information.
On
August 5, 2019, a meeting was held in which members of the board of directors and management participated. During this meeting, the directors, with input from management,
discussed, among other matters, that the Company had received over the last few months inbound interest from multiple parties, including the inquiry from Party A. Management informed the directors
that the Company, in the ordinary course, spoke with such parties and provided limited information to enable them to better understand the Company's businesses and strategies. Following discussion,
management noted to the directors that the Company was seeking to finalize a confidentiality agreement with Party A and provide Party A with access to limited confidential information concerning the
Company's business.
On
August 12, 2019, the Company executed a confidentiality agreement with Party A that contained a standstill provision that would automatically terminate upon, among other
things, the entry by the Company into a binding definitive agreement with any third party providing for a sale of the Company.
On
August 21, 2019, management met with representatives of Party A to discuss the Company's business.
On
September 12, 2019, Party A called to inform Mr. Anthony Ibarguen, the Company's Chief Executive Officer and President, that it was interested in pursuing a non-binding
proposal to acquire all of the Company's outstanding ordinary shares for $24.00 per share in cash.
On
September 13, 2019, Party A called to inform Mr. Ibarguen that it would need two to three weeks to conduct additional diligence, after which it would seek exclusivity to
perform additional confirmatory due diligence and negotiate the terms and conditions of a potential acquisition of the Company.
On
September 19, 2019, the board of directors held a meeting, in which members of management and representatives of Goodwin Procter LLP, AquaVenture's outside legal counsel
("Goodwin"), participated. During this meeting, management informed the board of directors of Party A's interest in pursuing a potential acquisition of the Company, including the proposed $24.00 per
share cash price, its need of two to three weeks to conduct additional diligence and its desire for exclusivity during which it would conduct further confirmatory due diligence and negotiate the terms
and conditions of a potential acquisition. Counsel discussed the need for confidentiality and the directors' fiduciary duties. Management also updated the directors on the status of various matters
relating to the Company and its business, and reviewed the other parties that had over time inquired about entering into discussions regarding a potential acquisition of the Company or either its
Seven Seas Water or Quench business. The board of directors authorized management to advise Party A that $24.00 per share was not sufficient to provide exclusivity and to provide Party A with certain
limited additional information to enable Party A to increase its proposed valuation. The board of directors also authorized management to contact third parties who had previously approached the
Company to express an interest in discussing a potential acquisition of the Company or either its Seven Seas Water or Quench business about their potential interest in acquiring the entire company.
From
the last week of September through early October 2019, as authorized by the board of directors, management contacted third parties who had previously approached the Company to
express an interest in discussing a potential acquisition of the Company or either its Seven Seas Water or Quench business. Also during this period, as instructed by the board of directors, the
Company negotiated confidentiality agreements with the third parties that had expressed an interest in receiving further information about the Company. The Company entered into confidentiality
agreements with eight potentially interested parties. Confidentiality agreements with two other parties, including
25
Table of Contents
Party A,
were already in existence. Each of the confidentiality agreements contained a standstill provision that would terminate upon, among other things, the entry by AquaVenture into a
binding definitive agreement with any third party providing for a sale of the Company.
On
September 30, 2019, the board of directors held a meeting in which members of management also participated. During this meeting, the board of directors discussed AquaVenture's
business and general market conditions, including the trends in the industry. The Board also discussed the status of Party A's interest as well as the initial interest of the additional parties
contacted by management since the September 19th board of directors meeting. Following discussion, the board of directors determined that Party A's proposal was still not
sufficiently attractive from a financial point of view to sell the Company, but that the possibility of improving the economic terms of Party A's proposal, together with information from the recent
discussions with the other parties that had been contacted, warranted continued additional discussions with the additional parties to learn more about the potential value of the Company to be realized
in such a strategic transaction.
Also
at the September 30th meeting, the board of directors discussed the potential that the Company might receive proposals from financial sponsors, including
Party A, and the potential that certain shareholders with representatives on the board of directors may have interests that differ from AquaVenture's other shareholders. As a result, the board of
directors determined that it would be advisable to form a special committee of independent and disinterested directors to evaluate any such offers and to consider the Company's strategic
alternatives to remaining an independent public company. Following this discussion, the board of directors established a special committee (the "special committee") that was authorized to consider and
evaluate any proposals that might be received by the Company regarding a potential strategic transaction, participate in and direct the negotiation of the material terms and conditions of any such
transaction and recommend to the board of directors the advisability of entering into any such transaction or pursuing another strategic alternative. The special committee consisted of Hugh Evans (who
was designated as the Chair), Debra Coy, Paul Hanrahan, Richard F. Reilly and Timothy J. Whall. Throughout the special committee's evaluation of a potential sale of the Company, the special committee
conducted formal meetings, to which other directors were invited to attend, and had regular discussions with the Company's management and advisors and among themselves. The special committee on a
number of occasions also met in executive session with only the independent directors and at times counsel present. In addition, Hugh Evans, Chair of the special committee, would receive updates from
the Company's management, financial advisors and outside counsel. Also at that meeting, the board of directors authorized the special committee to cause the Company to engage a financial advisor.
On
October 2, 3 and 4, 2019, the special committee held meetings to consider the qualifications and formal engagement of a financial advisor. At the
October 4th meeting, the special committee authorized the engagement of both Citi and UBS as its financial advisors and directed management, with the involvement of Goodwin
and Mr. Evans, to negotiate appropriate engagement letters with Citi and UBS consistent with terms discussed with the special committee.
Throughout
early and mid-October, AquaVenture management, Citi and UBS held discussions with nine third parties. During this period, the Company also provided Party A and the seven other
interested parties that had entered into confidentiality agreements access to a limited amount of additional information about the Company and its businesses in an effort to enable them to provide the
Company with indications of the values at which they may be interested in pursuing a transaction with the Company (the ninth third party with whom preliminary discussions had been held decided not to
proceed further prior to receiving a confidentiality agreement).
On
October 8, 2019, Party A reiterated its non-binding proposal of $24.00 per share in cash.
On
October 14, 2019, AquaVenture entered into engagement letters with each of Citi and UBS consistent with terms discussed with the special committee.
26
Table of Contents
On
October 14, 2019, a bid process letter was distributed by Citi and UBS to eight interested parties (consisting of four strategic parties, including Culligan, and four financial
sponsors). The process letter requested that the interested parties submit preliminary indications of interest by October 23, 2019 regarding a potential acquisition of 100% of the outstanding
ordinary shares of AquaVenture in a single transaction.
On
October 15, 2019, the special committee held a meeting, in which other directors, members of management and representatives of Citi, UBS and Goodwin participated. During this
meeting, the special committee was provided an update regarding the parties that had entered into confidentiality agreements, the continuing discussions with Party A and the distribution of the bid
process letter.
Before
October 23, 2019, eight interested parties attended meetings or teleconferences with AquaVenture management to discuss AquaVenture's business.
On
October 23, 2019, AquaVenture's financial advisors received eight preliminary indications of interest: five parties (Party A, Culligan, and three other financial sponsors
referred to as Party B, Party C and Party D) submitted indications of interest to acquire AquaVenture as a whole, and three strategic companies (Party E, Party F and Party
G) submitted indications of interest to acquire the Quench business only. Two of the parties that submitted indications of interest to acquire AquaVenture as a whole also separately informed
the financial advisors that they were primarily interested in the Seven Seas Water business.
On
October 25, 2019, the special committee held a meeting in which other directors, members of management and representatives of Citi, UBS and Goodwin also participated.
Representatives of Citi and UBS updated the special committee on their recent activities on behalf of the Company and noted that they had engaged with nine interested parties, which included both
strategic and financial parties. They discussed the parties they had contacted, the interested parties and the management meetings that had been held to date. They then further detailed the eight
preliminary indications of interest they had received and discussed for each the key assumptions, expected sources of financing, implied enterprise value (or value of the Quench business for the
parties that submitted indications of interest with respect to the Quench business only), implied premia and implied valuation multiples, proposed timing to signing, key due diligence areas, key
approvals needed and form of consideration. The following summarizes the preliminary indications of interest that were received:
-
-
Party A proposed to acquire 100% of the issued and outstanding ordinary shares of AquaVenture for $24.00 per share;
-
-
Culligan proposed to purchase 100% of the issued and outstanding ordinary shares of AquaVenture for a range of $25.50 to $27.00 per share;
-
-
Party B proposed to purchase 100% of the issued and outstanding ordinary shares of AquaVenture for a range of $21.31 to $22.28 per share;
-
-
Party C proposed to purchase 100% of the issued and outstanding ordinary shares of AquaVenture for $23.00 per share;
-
-
Party D proposed to purchase 100% of the issued and outstanding ordinary shares of AquaVenture for $20.00 per share;
-
-
Party E proposed to purchase the Quench business for $550.0 million, subject to certain adjustments;
-
-
Party F proposed to purchase the Quench business for $375.0 million; and
-
-
Party G proposed to purchase the Quench business for a range of $500.0 to $550.0 million.
27
Table of Contents
Party
C and Party D also had separately informed the financial advisors that they would also be interested in acquiring the Seven Seas Water business only for $600.0 million and
$430.0 million, respectively.
At
the October 25th meeting, the special committee engaged in discussion with representatives of each of Citi and UBS regarding the financial aspects of each
of the preliminary indications of interest. Representatives of Goodwin discussed the directors' fiduciary duties. Representatives of Citi and the special committee noted that Party C and Party D had
indicated that they were principally interested in only the Company's Seven Seas Water business, and that the Company had received three proposals specifically for only the Quench business. In light
of the interest of various parties in acquiring the separate businesses and the potential to realize a higher value for shareholders from such transactions, the special committee discussed whether it
would be appropriate at some point to specifically permit parties to bid for only the Seven Seas Water or Quench business. The special committee, however, was of the view that a sale of the entire
Company was preferable given the added complexities, costs and execution risks associated with concurrent separate sales of both the Seven Seas Water and Quench businesses. The special committee
concluded that selling only one of the two businesses was not an attractive alternative, expressing the concern that doing so would leave a smaller publicly traded company that would have to bear the
full public company costs and may not be attractive to investors. The special committee also discussed pairing, at an appropriate time, parties who were interested in acquiring only one of the
businesses with those interested in acquiring the other business. After discussion, the special committee determined that the preliminary indications of interest received from Culligan, Party C, Party
E and Party G were sufficiently attractive from a financial point of view to warrant continued discussions with those parties. The special committee also decided to provide additional information and
access to management to those parties and to request that they submit more refined indications of interest, including specific proposed prices, for the acquisition of the entire company. The special
committee agreed to hold another meeting on the next day to further discuss how to move forward before finalizing its directions to management and its advisors.
On
October 26, 2019, the special committee held a meeting in which other directors and management also participated. The special committee further discussed the information
received in the prior meeting regarding the preliminary indications of interest. The special committee determined to proceed further with Culligan, Party C, Party E and Party G and instructed Citi and
UBS to communicate such information to the interested parties.
From
October 26, 2019 through December 22, 2019, the parties that remained in the process were provided access to additional diligence materials.
Between
October 26 and 30, 2019, representatives of Citi informed Party A, Party B, Party D and Party F that they would no longer be invited to continue in the process without an
increased offer price. Each of these parties informed Citi that it would no longer be participating in the process.
On
November 3, 2019, the special committee held a meeting in which other directors, members of management and representatives of Citi, UBS and Goodwin also participated.
Representatives of Citi and UBS updated the special committee on their recent activities on behalf of the Company, their discussions with the parties who were no longer participating in the process,
and the parties that remained in the process, including a discussion of the due diligence activities and management's participation in those activities. The special committee again discussed whether
it would be appropriate at some point to specifically permit parties to submit proposals to acquire only the Seven Seas Water or Quench business, particularly in light of Party C's indication in
conversations with representatives of Citi that it was primarily interested in the Seven Seas Water business and the proposals by Party E and Party G to acquire only the Quench business. The special
committee also discussed the transaction process, including the processes for obtaining revised indications of interest and for implementing a transaction after signing.
28
Table of Contents
Between
November 8 and 19, 2019, the remaining interested parties attended meetings and teleconferences with management to discuss AquaVenture's businesses and to continue their
diligence on the Company. Representatives of Citi, UBS or both participated in these meetings and teleconferences.
On
November 14, 2019, a representative from Citi spoke with a representative from Culligan and indicated that Culligan would need to provide a specific price instead of a price
range in order for AquaVenture to further consider a potential combination with Culligan.
Between
November 14 and 16, 2019, representatives of Citi also contacted each of Party C, Party E and Party G and indicated that each such party needed to increase its price from
the price stated in its respective preliminary indication of interest.
On
November 11, 2019, a financial sponsor, referred to as Party H, submitted to Citi an unsolicited non-binding proposal to acquire the Seven Seas Water business for
$650.0 million in cash. After discussions with AquaVenture management in which Party H confirmed that it was prepared to move expeditiously to complete due diligence and negotiate and enter
into a definitive transaction agreement, Party H was invited to participate in the process. On November 12, 2019, Party H executed a confidentiality agreement with AquaVenture that contained a
standstill provision that would terminate
upon, among other things, the entry by AquaVenture into a binding definitive agreement with any third party providing for a sale of the Company.
On
November 14, 2019, at the direction of the special committee and following review and comment by management and AquaVenture's advisors, bid process letters were sent by
representatives of Citi and UBS to Culligan, Party C, Party E, Party G and Party H, in each case requesting that the party submit a revised indication of interest by November 20, 2019. The
process letter sent to Culligan requested a revised indication of interest regarding a potential acquisition of 100% of the outstanding ordinary shares of AquaVenture in a single transaction. The
process letters sent to Party C, Party E, Party G and Party H invited indications of interest in either the Seven Seas Water or Quench business that might be used to facilitate a potential partnership
between parties that expressed interest in the separate businesses. The purpose of such partnership would be to allow the parties to enter into such arrangements as are necessary to enable them to
submit a proposal to acquire 100% of the Company's outstanding ordinary shares in a single transaction.
On
November 18, 2019, Party C submitted a revised proposal that contemplated an acquisition of the Seven Seas Water business for a purchase price of $525.0 million. The
proposal contemplated that Party C would finance the purchase price through a combination of equity and debt financing. Party C's proposal sought an agreement from the Company to negotiate exclusively
with Party C through December 19, 2019.
On
November 20, 2019, the special committee held a meeting in preparation for the anticipated receipt of revised indications of interest later that day. Other directors,
management and representatives of Citi, UBS and Goodwin also participated in the meeting. Representatives of Citi and UBS updated the special committee with respect to the activities undertaken with
each of the parties that were expected to submit revised proposals. The special committee reviewed the prior proposals made by each of Culligan, Party C, Party E and Party G, and discussed the revised
proposal received from Party C on November 18, as well as the initial proposal received from Party H on November 11. The special committee also discussed various structuring
considerations relating to separate concurrent sales of the Seven Seas Water and Quench businesses, including the additional complexity and execution risk and financial considerations related to
conditioning the closing of each sale on the other, potential costs to be borne by the Company, tax structuring considerations and the additional complexities of liquidating and winding down the
Company following such sales. In addition, the special committee discussed and considered the Company's stand-alone business plan and prospects, including the methodology used to create the financial
projections, the assumptions underlying the financial
29
Table of Contents
projections
and the perceived challenges and risks associated with the Company's ability to meet the financial projections, including, among other things, the challenges of making acquisitions at
attractive prices and generating organic growth in the Company's businesses. Following discussion, the special committee approved the financial projections provided by management, including the
methodology and
assumptions, for use by Citi and UBS in their respective analyses. See the section entitled "Projected Financial Information" for further
information regarding the "financial projections."
Later
on November 20, 2019, AquaVenture received a revised indication of interest from Culligan, proposing to acquire 100% of AquaVenture's issued and outstanding ordinary shares
for $26.25 per share, and providing that Culligan would be prepared to complete due diligence within approximately two weeks. Culligan's proposal provided for the merger consideration to be funded
with the proceeds from a combination of debt financing from various lenders and equity financing from Culligan's principal equity investors.
Also
on November 20th, proposals for the separate acquisitions of the Seven Seas Water and Quench businesses were received. Party H re-submitted its
November 11 proposal to acquire the Seven Seas Water business for $650.0 million, which was to be financed with equity financing only. Party H indicated that it would be prepared to
complete due diligence within approximately six weeks. Party E submitted a revised proposal to acquire the Quench business for $550.0 million, which was to be financed with existing cash and
credit facilities. Party G submitted a revised proposal to acquire the Quench business for a purchase price in the range of $550.0 million to $570.0 million, which was to be financed
with debt and equity financing. Party G indicated to Citi that it would be prepared to complete due diligence within approximately four weeks.
On
November 22, 2019, the special committee held a meeting in which other directors, members of management and representatives of Citi, UBS and Goodwin also participated.
Representatives of Citi and UBS updated the special committee with respect to the revised proposals submitted by each of the remaining interested parties. The special committee also discussed
differences in the nature of the parties and their proposals, including that certain of the parties needed third party debt financing. The special committee engaged in a discussion with
representatives of Citi and UBS concerning the implied valuations contained in current proposals for the whole company. Representatives of Citi and UBS noted that Culligan indicated it could act
quickly to execute a transaction to acquire the whole Company, thereby minimizing the complexity, execution risk and financial considerations discussed by the special committee at its prior meetings,
and only had confirmatory due diligence remaining, whereas other parties required additional time to finalize their financing arrangements and complete further due diligence.
At
the November 22nd special committee meeting, representatives of Citi and UBS also provided an overview of the formal proposals received from Party C and
Party H for the Seven Seas Water business. The special committee engaged in a discussion with the representatives of Citi and UBS about the implied valuations contained in current proposals for the
Seven Seas Water business, the certainty to closing, the proposed financing arrangements and the ongoing discussions with Party C and Party H. Representatives of Citi and UBS then provided an overview
of the formal proposals received from Party E and Party G for the Quench business. The special committee engaged in a discussion with representatives of Citi and UBS about the implied valuations
contained in the current proposals for the Quench business, the certainty to closing, the proposed financing arrangements and the ongoing discussions with Party E and Party G. After discussion, the
special committee determined that the proposal made by Party C was not sufficiently attractive from a financial point of view to warrant continued engagement with Party C. The special committee
concluded that the Company should
continue to engage with Culligan, Party E, Party G and Party H, and directed Citi to indicate to these parties that AquaVenture expected to see higher prices in final proposals to be submitted with a
markup of an acquisition agreement.
30
Table of Contents
Following
the November 22nd special committee meeting, representatives of Citi and UBS informed a representative of Party C that the special committee had
determined they would not move forward with their proposal.
On
November 26, 2019, the special committee held a meeting in which other directors, members of management and representatives of Citi, UBS and Goodwin also participated.
Representatives of Citi and UBS provided an update with respect to the activities undertaken with each of the parties that submitted revised proposals before the
November 20th bid deadline. The special committee also discussed the proposed timing for the submission of best and final proposals by the parties with whom the Company
continued to discuss a potential strategic transaction. At this meeting, representatives of Citi and UBS also discussed with the special committee their separate preliminary financial analyses of the
Company and each of the proposals made by these parties. Goodwin also discussed with the special committee certain matters relating to the proposed definitive acquisition agreement forms to be
provided to the remaining interested parties.
On
November 26, 2019, a representative of Party E informed Citi that Party E would no longer participate in the process, indicating that it would require significant time to
perform additional due diligence and confirm its proposed price.
On
December 3, 2019, a draft of a merger agreement for the acquisition of the entire Company was delivered to Culligan and a draft of a share purchase agreement regarding the
potential separate but concurrent sales of the Seven Seas Water and Quench businesses was delivered to Party G and Party H. The share purchase agreement provided that the closings of the sales of the
Seven Seas Water and Quench businesses were conditioned on each other.
On
December 6, 2019, at the direction of the special committee and following review and comment by management and AquaVenture's advisors, final bid process letters were sent by
representatives of Citi and UBS to Culligan, Party G and Party H, together with a draft of an equity commitment letter in the case of those parties who required equity financing. The process letters
sent to Party G and Party H requested that they each submit a final proposal by December 16, 2019, with comments to the draft share purchase agreement and equity commitment letter to be
submitted by December 10, 2019. The process letters to Party G and Party H indicated that a definitive final proposal should assume that the Seven Seas Water business and Quench business, as
applicable, would be sold concurrently on a
cash-free, debt-free basis with no post-closing adjustments to the purchase price and no post-closing indemnification for breaches of Company representations and warranties. The process letter sent to
Culligan requested that it submit its final proposal by December 18, 2019, with comments to the draft merger agreement and equity commitment letter to be submitted by December 10, 2019.
Further, the parties were instructed that their definitive proposals must include, in addition to the proposed purchase price, a description of all material assumptions on which the proposal was based
and sources and certainty of financing.
During
late November and December 2019, the Company provided the remaining interested parties access to additional non-public information about the Company and its businesses and to
Company management. During this period, each of Culligan, Party G and Party H continued to conduct their due diligence investigations of the Company, and representatives of the Company, Citi and UBS
met with each party to discuss certain diligence matters.
On
December 10, 2019, Culligan submitted its initial comments on a draft of the merger agreement and Party H submitted its initial comments on a draft of the share purchase
agreement. The material changes to the draft merger agreement proposed by Culligan included, among other things, (1) the request by Culligan for voting agreements by certain shareholders,
(2) exceptions to the definition of "Material Adverse Effect," which generally defines the standard for closing risk, (3) the efforts covenant relating to antitrust approvals,
(4) the Company's ability to provide due diligence to, and negotiate a merger agreement with, a party making an unsolicited acquisition proposal that
31
Table of Contents
constitutes
or would reasonably be expected to lead to a superior proposal, (5) the Company's ability to accept a superior proposal after providing the buyer with a right to match such proposal
and the amount of the associated termination fee payable by the Company, (6) provisions relating to Culligan's equity and debt financing and (7) the parties' respective remedies for
pre-closing breach. The material changes to the draft share purchase agreement proposed by Party H included, among other things, (1) exceptions to the definition of "Material Adverse Effect,"
(2) the efforts covenant relating to antitrust approvals, (3) the Company's ability to provide due diligence to, and negotiate an alternative acquisition agreement with, a party making
an unsolicited acquisition proposal that constitutes or would reasonably be expected to lead to a superior proposal, (4) the Company's ability to accept a superior proposal after providing the
buyer with a right to match such proposal and the amount of the associated termination fee payable by the Company, (5) provisions relating to Party H's equity financing, (6) the
provisions providing that the sale of the Seven Seas Water business is conditioned on the sale of the Quench business, (7) expansion of the scope of the proposed Company representations and
warranties, (8) the requirement for representation and warranty insurance to protect Party H from any breaches in the Company representations and warranties and (9) the parties'
respective remedies for pre-closing breach.
Over
the course of the next week, each of Culligan and Party H, and the Company and their respective advisors continued to address due diligence matters and began negotiating the merger
agreement and the share purchase agreement, as applicable. In addition, representatives of the Company, Goodwin, Citi and UBS regularly discussed the status of negotiations and the status of the draft
merger agreement and share purchase agreement.
On
December 15, 2019, Party G provided the Company with an extensive list of preliminary issues with the share purchase agreement, including issues relating to proposed purchase
price adjustments, working capital matters, financing, indemnification, transaction expenses and termination fees, as well as an extensive list of additional diligence matters.
On
December 16, 2019, the Company received final proposals from Party G and Party H. Party G submitted a revised final proposal to acquire the Quench business for a purchase price
of $550.0 million, which was to be financed with debt and equity financing. Party H submitted a revised final proposal to acquire the Seven Seas Water business for a purchase price of
$615.0 million (subject to adjustments), which was to be financed with equity financing only. Both Party G and Party H indicated that their respective proposals remained subject to confirmatory
due diligence.
On
December 18, 2019, the Company received a revised final proposal from Culligan, proposing to purchase 100% of AquaVenture's issued and outstanding ordinary shares for $26.90
per share, and stating that Culligan's due diligence was substantially complete and that it was prepared to execute a definitive transaction agreement subject to negotiation of final terms based on
its markup of the merger agreement. Culligan's proposal included its debt financing commitment letters and markups of the draft merger agreement and equity commitment letter.
On
December 19, 2019, the special committee held a meeting in which other directors, members of management and representatives of Citi, UBS and Goodwin also participated. The
representatives of Citi and UBS discussed in detail financial considerations relevant to a contemplated transaction with each of Culligan, Party G and Party H based on the parties' respective final
proposals. Representatives of Citi and UBS discussed with the special committee their respective preliminary financial analyses of AquaVenture, the Seven Seas Water business and the Quench business.
Representatives of Citi and UBS also addressed the potential impacts of Party H's proposed purchase price adjustments, certain additional transaction expenses and costs associated with separate
sales of the Seven Seas Water and Quench businesses followed by the liquidation of the Company, and the potential resulting net proceeds from such transactions compared to the proposed merger with
Culligan, based on estimated
32
Table of Contents
transaction
expenses and costs and estimated liquidation expenses, in each case, as provided by management.
Also
at the December 19th special committee meeting, representatives of Goodwin reviewed the board's fiduciary duties, discussed in detail the transaction
terms proposed by each of Culligan, Party G and Party H and provided an update on the progress of negotiations with each party's representatives. The presentation by Goodwin representatives in respect
of the transaction terms focused on, among other topics, potential execution risks associated with the merger versus the separate sales of the Seven Seas Water and Quench businesses and how those
risks had been addressed in the merger agreement and the share purchase agreements, fiduciary protections and termination rights afforded to the parties and remedies for pre-closing breaches,
including in the event that a party's financing became unavailable following announcement of a transaction. Following discussion, the special committee determined that, in light of all the
considerations discussed by the special committee, including those relating to the proposals from Party G and Party H as well as those relating to the Company remaining as an independent and
standalone business, Culligan's proposal provided the best value and least execution risk for the Company's shareholders. The special committee then discussed strategies for seeking any further price
increase from Culligan and directed representatives of Citi and UBS to negotiate for a best and final price from Culligan with an objective of entering into and announcing a definitive transaction no
later than December 23, 2019.
On
December 20, 2019, the special committee held a meeting in which other directors, members of management and representatives of Citi, UBS and Goodwin also participated. At this
meeting, the special committee received an update of the discussions and negotiations between representatives of Culligan and the Company's legal and financial advisors. The special committee also
discussed the Company's business, including the opportunities and challenges associated with implementing its standalone long-term strategic plans, and the potential for achieving valuations as a
standalone public company comparable to the valuation proposed by Culligan.
Later
on December 20th, representatives from Citi spoke to a representative of Culligan regarding Culligan's offer price. The Culligan representative stated that
Culligan would raise its offer to $27.10 per share, its best and final proposal, subject to certain final transaction terms being negotiated. In addition, representatives of Weil, Gotshal &
Manges LLP ("Weil"), outside legal counsel to Culligan, and representatives of Goodwin continued negotiating the open issues with respect to the draft merger agreement and other transaction
documents. Among other things, these items included: (1) exceptions to the definition of "Material Adverse Effect," (2) the Company's ability to provide due diligence to, and negotiate a
merger agreement with, a party making an unsolicited acquisition proposal that constitutes or would reasonably be expected to lead to a superior proposal, (3) the Company's ability to accept a
superior proposal after providing Culligan with a right to match such proposal and the amount of the associated termination fee payable by the Company, (4) Culligan's request that AquaVenture
provide reasonable assistance, if requested, to Culligan's efforts to sell the Seven Seas Water business, (5) provisions relating to Culligan's equity and debt financing and (6) the
parties' respective remedies for pre-closing breach.
On
December 21, 2019, the special committee held a meeting. Before representatives of each of Citi and UBS joined the meeting, representatives of Goodwin discussed with the
special committee letters provided by each of Citi and UBS that summarized the nature of Citi's and UBS' respective relationships with Culligan, Party G and Party H. The special committee, after
discussion with representatives of Goodwin, concluded that none of the relationships disclosed would interfere with either Citi's or UBS' continued ability to provide financial advisory services to
AquaVenture.
Representatives of Citi and UBS then joined the meeting. The special committee was then provided an update regarding the status of discussions with Culligan and, specifically, that Culligan had
proposed a best and final price of $27.10 per share, subject to reaching agreement on the open issues in the merger agreement. Thereafter, Goodwin again discussed with the special committee the
fiduciary duties
33
Table of Contents
of
directors in connection with evaluating the Company's strategic alternatives. Thereafter, representatives of Goodwin reviewed the key terms of the proposed merger agreement relating to deal
certainty and the parties' required efforts to obtain applicable regulatory approvals, including certain open issues between the parties, including the size of the termination fee payable by the
Company in connection with accepting a superior proposal from a third party, the size of the termination fee payable by Culligan and provisions relating to Culligan's equity and debt financing and any
pre-closing breach. Representatives of Citi then discussed with the special committee matters relating to, among other things, the price per share proposed by Culligan compared to (1) certain
precedent transactions based upon relevant valuation metrics and delivered a presentation to the special committee regarding preliminary financial analyses with respect to the Company based on the
financial projections, and (2) the estimated proceeds available for distribution to AquaVenture's shareholders from the potential separate concurrent sales of the Seven Seas Water and the
Quench businesses followed by the liquidation of the Company based on the final proposals from Party G and Party H.
During
the rest of the weekend of December 21, 2019 through December 22, 2019, representatives of AquaVenture, Culligan, Weil and Goodwin, and various combinations of these
parties, held several negotiating calls to finalize the terms of the proposed transaction and resolve outstanding issues. The topics discussed over this weekend included, among other things:
(1) the operation of the Company during the period between signing and closing, (2) the standard of the bring-down of certain representations and warranties, (3) termination fees
and remedies for pre-closing breach, (4) provisions relating to Culligan's equity and debt financing and (5) employee compensation and severance.
During
the afternoon of December 22, 2019, Goodwin circulated a revised draft of the merger agreement to the board of directors, AquaVenture management, Citi and UBS, which also
included an update to previous drafts received and reviewed by the board of directors and the special committee.
Later
that day, the board of directors and special committee conducted a joint meeting in which members of AquaVenture management and representatives of Citi, UBS and Goodwin also
participated. Representatives of Goodwin provided an overview of the negotiation process since the last special committee meeting and discussed changes made to the draft of the merger agreement since
the last special committee meeting. During these discussions, the directors asked questions relating to specific terms in the merger agreement, including interim operating covenants, the treatment of
employees, termination provisions and remedies for pre-closing breach, representations and warranties and conditions to closing. Representatives of Goodwin again led a discussion concerning the
board's fiduciary duties. Representatives of Citi and UBS then reviewed with the board of directors their
respective firm's financial analyses of the merger consideration provided for in the merger agreement and each delivered to the special committee their respective firm's oral opinion, which was
subsequently confirmed by delivery of a written opinion, to the effect that, as of the date of the written opinion and based upon and subject to the factors and assumptions set forth in its written
opinion, the $27.10 in cash per share to be paid to the holders of ordinary shares pursuant to the merger agreement was fair, from a financial point of view, to such holders. For a detailed discussion
of Citi's and UBS' opinions, please see the headings titled "Opinion of Citigroup Global Markets Inc." and
"Opinion of UBS Securities LLC." After discussion, the special committee recommended to the board of directors that it approve the
merger agreement and the transactions contemplated thereby. After further discussion, the board of directors, upon the recommendation of the special committee, approved the merger and the merger
agreement.
Early
in the morning on December 23, 2019, the parties executed the transaction documents and prior to the opening of the U.S. stock markets issued a joint press release
announcing the transaction.
34
Table of Contents
Reasons for the Merger
During the course of its deliberations regarding the merger, the board of directors and the special committee held numerous meetings and
consulted with our senior management, financial advisors and outside legal counsel, and reviewed, evaluated and considered numerous factors and a significant amount of information and data,
including:
-
-
information concerning our business, financial performance (both historical and projected) and our financial condition, results of operations
(both historical and projected), and business and strategic objectives, as well as the risks of accomplishing those objectives;
-
-
the possible alternatives to the merger (including the option of continuing to operate our company independently on a stand-alone basis and
pursuing separate dispositions of our Seven Seas Water and Quench businesses), the timing and likelihood of accomplishing the business plans and strategic objectives of those alternatives and the
potential benefits and risks of those alternatives;
-
-
the results of our discussions with certain third parties who expressed interest in a potential strategic transaction with us and our ability
under the terms of the merger agreement to negotiate with third parties concerning certain unsolicited alternative acquisition proposals thereafter; and
-
-
the other terms of the merger agreement, including the parties' representations, warranties and covenants, the conditions to their respective
obligations and the termination rights of the parties.
In
reaching its decision to approve the merger agreement and the merger, and to recommend that AquaVenture shareholders adopt the merger agreement, the board of directors and the special
committee considered the following positive reasons to support the merger agreement and the merger:
-
-
the fact that the price of $27.10 per share in cash payable in the merger provides certainty, immediate value and liquidity to AquaVenture
shareholders;
-
-
the fact that the price of $27.10 per share to be received by AquaVenture shareholders in the merger represents:
-
-
a 25% premium to the closing price of $21.76 on December 20, 2019, the last trading day before public announcement of the
merger agreement;
-
-
a 25% premium to the 30-day trailing volume-weighted average price of $21.67 for the period ended on December 20, 2019;
-
-
a 34% premium to the 90-day trailing volume-weighted average price of $20.19 for the period ended on December 20, 2019;
-
-
a 17% premium to the 52-week high closing price of $23.22 as of December 20, 2019; and
-
-
a 65% premium to the 52-week low closing price of $16.38 as of December 20, 2019;
-
-
the financial presentation and oral opinion rendered by Citi to the special committee, and subsequently confirmed by delivery of a written
opinion of Citi that, as of December 23, 2019, and on the basis of and subject to the various factors, assumptions and limitations set forth in such written opinion, the per share merger
consideration was fair, from a financial point of view, to the holders of our ordinary shares (other than Culligan and its affiliates), which is described below under the heading
"Opinion of Citigroup Global Markets Inc.;"
-
-
the analyses and presentation prepared by UBS, and its written opinion dated as of December 23, 2019, to the effect that, as of that
date and based upon and subject to various assumptions, matters considered and limitations described in its written opinion, the merger
35
Table of Contents
consideration
provided for in the merger was fair, from a financial point of view, to the holders of ordinary shares, which is described below under the heading
"Opinion of UBS Securities LLC;"
-
-
the belief of the board of directors and special committee that the consideration of $27.10 per share to be received by AquaVenture
shareholders in the merger provides greater certainty of shareholder value and less risk to shareholders relative to the potential trading price of our shares over the long-term after accounting for
the risks to our business resulting from operational execution risk, developing industry dynamics, competition and our progress to date;
-
-
the belief of the board of directors and special committee that the consideration of $27.10 per share to be received by AquaVenture
shareholders in the merger provides greater certainty of shareholder value and less risk to shareholders relative to the potential separate sales of our Seven Seas Water and Quench businesses;
-
-
the likelihood that the proposed acquisition would be consummated in light of the conditions to closing set forth in the merger agreement and
the committed financing of Culligan;
-
-
the ability of the board of directors and special committee to furnish information to, and conduct negotiations with, third parties in certain
circumstances, and to terminate the merger agreement to accept a superior proposal from a third party upon our payment to Parent of an approximately $34 million termination fee (which the
special committee and the board of directors believed was reasonable under the circumstances);
-
-
the other terms and conditions of the merger agreement, including, among other things, (1) the size of the termination fee and the
circumstances under which the fee may be payable, (2) the limited number and nature of the conditions to the obligations of Parent and Merger Sub to complete the merger, including the absence
of a financing condition and (3) the definition of "Material Adverse Effect" and the exceptions for what constitutes a material adverse effect for purposes of the merger agreement;
-
-
the commitments of the Lenders to provide $500.0 million in debt financing for the merger, which may consist of a senior secured cash
flow revolver, a senior secured term loan facility and/or senior unsecured notes, in each case, on customary terms and conditions;
-
-
the requirement that, in the event of a failure to complete the merger under certain circumstances, Parent is obligated to pay us the parent
termination fee of approximately $54.6 million;
-
-
the commitment of the Investors to capitalize Parent, at or prior to the effective time, with an aggregate equity contribution in an amount of
$656.8 million to fund the payment of the merger consideration and the commitment of the Investors to fund payment of the $54.6 million parent termination fee and certain other expense
and indemnification obligations under the merger agreement;
-
-
representations by Parent and Merger Sub in the merger agreement that, assuming the accuracy of the Company's representations in the merger
agreement, the aggregate proceeds represented by the financing commitments will be sufficient for Parent and Merger Sub to pay all amounts required to be paid in connection with the merger;
-
-
our entitlement to specific performance under certain circumstances to cause the equity financing to be funded; and
-
-
the likelihood that the proposed acquisition would be consummated, in light of the experience, reputation and financial capabilities of
Culligan, Advent and the Lenders.
36
Table of Contents
In
the course of its deliberations, the board of directors and the special committee also considered, among other things, the following negative
factors:
-
-
the fact that AquaVenture shareholders will not participate in any future growth potential or benefit from any future increase in the value of
our company (whether through organic growth, extraordinary events, acquisitions or otherwise);
-
-
the possibility that the merger will not be consummated and the potential negative effects on our business, operations, financial results and
stock price;
-
-
the fact that completion of the merger will require antitrust clearance in the United States;
-
-
the potential negative effects of the public announcement of the merger on our operating results and stock price, our ability to retain key
management and other personnel and our relationships with customers and suppliers;
-
-
the restrictions on the conduct of our business prior to the consummation of the merger, requiring us to conduct our business in the ordinary
course and preventing us from taking certain specified actions, subject to specific limitations, all of which may delay or prevent us from undertaking business opportunities pending completion of the
merger;
-
-
the risk of diverting management's focus and resources from other strategic opportunities and from operational matters while working to
implement the merger;
-
-
the conditions to the obligations of Parent and Merger Sub to complete the merger and the right of Parent to terminate the merger agreement
under certain circumstances;
-
-
the possibility that we may be obligated to pay Parent a termination fee if Parent terminates the merger agreement following an adverse
recommendation change;
-
-
the fact that the approximately $54.6 million parent termination fee payable by Parent is available in only certain instances in which
the merger agreement is terminated;
-
-
the fact that Parent requires significant third-party debt financing for the transaction and in the event that the Lenders do not provide the
debt financing under the debt commitment letter, Parent will not be able to satisfy its obligations to complete the merger and in such circumstances we may only be entitled to receive the parent
termination fee as provided under the merger agreement;
-
-
the fact that the merger consideration consists of cash and will therefore be taxable to AquaVenture shareholders who are subject to taxation
for U.S. federal income tax purposes; and
-
-
the interests that certain of our directors and executive officers may have with respect to the merger, in addition to their interests as
AquaVenture shareholders generally, as described in the section entitled "Interests of the Company's Directors and Executive Officers in the
Merger."
The
preceding discussion of the information and factors considered by the board of directors and special committee is not, and is not intended to be, exhaustive. In light of the variety
of factors considered in connection with their evaluation of the merger and the complexity of these matters, the board of directors and special committee did not find it practicable to, and did not,
quantify or otherwise attempt to rank or assign relative weights to the various factors considered in reaching their determination. In considering the factors described above and any other factors,
individual members of the board of directors and special committee may have viewed factors differently or given different weight, merit or consideration to different factors. In addition, the board of
directors and special committee 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 the
ultimate determination of the board of directors and special committee, but rather the board of directors and special committee
37
Table of Contents
conducted
an overall analysis of the factors described above, including discussions with and questioning of our senior management, legal counsel and financial advisors.
Recommendation of the Company's Board of Directors
After careful consideration, and acting upon the recommendation of the special committee, the board of directors has unanimously approved the
merger agreement and determined that the merger agreement is advisable and in the best interests of AquaVenture and its shareholders. The board of directors unanimously
recommends that shareholders vote "FOR" the proposal to adopt the merger agreement.
Opinion of Citigroup Global Markets Inc.
The special committee retained Citi as a financial advisor in connection with a possible transaction involving AquaVenture. In connection with
Citi's engagement, the special committee requested that Citi evaluate the fairness, from a financial point of view, to the holders of AquaVenture ordinary shares (other than Culligan and its
affiliates) of the merger consideration to be received in the proposed merger by such holders pursuant to the terms and subject to the conditions set forth in the merger agreement. On
December 22, 2019, at a meeting of the special committee held to evaluate the proposed merger, Citi rendered to the special committee an oral opinion, subsequently confirmed by delivery of a
written opinion, dated December 23, 2019, to the effect that, as of the date of Citi's written opinion and based on and subject to various assumptions made, procedures followed, matters
considered and limitations and qualifications on the review undertaken by Citi as set forth in its written opinion, the merger consideration was fair, from a financial point of view, to the holders of
AquaVenture ordinary shares (other than Culligan and its affiliates).
The
full text of Citi's written opinion, dated December 23, 2019, to the special committee, which sets forth, among other things, the assumptions made, procedures followed,
matters considered and limitations and qualifications on the review undertaken by Citi in rendering its opinion, is attached to this proxy statement as Annex B and is incorporated herein by
reference in its entirety. The summary of Citi's opinion set forth below is qualified in its entirety by
reference to the full text of Citi's opinion. Citi's opinion was rendered to the special committee (in its capacity as such) in connection with its evaluation of the proposed
merger and was limited to the fairness, from a financial point of view, as of the date of the opinion, to the holders of AquaVenture ordinary shares (other than Culligan and its affiliates) of the
merger consideration. Citi's opinion did not address any other terms, aspects or implications of the proposed merger or the merger agreement. Citi's opinion did not address the underlying business
decision of AquaVenture to effect the proposed merger, the relative merits of the proposed merger as compared to any alternative business strategies that might have existed for AquaVenture or the
effect of any other transaction in which AquaVenture might have engaged. Citi's opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder
should vote or act on any matters relating to the proposed merger or otherwise.
In
arriving at its opinion, Citi:
-
-
reviewed a draft, dated December 22, 2019, of the merger agreement;
-
-
held discussions with certain senior officers, directors and other representatives and advisors of AquaVenture concerning the business,
operations and prospects of AquaVenture;
-
-
examined certain publicly available business and financial information relating to AquaVenture as well as certain financial forecasts and other
information and data relating to AquaVenture which were provided to or discussed with Citi by management;
-
-
reviewed the financial terms of the proposed merger as set forth in the merger agreement in relation to, among other things, current and
historical market prices and trading volumes of
38
Table of Contents
The
issuance of Citi's opinion was authorized by Citi's fairness opinion committee.
In
rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available
or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of management that they were not aware of any relevant information that was omitted or that remained undisclosed
to Citi. With respect to financial forecasts and other information and data relating to AquaVenture provided to or otherwise reviewed by or discussed with Citi, Citi was advised by management that
such forecasts and other information and data were reasonably prepared on bases reflecting the best then-currently available estimates and judgments of management as to the future financial
performance of AquaVenture.
Citi
assumed, with the consent of the special committee, that the proposed merger would be consummated in accordance with its terms, without waiver, modification or amendment of any
material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the proposed merger, no delay, limitation,
restriction or condition would be imposed that would have an adverse effect on AquaVenture or the merger. Representatives of AquaVenture advised Citi, and Citi further assumed, that the final terms of
the merger agreement would not vary materially from those set forth in the draft reviewed by Citi. Citi did not make and was not provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of AquaVenture nor did Citi make any physical inspection of the properties or assets of AquaVenture.
In
connection with Citi's engagement and at the direction of the special committee, Citi held discussions with selected third parties to solicit indications of interest in a possible
acquisition of all or a part of AquaVenture. Citi's opinion did not address the underlying business decision of AquaVenture to effect the proposed merger, the relative merits of the proposed merger as
compared to any alternative business strategies that might have existed for AquaVenture or the effect of any other transaction in which AquaVenture might have engaged. Citi also expressed no view as
to, and Citi's opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to
the proposed merger, or any class of such persons, relative to the merger consideration or otherwise. Citi's opinion was necessarily based upon information available to Citi, and financial, stock
market and other conditions and circumstances existing, as of the date of its opinion. Although subsequent developments may affect Citi's opinion, Citi has no obligation to update, revise or reaffirm
its opinion.
In
preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The preparation of a financial opinion is a complex analytical
process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a
financial opinion is not readily susceptible to partial analysis or summary description. Citi arrived at its opinion based on the
39
Table of Contents
results
of all analyses undertaken by it and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its
opinion.
In
its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which
are beyond the control of AquaVenture. No company, business or transaction reviewed is identical or directly comparable to AquaVenture or the merger and an evaluation of these analyses is not entirely
mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition
or other values of the companies, businesses or transactions reviewed or the results of any particular analysis.
The
estimates used by Citi for purposes of its analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi's analyses
are inherently subject to substantial uncertainty.
Citi
was not requested to, and it did not, recommend or determine the specific consideration payable in the merger. The type and amount of consideration payable in the proposed merger
was determined through negotiations between AquaVenture, on the one hand, and Culligan and its affiliates, on the other hand, and AquaVenture's decision to enter into the merger agreement was solely
that of the special committee and the board of directors of AquaVenture. Citi's opinion was only one of many factors considered by the special committee in its evaluation of the merger and should not
be viewed as determinative of the views of the special committee, the board of directors or management with respect to the proposed merger, merger consideration or any other aspect of the transactions
contemplated by the merger agreement.
The following is a summary of the material financial analyses prepared for and reviewed with the special committee in connection with Citi's
opinion, dated December 23, 2019, to the special committee. The summary set forth below does not purport to be a complete description of the financial analyses performed
by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial
analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the
tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Future results may be different from those
described and such differences may be material. Approximate implied equity value per share reference ranges derived from the financial analyses described below and other per
share ranges presented for reference purposes only were rounded to the nearest $0.10, except for data relating to closing share prices. Except as otherwise noted, financial data utilized for
AquaVenture in the financial analyses described below were based on the base case forecast and other information and data relating to AquaVenture provided to or discussed with Citi and approved for
Citi's use by the special committee and as summarized under "Projected Financial InformationSummary of
Base Case Forecast" below, and which are referred to collectively as the AquaVenture base case projections. For purposes of the financial analyses described below, the term
"adjusted EBITDA," (1) when used with respect to any company other than AquaVenture, generally refers to that company's earnings (loss) before interest, taxes, depreciation and amortization
expenses, adjusted, as applicable, to be consistent with "adjusted EBITDA" as reflected in AquaVenture's recent public disclosure and (2) when used with respect to
40
Table of Contents
AquaVenture,
means "adjusted EBITDA" as reflected in AquaVenture's recent public disclosure adjusted further to (a) exclude certain financing revenue recorded in relation to a portion of the
monthly installment payments (which management directed Citi to treat as finite-lived and non-operating in nature for purposes of its analysis) collected in respect of the long-term receivable
attributable to AquaVenture's construction contract in Peru (the "Peru Long-Term Receivable") and (b) include the portion of certain monthly water payments (which management directed Citi to
treat as recurring and operating in nature for purposes of its analysis) recorded as principal payments and collected in respect of the long-term receivable attributable to a contract with the
government of St. Maarten (the "St. Maarten Long-Term Receivable").
Citi reviewed certain financial and stock market information relating to AquaVenture and six publicly traded companies listed further below
whose operations, for the purposes of Citi's analysis and based on its experience and professional judgment, Citi considered generally relevant in evaluating those of AquaVenture, based on business
sector participation, operational characteristics and financial metrics (such companies collectively, the "selected companies").
For
the selected companies, Citi calculated and reviewed, among other information, adjusted firm values (calculated as fully diluted market equity value, plus net debt, preferred equity
and non-controlling interests, and less unconsolidated investments and non-operating assets, as applicable) as multiples of estimated calendar year 2020 adjusted EBITDA. All calculations in this
review were based on closing share prices on December 20, 2019 and, with respect to the selected companies, financial data (pro forma as applicable) were based on publicly available Wall Street
research analysts' estimates, public filings and other publicly available information. The adjusted firm values to calendar year 2020 adjusted EBITDA multiples calculated by Citi for each selected
company (as well as the median multiple) is set forth below:
|
|
|
|
|
Selected Company
|
|
Adjusted Firm Value /
2020E adjusted EBITDA
|
|
Evoqua Water Technologies Corporation
|
|
|
13.1
|
x
|
Consolidated Water Co. Ltd.
|
|
|
12.8
|
x
|
Ormat Technologies, Inc.
|
|
|
12.2
|
x
|
Primo Water Corporation
|
|
|
11.2
|
x
|
Covanta Holding Corporation
|
|
|
10.4
|
x
|
Cott Corporation
|
|
|
9.1
|
x
|
|
|
|
|
|
Median
|
|
|
11.7
|
x
|
|
|
|
|
|
Citi
also calculated and reviewed the adjusted firm value of AquaVenture (calculated pro forma for certain acquisitions completed by AquaVenture during the fourth quarter of 2019, as
provided by management, and reflecting the book value of the Peru Long-Term Receivable as a non-operating asset) as a multiple of its estimated calendar year 2020 adjusted EBITDA, based on publicly
available Wall Street research analysts' estimates. Citi noted, for reference purposes only, that the estimated calendar year 2020 adjusted EBITDA multiple observed for AquaVenture was 11.8x (based on
publicly available Wall Street research analysts' estimates).
Based
on the multiples calculated and observed for the selected companies as described above and its professional judgment and experience, Citi identified and applied a selected
illustrative range of adjusted firm value to calendar year 2020 adjusted EBITDA multiples of 10.5x to 13.0x to AquaVenture's estimated calendar year 2020 adjusted EBITDA of $79 million, based
on the
AquaVenture base case projections (and reflecting the further adjustments described above), to derive a range of implied adjusted firm values for AquaVenture. From this derived range of implied
adjusted
41
Table of Contents
firm
values, Citi subtracted AquaVenture's net debt balance (calculated pro forma for certain acquisitions completed by AquaVenture during the fourth quarter of 2019, as provided by management) and
added the book value of the Peru Long-Term Receivable (both balances as of September 30, 2019), and divided the result by the number of AquaVenture ordinary shares outstanding on a fully
diluted basis, calculated using the treasury stock method, based on information provided by management. This analysis indicated the following approximate implied per share equity value reference range
for AquaVenture, as compared to the merger consideration:
|
|
|
|
|
Implied per Share Equity
Value Reference Range
|
|
Merger
Consideration
|
|
$19.70 - $25.30
|
|
$
|
27.10
|
|
|
|
|
|
|
Using publicly available information, Citi reviewed certain financial data relating to ten transactions listed further below involving target
companies whose operations, for the purposes of Citi's analysis and based on its experience and professional judgment, Citi considered generally relevant in evaluating those of AquaVenture, based on
business sector participation, operational characteristics and financial metrics (such transactions collectively, the "selected transactions").
Citi
calculated and reviewed, among other information, the transaction values of the selected transactions (calculated as the implied firm value for the target company involved in such
transaction at the time of announcement, based on (i) the aggregate consideration paid or to be paid in such transaction, or, if and as applicable, (ii) the fully diluted equity value
implied by the per share purchase price in such transaction, plus net debt, preferred equity and non-controlling interests, and less unconsolidated investments and non-operating assets, as applicable)
as a multiple of the applicable target company's publicly available estimated adjusted EBITDA (or metric functionally equivalent thereto) for the last 12 month period ("LTM") prior to the
announcement of the applicable transaction. The transaction values to LTM adjusted EBITDA multiples calculated by Citi for each selected transaction (as well as the median multiple) is set forth
below:
|
|
|
|
|
|
|
|
|
Announcement Date
|
|
Acquiror
|
|
Target
|
|
Transaction Value /
LTM adjusted
EBITDA
|
|
December 2017
|
|
Xylem Inc.
|
|
Pure Technologies Ltd.
|
|
|
24.4
|
x
|
November 2017
|
|
Fluidra S.A.
|
|
Zodiac Pool Solutions LLC
|
|
|
10.5
|
x
|
March 2017
|
|
SUEZ & Caisse de dépôt et placement du Québec
|
|
GE Water & Process Technologies SC
|
|
|
12.5
|
x
|
August 2016
|
|
XYLEM INC.
|
|
Sensus USA Inc.
|
|
|
10.7
|
x
|
February 2015
|
|
3M Company
|
|
Polypore International LP
|
|
|
13.7
|
x
|
November 2014
|
|
Castik Capital S.a.r.l.
|
|
Waterlogic Holdings Ltd.
|
|
|
9.6
|
x
|
November 2014
|
|
Watts Water Technologies, Inc.
|
|
AERCO International, Inc.
|
|
|
11.0
|
x
|
February 2014
|
|
Clayton, Dubilier & Rice, LLC
|
|
Solenis International LLC (f/k/a Ashland Water Technologies)
|
|
|
10.2
|
x
|
July 2011
|
|
Ecolab Inc.
|
|
Nalco Holding Company
|
|
|
11.7
|
x
|
July 2011
|
|
A.O. Smith Corporation
|
|
Lochinvar Care Ltd.
|
|
|
10.1
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
10.9
|
x
|
|
|
|
|
|
|
|
|
|
Based
on the multiples calculated and observed for the selected transactions and its professional judgment and experience, Citi identified and applied a selected illustrative range of
LTM adjusted EBITDA multiples of 10.0x to 12.0x to AquaVenture's estimated LTM adjusted EBITDA of approximately $74 million for the 12 month period up to and including
September 30, 2019 (reflecting
42
Table of Contents
further
adjustments as described above), calculated on a pro forma basis to reflect the estimated full-year impact, as provided by management, of certain acquisitions completed by AquaVenture since
September 30, 2018 (including certain acquisitions completed in the fourth quarter of 2019, as provided by management), to derive a range of implied adjusted firm values for AquaVenture. From
this derived range of implied adjusted firm values, Citi subtracted AquaVenture's net debt balance (calculated pro forma for certain acquisitions completed by AquaVenture during the fourth quarter of
2019, as provided by management) and added the book value of the Peru Long-Term Receivable (both balances as of September 30, 2019), and divided the result by the number of AquaVenture ordinary
shares outstanding on a fully diluted basis, calculated using the treasury stock method, based on information provided by management. This analysis indicated the following approximate implied per
share equity value reference range for AquaVenture, as compared to the merger consideration:
|
|
|
|
|
Implied per Share Equity
Value Reference Range
|
|
Merger
Consideration
|
|
$17.20 - $21.40
|
|
$
|
27.10
|
|
Citi conducted a discounted cash flow analysis of AquaVenture by calculating the present values (as of September 30, 2019) of the
estimated unlevered after-tax free cash flows that AquaVenture was forecasted to generate during the fourth quarter of the fiscal year ending December 31, 2019 through the full fiscal year
ending December 31, 2024, based on the AquaVenture base case projections (such cash flows referred to as the "projected cash flows"). For purposes of this analysis, stock based compensation was
treated as a cash expense. Citi also calculated estimated terminal values for AquaVenture based on the following selected illustrative ranges of terminal growth rates, selected by Citi based on its
professional judgment and experience, and applied to AquaVenture's estimated terminal year unlevered after-tax free cash flow (referred to as the "terminal cash flow"): (i) 2.0% to 3.0% in
relation to the estimated terminal cash flow contribution from Quench, (ii) 1.0% to 2.0% in relation to the estimated terminal cash flow contribution from Seven Seas Water and (iii) 1.5%
to 2.5% in relation to the estimated terminal cash flow expenditure attributable to AquaVenture's Corporate and Other administration function. The estimated terminal values for AquaVenture were then
discounted to present values (as of September 30, 2019) and added to the estimated present values of the projected cash flows referred to above in order derive a range of implied firm values
for AquaVenture.
In
calculating the present values referred to above, Citi discounted the projected cash flows and estimated terminal values using discount rates ranging from 7.5% to 8.6%, which Citi
derived from a calculation of the weighted average cost of capital of AquaVenture, performed utilizing the capital asset pricing model with inputs that Citi determined were relevant based on publicly
available data and Citi's professional judgment. From the derived range of implied firm values referenced above, Citi subtracted AquaVenture's reported net debt balance as of September 30,
2019, and divided the result by the number of AquaVenture ordinary shares outstanding on a fully diluted basis, calculated using the treasury stock method, based on information provided by management.
This analysis indicated the following approximate implied per share equity value reference range for AquaVenture, as compared to the merger consideration:
|
|
|
|
|
Implied per Share Equity
Value Reference Range
|
|
Merger
Consideration
|
|
$17.30 - $25.90
|
|
$
|
27.10
|
|
|
|
|
|
|
43
Table of Contents
Additional Observed Information. Citi also observed certain other information with respect to AquaVenture that was not considered part
of its
financial analyses with respect to its opinion, but was noted for reference purposes only, including the following:
-
-
historical closing prices of AquaVenture ordinary shares for the 52-week period ended December 20, 2019, which indicated an overall low
to high closing share price range of $16.38 to $23.22 per share over the period; and
-
-
publicly available Wall Street research analysts' one-year forward price targets, prepared and published in relation to AquaVenture ordinary
shares, which indicated an overall low to high price target range of $25.00 to $37.00 per share (with a median of $27.50), implying a range of approximately $23.00 to $34.10 per share (with a median
of $25.30) on a discounted basis when discounted one year at a selected equity discount rate of 8.5%.
Illustrative Discounted Cash Flow Impact of Acquisitions. Citi also calculated, for reference purposes only and not as part of Citi's
financial
analyses with respect to its opinion, the illustrative equity value per share impact, relative to the discounted cash flow analysis Citi conducted based on the AquaVenture base case projections,
assuming AquaVenture were to pursue and consummate illustrative hypothetical acquisitions through fiscal years 2020 to 2024, based on various illustrative assumptions provided by management as to
(i) the illustrative annual amount of capital allocated to and deployed by AquaVenture in consummating such acquisitions (the "annual acquisition expenditures"), and (ii) the
illustrative adjusted EBITDA acquisition multiple paid by AquaVenture for such acquisitions (the "acquisition multiple"). Citi noted that the implied midpoint equity value per share indicated by its
discounted cash flow analysis described above was $20.90, based on the midpoints of the ranges of discount rates and terminal growth rates applied in such analysis. Using such midpoints of the ranges
of discount rates and terminal growth rates, and utilizing an illustrative acquisition multiple range of 6.0x (the multiple reflected in the "Summary of M&A
Forecast" summarized in the section entitled "Projected Financial Information" below) to 10.0x, and an illustrative
annual acquisition expenditure range of $25 million per year to $110 million per year (the amount reflected in the "Summary of M&A
Forecast"), as provided by management, this calculation indicated an illustrative equity value reference range for the AquaVenture ordinary shares of $21.20 to $34.80.
AquaVenture has agreed to pay Citi for its services in connection with the merger an aggregate fee of approximately $9 million,
$2 million of which became payable upon delivery of Citi's opinion to the special committee, and the remainder of which is payable contingent upon the consummation of the proposed merger. In
addition, AquaVenture agreed to reimburse Citi for expenses incurred by Citi in performing its services, and to indemnify Citi and related parties against certain liabilities, including liabilities
under federal securities laws, arising out of Citi's engagement.
As
the special committee was aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide certain investment banking, commercial
banking and other similar financial services to AquaVenture unrelated to the proposed merger, for which services Citi and such affiliates have received and expect to receive compensation, including,
without limitation, during the two-year period prior to the date of Citi's opinion, having acted as joint bookrunner in connection
with an offering of equity securities of AquaVenture and as a lender in connection with certain loans of AquaVenture. For the services described above for AquaVenture, Citi and its affiliates
received, during the two-year period prior to the date of Citi's opinion, aggregate fees of approximately $1 million. As the special committee also was aware, Citi and its affiliates in the
past have provided, currently are providing and in the future may provide certain investment banking, commercial banking and other similar financial services to Advent and its affiliates and portfolio
companies unrelated to the proposed
44
Table of Contents
merger,
for which services Citi and such affiliates have received and expect to receive compensation, including, without limitation, during the two-year period prior to the date of Citi's opinion,
having acted as financial advisor to Advent and certain of its affiliates and portfolio companies in connection with certain mergers and acquisitions activity, as joint bookrunner in connection with
certain initial public offerings and other equity offerings of affiliates and portfolio companies of Advent, and as joint bookrunner and/or joint arranger in connection with certain bond issuances,
loan and credit facility underwritings for Culligan and other affiliates and portfolio companies of Advent and as a lender in connection with certain loans of affiliates and portfolio companies of
Advent. For the services described above for Advent and its affiliates and portfolio companies, Citi and its affiliates received, during the two-year period prior to the date of Citi's opinion,
aggregate fees of approximately $40 million. In the ordinary course of Citi's business, Citi and its affiliates may actively trade or hold the securities of AquaVenture, Advent and Culligan and
their respective affiliates and, as applicable, portfolio companies for Citi's own account or for the account of Citi's customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with AquaVenture, Advent, Culligan and their respective affiliates
and, as applicable, portfolio companies.
The
special committee selected Citi as a financial advisor in connection with the merger based on Citi's reputation, experience and familiarity with AquaVenture and its business. Citi is
an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions and other purposes.
Opinion of UBS Securities LLC
On December 22, 2019, at a meeting of the special committee held to evaluate the merger, UBS delivered to the special committee an oral
opinion, which opinion was confirmed by delivery of a written opinion dated December 23, 2019, to the effect that, as of that date and based upon and subject to various assumptions, matters
considered and limitations described in its written
opinion, the merger consideration to be received by holders of ordinary shares in the merger was fair, from a financial point of view, to such holders of ordinary shares.
The
full text of UBS' opinion describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS. The opinion is attached as Annex C to this proxy
statement and is incorporated herein by reference. UBS' opinion was provided for the benefit of the
special committee (in its capacity as such) in connection with, and for the purpose of, its evaluation of the merger consideration in the merger and addresses only the fairness, from a financial point
of view, of the merger consideration to holders of ordinary shares in the merger. The opinion does not address the relative merits of the merger as compared to other business strategies or
transactions that might be available with respect to the Company or the Company's underlying business decision to effect the merger. The opinion does not constitute a recommendation to any shareholder
as to how to vote or act with respect to the merger. Holders of ordinary shares are encouraged to read UBS' opinion carefully in its entirety. The following summary of UBS'
opinion should be read in conjunction with the full text of UBS' opinion.
In
arriving at its opinion, UBS, among other things:
-
-
reviewed certain publicly available business and financial information relating to the Company;
-
-
reviewed certain internal financial information and other data relating to the businesses and financial prospects of the Company that were not
publicly available, including financial forecasts and estimates prepared by the management of the Company that UBS was directed to utilize for purposes of its analysis (and which the special committee
approved for such use);
45
Table of Contents
-
-
conducted discussions with members of the senior management of the Company concerning the businesses and financial prospects of the Company;
-
-
reviewed publicly available financial and stock market data with respect to certain other companies UBS believes to be generally relevant;
-
-
compared the financial terms of the merger with the publicly available financial terms of certain other transactions UBS believes to be
generally relevant;
-
-
reviewed current and historical market prices of ordinary shares;
-
-
reviewed a draft of the merger agreement; and
-
-
conducted such other financial studies, analyses and investigations, and considered such other information, as UBS deemed necessary or
appropriate.
At
the request of the special committee, UBS contacted third parties to solicit indications of interest in a possible transaction with the Company and held discussions with certain of
these parties prior to the date of its opinion.
In
connection with its review, with the consent of the special committee, UBS assumed and relied upon, without independent verification, the accuracy and completeness in all material
respects of the information provided to or reviewed by UBS for the purpose of its opinion. In addition, with the consent of the special committee, UBS did not make any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the Company, nor was it furnished with any such evaluation or appraisal. With respect to the financial forecasts and
estimates, referred to above, UBS assumed, at the direction of the special committee, that they had been reasonably prepared on a basis reflecting the best currently available estimates and judgments
of the management of the Company as to the future financial performance of the Company. UBS' opinion was necessarily based on economic,
monetary, market and other conditions as in effect on, and the information available to UBS as of, the date of its opinion.
At
the direction of the special committee, UBS was not asked to, nor did it, offer any opinion as to the terms, other than the merger consideration to the extent expressly specified in
UBS' opinion, of the merger agreement or the form of the merger. In addition, UBS expressed no opinion as to the fairness of the amount or nature of any compensation to be received by any officers,
directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration. In rendering its opinion, UBS assumed, with the consent of the special
committee, that (1) the final executed form of the merger agreement would not differ in any material respect from the draft that UBS reviewed, (2) the parties to the merger agreement
would comply with all material terms of the merger agreement and (3) the merger would be consummated in accordance with the terms of the merger agreement without any adverse waiver or amendment
of any material term or condition thereof. UBS also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be obtained without any
material adverse effect on the Company or the merger. Except as described above, there were no other instructions to, or limitations on, UBS with respect to the investigations made or the procedures
followed by UBS in rendering its opinion. The issuance of UBS' opinion was approved by an authorized committee of UBS.
In
connection with rendering its opinion to the special committee, UBS performed a variety of financial and comparative analyses which are summarized below. The following summary is not
a complete description of all analyses performed and factors considered by UBS in connection with its opinion. The preparation of a financial opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected public company analysis and selected transactions analysis summarized below, no
company or transaction used as a comparison was identical to the Company or the merger. These analyses
46
Table of Contents
necessarily
involved complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or acquisition values of the
companies concerned.
UBS
believes that its analysis and the summary below must be considered as a whole and that selecting portions of its analysis and factors or focusing on information presented in tabular
format, without considering all analyses and factors or the full narrative description of the analyses, could create a misleading or incomplete view of the processes underlying UBS' analyses and
opinion. UBS did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on
results of all analyses undertaken by it and assessed as a whole.
The
estimates of the future performance of the Company provided by the Company's management, and the estimates of the future financial performances reflecting such estimates, in or
underlying UBS' analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses, UBS considered
industry performance, general business and economic conditions and other matters, many of which were beyond the control of the Company. Estimates of the financial value of companies do not purport to
be appraisals or necessarily reflect the prices at which companies may actually be sold.
The
merger consideration was determined through negotiation between the Company and Parent and the decision by the board of directors to enter into the merger agreement was solely that
of the board of directors, acting upon the recommendation of the special committee. UBS' opinion and financial analyses were only one of many factors considered by the special committee in its
evaluation of the merger and should not be viewed as determinative of the views of the special committee with respect to the merger or the merger consideration.
The
following is a brief summary of the material financial analyses performed by UBS and reviewed with the special committee on December 22, 2019 in connection with UBS' opinion
relating to the merger. The financial analyses summarized below include information presented in tabular format. In order to fully understand UBS' financial analyses, the
tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full
narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of UBS' financial
analyses.
For
purposes of its analyses, UBS reviewed a number of financial and operating metrics, including:
-
-
Enterprise Value, defined as equity value (calculated as the value of the applicable company's outstanding equity securities based on the
applicable company's closing stock price as of a specified date), plus outstanding debt, at book value, less cash and cash equivalents ("net debt"), plus minority interests at book value, as of a
specified date;
-
-
EBITDA, defined as earnings before interest, taxes, depreciation, amortization; and
-
-
Adjusted EBITDA, defined as EBITDA, adjusted for certain non-cash, one-time, or non-recurring items (See
"Projected Financial Information" below for additional description of Adjusted EBITDA with respect to the Company).
Unless
the context indicates otherwise, (1) Enterprise Values derived from the selected companies analysis described below were calculated using the closing price of the common
stock of the selected publicly traded companies in the U.S.-listed water services and related infrastructure industry listed below as of December 20, 2019, (2) transaction values for the
target companies derived from the selected transactions analysis described below were calculated based on implied Enterprise Values as of the public announcement date of the relevant transaction,
assuming equity values equal to the
47
Table of Contents
estimated
purchase prices paid for the common equity of the target companies in the selected transactions, or the estimated purchase prices paid for the target business units, as applicable, and
(3) net debt for the Company was based on such amount as of September 30, 2019, and was calculated including restricted cash. Accordingly, this information may not reflect current or
future market conditions.
In
addition, unless the context indicates otherwise, (1) per share amounts for the Company's ordinary shares were calculated on a diluted basis, using the treasury stock method,
based on shares, options and warrants outstanding as of December 20, 2019, as provided by the management of the Company, (2) Enterprise Value for the Company was calculated by adjusting
for (a) estimated cash payments in connection with acquisitions consummated or expected to be consummated during the fourth quarter of 2019, (b) the present value of estimated principal
payments to be collected with respect to long-term receivables from the Company's Peru construction contract and the contracts with the government of St. Maarten (and not otherwise reflected in
estimated Adjusted EBITDA) and (c) the net value of estimated usage of net operating loss carryforwards, (3) estimated 2019 data for the Company was based on data pro forma for
acquisitions consummated or expected to be consummated during 2019 and (4) estimated data based on internal forecasts and estimates for the Company were based on the base case forecast
described more fully below under "Projected Financial Information."
Selected Public Company Analysis. UBS compared selected multiples related to Enterprise Value for the Company on a standalone basis,
and for the
merger, to the corresponding multiples for the selected publicly traded companies in the U.S.-listed water services and related infrastructure industries identified below. These companies were
selected because their equity is publicly traded in the United States, they are focused on the water services and related infrastructure industries.
For
each of the companies selected by UBS, UBS reviewed, among other things multiples of Enterprise Values to estimated calendar year 2020 ("2020E") Adjusted EBITDA ("EV/Adj. EBITDA")
and 2020E Adjusted EBITDA less capital expenditure ("EV/Adj. EBITDA Capex"). Estimated financial data for the selected companies (and the Company (Research)) were based on
publicly available Wall Street research analysts' consensus estimates, public filings and other publicly available information. Other estimated financial data for the Company was based on internal
forecasts and estimates referred to above for the Company, prepared by the Company management.
48
Table of Contents
The list of selected companies and related high, mean, median and low multiples for such selected companies and for the Company (based upon both Wall Street
research and management estimates) are as follows:
|
|
|
|
|
|
|
|
|
|
EV/2020E Adj.
EBITDA (x)
|
|
EV/2020E Adj.
EBITDA Capex (x)
|
|
Selected Companies
|
|
|
|
|
|
|
|
Pentair plc
|
|
|
14.3
|
|
|
15.8
|
|
Ormat Technologies, Inc.
|
|
|
12.1
|
|
|
32.6
|
|
Evoqua Water Technologies Corp. (1)
|
|
|
13.2
|
|
|
19.2
|
|
Covanta Holding Corp.
|
|
|
10.3
|
|
|
13.5
|
|
Cott Corporation
|
|
|
8.8
|
|
|
13.8
|
|
Primo Water Corp.
|
|
|
11.2
|
|
|
18.1
|
|
Consolidated Water Co. Ltd.
|
|
|
12.9
|
|
|
N/A
|
(2)
|
High
|
|
|
14.3
|
|
|
32.6
|
|
Mean
|
|
|
11.8
|
|
|
18.8
|
|
Median
|
|
|
12.1
|
|
|
16.9
|
|
Low
|
|
|
8.8
|
|
|
13.5
|
|
The Company (Management) at merger consideration
|
|
|
13.4
|
|
|
19.9
|
|
The Company (Research) at merger consideration
|
|
|
12.9
|
|
|
19.0
|
|
-
(1)
-
Data
used was pro forma for divestiture of WTG Holdco Australia Pty. Ltd.
-
(2)
-
EV/Adj.
EBITDA Capex data was not available.
Based
on the foregoing and using its professional judgment, UBS selected reference range multiples of (1) 10.5x to 13.0x 2020E EV/Adj. EBITDA and (2) 15.0x to 19.0x 2020E
EV/Adj. EBITDA less Capex. UBS then applied such multiple ranges to corresponding financial data for the Company (based on
2020E data provided by management of the Company). UBS then derived implied per share reference ranges from the resulting implied Enterprise Value reference ranges, using the net debt and diluted
share information described above. This analysis indicated the following implied per share reference ranges for ordinary shares, as compared to the merger consideration:
|
|
|
|
|
2020E EV/Adj. EBITDA
|
|
2020E EV/Adj. EBITDA Capex
|
|
Merger Consideration
|
$20.52 - $26.61
|
|
$19.56 - $26.12
|
|
$27.10
|
Selected Transactions Analysis. UBS reviewed the purchase prices paid in the 26 transactions set forth below, which involved selected
targets in the
water-related solutions and utility industries that were announced after January 1, 2010, and involved a target company or business that had implied transaction values greater than
$100 million. UBS calculated and compared the implied Enterprise Value for each target, based on the implied purchase price paid for the common equity of the target company (or the implied
purchase price paid for the business unit, as applicable), as a multiple of the target's (1) Adjusted EBITDA for the last twelve month period for which financial information was publicly
available ("LTM") immediately preceding the announcement of the relevant transaction and (2) Adjusted EBITDA less capital expenditure for the LTM immediately preceding the announcement of the
relevant transaction, based on publicly reported financial information.
49
Table of Contents
The
list of selected transactions and related high, mean, median and low multiples for such selected transactions and for the Company (based upon, in the case of the Company, estimated
calendar year 2019 ("2019E") results) are as follows:
|
|
|
|
|
|
|
|
|
Announcement
Date
|
|
Acquiror
|
|
Target
|
|
EV/LTM Adj. EBITDA (x)
|
|
EV/LTM Adj. EBITDA Capex (x)
|
01/19
|
|
Shawcor Ltd.
|
|
ZCL Composites Inc.
|
|
13.3
|
|
15.6
|
01/19
|
|
Pentair plc
|
|
Aquion, Inc.
|
|
~12.8
|
|
N/A (1)
|
01/19
|
|
Pentair plc
|
|
Pelican Water Systems as owned by Enviro Water Solutions LLC
|
|
N/A (2)
|
|
N/A (2)
|
11/18
|
|
Platinum Equity
|
|
Lonza America Inc.
|
|
16.7
|
|
N/A (1)
|
11/18
|
|
AquaVenture Holdings Ltd.
|
|
AUC Group, L.P.
|
|
12.5
|
|
N/M (3)
|
11/17
|
|
Fluidra S.A.
|
|
Zodiac Pool Solutions LLC
|
|
10.5
|
|
12.7
|
09/17
|
|
Kuraray Co., Ltd.
|
|
Calgon Carbon Corporation
|
|
15.6
|
|
33.1
|
08/17
|
|
Mexichem, S.A.V. de C.V.
|
|
Netafim, Ltd.
|
|
15.1
|
|
N/A (1)
|
07/17
|
|
Culligan International Company
|
|
Zip Industries (Aust) Pty Ltd
|
|
15.4
|
|
N/A (1)
|
06/17
|
|
CCMP Capital Advisors, LP and MSD Partners, L.P.
|
|
Hayward Industries, Inc.
|
|
12.0
|
|
N/A (1)
|
03/17
|
|
SUEZ Water Technologies and Caisse de dépôt et placement du Québec
|
|
GE Water & Process Technologies (owned by GE Osmonics, Inc.)
|
|
~12.5
|
|
15.5
|
11/16
|
|
Advent International
|
|
Culligan International Company
|
|
11.0
|
|
12.5
|
10/16
|
|
Rhone Group
|
|
Zodiac Pool Solutions LLC
|
|
11.8
|
|
14.3
|
08/16
|
|
Xylem Inc.
|
|
Sensus Worldwide Limited
|
|
10.7
|
|
N/A (1)
|
05/15
|
|
Danaher Corporation
|
|
Pall Corporation
|
|
20.8
|
|
22.7
|
02/15
|
|
3M Company
|
|
Polypore International Inc. (Separations Media)
|
|
13.7
|
|
16.4
|
11/14
|
|
Castik Capital S.a.r.l.
|
|
Waterlogic plc
|
|
9.6
|
|
N/M (3)
|
11/14
|
|
Watts Water Technologies, Inc.
|
|
AERCO International, Inc.
|
|
11.0
|
|
N/A (1)
|
02/14
|
|
Clayton, Dubilier & Rice LLC
|
|
Ashland Water Technologies (owned by Ashland Inc.)
|
|
10.2
|
|
14.3
|
10/13
|
|
AEA Investors LP
|
|
Siemens Water Technologies (owned by Siemens AG)
|
|
9.0
|
|
13.3
|
07/11
|
|
A.O. Smith Corp.
|
|
Lochnivar Corporation
|
|
10.1
|
|
N/A (1)
|
07/11
|
|
Ecolab Inc.
|
|
Nalco Holding Company
|
|
11.7
|
|
N/A (1)
|
04/11
|
|
Sulzer Ltd.
|
|
Cardo Flow Solutions Sweden AB (owned by Cardo AB)
|
|
12.7
|
|
N/A (1)
|
04/11
|
|
Pentair plc
|
|
Norit Clean Process Technologies (owned by Norit Holding, B. V.)
|
|
14.4
|
|
N/A (1)
|
04/11
|
|
Watts Water Technologies, Inc.
|
|
Danfoss Socla and Water (owned by Danfoss Socla S.A.S.)
|
|
~10.0
|
|
N/A (1)
|
06/10
|
|
ITT Corporation
|
|
Godwin Pumps of America, Inc.
|
|
N/A (2)
|
|
N/A (2)
|
|
|
|
|
|
|
|
|
|
The Company at merger consideration (4)
|
|
13.6
|
|
26.0
|
|
|
|
|
|
|
|
|
|
High
|
|
20.8
|
|
33.1
|
Mean
|
|
12.6
|
|
17.0
|
Median
|
|
12.2
|
|
14.9
|
Low
|
|
9.0
|
|
12.5
|
-
(1)
-
LTM
Adj. EBITDA Capex data was not available.
-
(2)
-
LTM
Adj. EBITDA and LTM Adj. EBITDA Capex data was not available.
-
(3)
-
LTM
Adj. EBITDA Capex data was deemed not meaningful.
-
(4)
-
LTM
Adj. EBITDA and LTM Adj. EBITDA Capex based on 2019E figures.
50
Table of Contents
Based
on the foregoing and using its professional judgment, UBS selected reference range multiples of (1) 11.5x to 14.0x EV/LTM Adj. EBITDA and (2) 15.0x to 17.0x EV/LTM
Adj. EBITDA less Capex multiple. UBS then applied such multiple ranges to corresponding financial data for the Company (based on 2019E results provided by management of the Company). UBS then derived
implied per share reference ranges from the resulting implied Enterprise Value reference ranges, using the net debt and diluted share information described above. This analysis indicated the following
implied per share reference ranges for ordinary shares, as compared to the merger consideration:
|
|
|
|
|
EV/LTM Adj. EBITDA
|
|
EV/LTM Adj. EBITDA CapEx
|
|
Merger Consideration
|
$22.47 - $28.45
|
|
$13.78 - $16.29
|
|
$27.10
|
Discounted Cash Flow Analysis. UBS performed a discounted cash flow analysis of the Company on a standalone basis using the base case
forecast
referred to below under "Projected Financial Information" that UBS was directed to utilize for purposes of its analysis. UBS calculated a
range of implied present values as of December 31, 2019 of the standalone after-tax unlevered free cash flows that the Company was forecasted to generate from January 1, 2020 through
December 31, 2024 using discount rates ranging between 8.5% and 9.5% based on the Company's estimated weighted average cost of capital ("WACC") using the capital asset pricing model, together
with a size premium. UBS also calculated estimated terminal values for the Company as of December 31, 2024, based on the estimated standalone Adjusted EBITDA less capital expenditures for
fiscal year 2024, as adjusted to reflect the Company's estimated normalized capital expenditures, using terminal multiples of 15.0x to 17.0x. The estimated terminal values were then discounted to
present value as of December 31, 2019 using discount rates ranging between 8.5% and 9.5% based on the Company's estimated WACC. UBS then derived an implied per share reference range from the
resulting implied Enterprise Value reference range, using the net debt and diluted share information described above. This analysis resulted in the following implied per share reference range for
ordinary shares as compared to the merger consideration:
|
|
|
Implied Per Share Reference Range
|
|
Merger Consideration
|
$20.49 - $24.28
|
|
$27.10
|
Other Information. UBS also noted for the special committee certain additional factors that were not relied upon in rendering its
opinion, but were
provided for informational purposes, including the following review:
-
-
the historical intraday trading prices for ordinary shares during the 52-week period ended December 20, 2019, which reflected low and
high stock prices during such period ranging from $16.08 to $23.35 per share, as compared to the closing price of ordinary shares on December 20, 2019 of $21.76 per share and the merger
consideration of $27.10 per share;
-
-
one-year forward stock price targets for ordinary shares in recently published, publicly available Wall Street research analysts' reports,
which indicated low and high stock price targets ranging from $25.00 to $37.00 per share, as compared to the merger consideration of $27.10 per share;
-
-
a discounted cash flow analysis using the same discount rates and terminal multiples as described above, but based on the M&A forecast
described below under "Projected Financial Information", which resulted in a reference range of implied equity value per share of ordinary
shares of approximately $19.65 to $24.64, as compared to the merger consideration of $27.10 per share; and
51
Table of Contents
-
-
two discounted cash flow analyses, based on a sum of the parts valuation using five-year standalone projections for each of the Quench and
Seven Seas Water businesses, as provided by management of the Company (based on each of the base case forecast and M&A forecast described below under "Projected
Financial Information"), and using the same discount rates as described above, but using, in the case of Quench, a range of perpetuity growth rates of 3.5% to 4.5% to calculate
a terminal value and using, in the case of Seven Seas Water, a range of perpetuity growth rates of 2.5% to 3.5% to calculate a terminal value; these discounted cash flow analyses resulted in reference
ranges of implied equity values per share of ordinary shares of approximately $20.29 to $30.75, in the case of the sum of the parts discounted cash flow analysis using the base case forecast, and
approximately $18.70 to $32.27 in the case of the sum of the parts discounted cash flow analysis using the M&A forecast, in each case, as compared to the merger consideration of $27.10 per share.
Under the terms of UBS' engagement by the special committee, the Company has agreed to pay UBS for its financial advisory services in connection
with the proposed transaction an aggregate fee currently estimated to be approximately $5.3 million, $3.0 million of which became payable upon delivery of UBS' opinion and remainder of
which is contingent upon consummation of the merger. In addition, the Company has agreed to reimburse UBS for certain expenses, including certain fees, disbursements and other charges of its counsel,
and to indemnify UBS and related parties against certain liabilities, including certain liabilities under federal securities laws, relating to, or arising out of, its engagement.
In
the ordinary course of business, UBS, its affiliates and its and their respective employees may currently own or trade loans, debt and/or equity securities of the Company and/or
affiliates of Parent (including Advent and funds affiliated with Centerbridge Partners, L.P. and/or their portfolio companies ("Centerbridge Partners"), who are Parent's principal equity investors)
for its own account or for the accounts of customers, and may at any time hold a long or short position in such securities.
In
connection therewith, UBS and/or its affiliates have provided services unrelated to the merger to the Company and its affiliates and/or Parent and its affiliates (including affiliates
of each of Advent and Centerbridge Partners) and received compensation for such services. In particular, since December 1, 2017, the Global Banking division of UBS Investment Bank, a business
group of UBS Group AG, has acted with respect to (1) the Company as bookrunner in connection with a follow on offering of ordinary shares, for which it received compensation of less than
$1.0 million; (2) Advent as (a) financial advisor in connection with the acquisitions of two portfolio companies and the sale of one portfolio company, (b) joint bookrunner
in connection with the initial public offering of equity securities of a portfolio company and (c) underwriter in connection with five offerings of debt securities by four separate portfolio
companies, for which it received aggregate compensation in excess of $20.0 million and less than $35.0 million; and (3) Centerbridge Partners as (a) financial advisor in
connection with the acquisition of one portfolio company and the sales of two portfolio companies and (b) joint bookrunner
in connection with an offering of debt securities by a portfolio company, for which it received aggregate compensation in excess of $6.0 million and less than $10.0 million.
The
special committee selected UBS as a financial advisor in connection with the merger because UBS is an internationally recognized investment banking firm with substantial experience
in similar transactions. UBS is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities and private placements.
52
Table of Contents
THIS
PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED FEBRUARY 18, 2020. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
95
Table of Contents
ANNEX A
AGREEMENT AND PLAN OF MERGER
among
CULLIGAN INTERNATIONAL COMPANY,
AMBERJACK MERGER SUB LIMITED
and
AQUAVENTURE HOLDINGS LIMITED
Dated as of December 23, 2019
Table of Contents
TABLE OF CONTENTS
Table of Contents
A-ii
Table of Contents
INDEX OF DEFINED TERMS
|
|
|
Term
|
|
Section
|
2019 Audited Financial Statements
|
|
5.6
|
Acquisition Inquiry
|
|
5.2
|
Acquisition Proposal
|
|
5.2
|
Acquisition Transaction
|
|
5.2
|
Action
|
|
8.5
|
Adverse Recommendation Change
|
|
5.2
|
Affiliate
|
|
8.5
|
Agreement
|
|
Preamble
|
Alternative Acquisition Agreement
|
|
7.1
|
Alternative Debt Financing
|
|
5.6
|
Anti-Bribery Law
|
|
8.5
|
Antitrust Law
|
|
8.5
|
Articles of Merger
|
|
1.3
|
Best Efforts Debt Financing
|
|
5.6
|
Book-Entry Shares
|
|
2.3
|
Borrower
|
|
4.5
|
Breakup Fee
|
|
7.3
|
Business Day
|
|
8.5
|
BVI Act
|
|
Recitals
|
Certificate
|
|
2.3
|
Citi
|
|
3.18
|
Closing
|
|
1.2
|
Closing Date
|
|
1.2
|
Code
|
|
2.4
|
Company
|
|
Preamble
|
Company Articles
|
|
1.5
|
Company Board
|
|
3.2
|
Company Contract
|
|
3.13
|
Company Disclosure Letter
|
|
Article III
|
Company Employee
|
|
5.7
|
Company IP Contract
|
|
8.5
|
Company Memorandum
|
|
1.5
|
Company Phantom Unit
|
|
8.5
|
Company Plans
|
|
3.11
|
Company Recommendation
|
|
5.3
|
Company Registered IP
|
|
8.5
|
Company SEC Documents
|
|
3.6
|
Company Shareholder Approval
|
|
3.2
|
Company Stock Option
|
|
8.5
|
Company Stock Plans
|
|
8.5
|
Confidentiality Agreement
|
|
5.4
|
Contract
|
|
8.5
|
Control
|
|
8.5
|
Copyrights
|
|
8.5
|
Debt Commitment Letter
|
|
4.5
|
Debt Fee Letter
|
|
4.5
|
Debt Financing
|
|
4.5
|
Debt Financing Sources
|
|
8.5
|
A-iii
Table of Contents
|
|
|
Term
|
|
Section
|
Dissenting Shares
|
|
8.5
|
Effective Time
|
|
1.3
|
Environmental Laws
|
|
8.5
|
Equitable Exceptions
|
|
3.2
|
Equity Commitment Letter
|
|
4.5
|
Equity Financing
|
|
4.5
|
ERISA
|
|
3.11
|
ERISA Affiliate
|
|
3.11
|
ESPP
|
|
2.2
|
Exchange Act
|
|
3.3
|
Existing First Lien Parent Credit Facility
|
|
8.5
|
Existing Second Lien Parent Credit Facility
|
|
8.5
|
Export Control Laws
|
|
8.5
|
Financing
|
|
4.5
|
Financing Commitments
|
|
4.5
|
Financing Cooperation Expenses
|
|
7.4
|
Foreign Plan
|
|
3.11
|
GAAP
|
|
3.6
|
Governmental Entity
|
|
8.5
|
Hazardous Materials
|
|
8.5
|
HSR Act
|
|
3.3
|
Indemnified Person
|
|
5.10
|
Intellectual Property
|
|
8.5
|
Intervening Event
|
|
5.2
|
IRS
|
|
3.11
|
Knowledge
|
|
8.5
|
Law
|
|
8.5
|
Leased Real Property
|
|
3.14
|
Lender Parties
|
|
4.5
|
Licensed Intellectual Property
|
|
8.5
|
Lien
|
|
8.5
|
Material Adverse Effect
|
|
8.5
|
Maximum Amount
|
|
5.10
|
Measurement Time
|
|
3.4
|
Merger
|
|
Recitals
|
Merger Consideration
|
|
2.1
|
Merger Sub
|
|
Preamble
|
Ordinary Shares
|
|
3.4
|
Outside Date
|
|
7.1
|
Owned Intellectual Property
|
|
3.15
|
Owned Real Property
|
|
3.14
|
Paid Off Indebtedness
|
|
5.6
|
Parent
|
|
Preamble
|
Parent Material Adverse Effect
|
|
8.5
|
Parent Plan
|
|
5.7
|
Parent Refinancing
|
|
8.5
|
Parent Termination Fee
|
|
7.4
|
Patents
|
|
8.5
|
Paying Agent
|
|
2.3
|
Payment Fund
|
|
2.3
|
A-iv
Table of Contents
|
|
|
Term
|
|
Section
|
Permits
|
|
3.10
|
Permitted Lien
|
|
8.5
|
Person
|
|
8.5
|
Plan of Merger
|
|
1.3
|
Proxy Statement
|
|
5.3
|
Recommendation Change Notice
|
|
5.2
|
Registrar
|
|
1.3
|
Representatives
|
|
8.5
|
Required Information
|
|
8.5
|
RSU
|
|
8.5
|
Sanctioned Person
|
|
8.5
|
Sanctions
|
|
8.5
|
Sarbanes Oxley Act
|
|
8.5
|
SEC
|
|
3.6
|
Securities Act
|
|
3.6
|
Shareholder Litigation
|
|
8.5
|
Shareholder Notice
|
|
5.3
|
Shareholders Meeting
|
|
5.3
|
Shares
|
|
2.1
|
Solvent
|
|
4.6
|
Special Committee
|
|
8.5
|
Specified Jurisdictions
|
|
8.5
|
Sponsor
|
|
4.5
|
Subsidiary
|
|
8.5
|
Superior Proposal
|
|
5.2
|
Surviving Company
|
|
1.1
|
Takeover Restrictions
|
|
3.17
|
Targeted Audit Delivery Date
|
|
5.6
|
Tax Returns
|
|
3.12
|
Taxes
|
|
3.12
|
Trade Secrets
|
|
8.5
|
Trademarks
|
|
8.5
|
Transaction Documents
|
|
8.5
|
Triggering Event
|
|
8.5
|
UBS
|
|
3.18
|
Voting Agreements
|
|
Recitals
|
WARN
|
|
5.7
|
|
|
|
A-v
Table of Contents
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December 23, 2019, among CULLIGAN INTERNATIONAL
COMPANY, a Delaware corporation ("Parent"), AMBERJACK MERGER SUB LIMITED, a business company incorporated under the laws of the British Virgin Islands and a wholly-owned
subsidiary of Parent ("Merger Sub"), and AQUAVENTURE HOLDINGS LIMITED, a business company incorporated under the laws of the British Virgin Islands (the
"Company").
RECITALS
WHEREAS, the Board of Directors of each of the Company (acting upon the recommendation of the Special Committee), Parent and Merger Sub deemed
it advisable and in the best interests of their respective shareholders or stockholders, as applicable, to consummate the merger, on the terms and subject to the conditions set forth in this
Agreement, of Merger Sub with and into
the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent (the "Merger"), all in accordance with the BVI Business Companies Act, 2004, as
amended (the "BVI Act"), of the British Virgin Islands;
WHEREAS,
the Boards of Directors of each of the Company (acting upon the recommendation of the Special Committee), Parent and Merger Sub have approved the Merger, this Agreement and the
Plan of Merger and the other transactions contemplated hereby;
WHEREAS,
the Board of Directors of the Company (acting upon the recommendation of the Special Committee) has approved a resolution recommending to the shareholders of the Company that
they adopt this Agreement and the Plan of Merger;
WHEREAS,
concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent's and Merger Sub's willingness to enter into this Agreement, Parent
is entering into voting agreements with certain shareholders of the Company (the "Voting Agreements").
NOW,
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and subject to the conditions set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the BVI Act, at the Effective Time, Merger Sub shall be merged with and into the Company,
whereupon the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving company in the Merger (the "Surviving Company") and
as a wholly-owned subsidiary of Parent.
SECTION 1.2 Closing.
The closing of the Merger (the "Closing") shall take place at 10:00 a.m., New York time, (a) on the date as soon as practicable (and, in any
event, within three Business Days) following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in Article VI (other
than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by applicable Law, waiver of those conditions), at the offices
of Goodwin Procter LLP, 100 Northern Avenue, Boston, Massachusetts or (b) on such other date or time as may be mutually agreed to in writing by Parent and the Company; provided, that
notwithstanding the foregoing, in no event shall the Closing take place prior to the Inside Date (determined after giving effect to any extensions as set forth in the definition thereof) without the
prior written consent of Parent. The date on which the Closing occurs is referred to in this Agreement as the "Closing Date."
Table of Contents
SECTION 1.3 Effective Time.
Upon the terms and subject to the provisions of this Agreement, at the Closing, the parties shall execute and file the articles of merger, in the form attached hereto as
Exhibit A (the "Articles of Merger") and the plan of merger, in the form attached hereto as
Exhibit B (the "Plan of Merger") with the Registrar of Corporate Affairs of the British Virgin Islands (the
"Registrar") pursuant to Section 171 of the BVI Act, and at the Closing, shall make any and all other filings or recordings required under the BVI Act in connection
with the Merger (including the filing by Merger Sub's registered agent of a letter confirming it has no objections to the Merger). The Merger shall become effective at such time as the Articles of
Merger are duly registered by the Registrar, or at such other date or time as Parent and the Company shall agree in writing (subject to the requirements of the BVI Act) and shall specify in the
Articles of Merger (the time the Merger becomes effective, the "Effective Time").
SECTION 1.4 Effects of the Merger.
The Merger shall have the effects set forth in this Agreement, the Plan of Merger, the Articles of Merger and in the relevant provisions of the BVI Act. Without limiting the generality
of the foregoing, at the Effective Time, all of the assets (including property), rights, privileges, powers and franchises of the Company and Merger Sub shall continue in the Surviving Company, and
all claims, debts, liabilities and duties of the Company and Merger Sub shall continue as the claims, debts, liabilities and duties of the Surviving Company.
SECTION 1.5 Memorandum of Association and Articles of Association.
At the Effective Time, the Amended and Restated Memorandum of Association (the "Company Memorandum") and Articles of Association (the "Company
Articles") of the Company shall be amended so that they read in their entirety as set forth in Exhibit C hereto, and, as so amended, shall be the
memorandum of association and articles of association of the Surviving Company until thereafter amended in accordance with its terms and as provided by applicable Law.
SECTION 1.6 Directors.
Unless otherwise determined by Parent prior to the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Company
immediately after the Effective Time until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.
SECTION 1.7 Officers.
The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Company until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Conversion of Shares.
At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any shares of capital stock of the Company, Parent
or Merger Sub:
(a) Each
ordinary share, of no par value of the Company (a "Share" and collectively, the "Shares"), issued and
outstanding immediately prior to the Effective Time (other than (i) Shares to be cancelled in accordance with paragraph (b) below and (ii) any Dissenting Shares) shall be
converted automatically into and shall thereafter represent only the right to receive $27.10 in cash, without interest (the "Merger Consideration"). As of the Effective
Time, but subject to Section 2.5, all Shares shall no longer
be outstanding and shall automatically be cancelled and shall cease to exist, and shall thereafter only represent the right to receive the Merger Consideration.
(b) Each
Share held in the treasury of the Company or owned, directly or indirectly, by Parent, Merger Sub or any wholly-owned Subsidiary of the Company immediately prior to
the
A-2
Table of Contents
Effective
Time shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(c) Each
ordinary share of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and
non-assessable ordinary share of the Surviving Company.
(d) If
at any time during the period between the date of this Agreement and the Effective Time, the outstanding shares of the Company shall be changed into a different
number of shares or a different class or shall have different terms, in each case as a result of any reclassification, recapitalization, share split (including a reverse share split), stock dividend
or any other similar event, then the Merger Consideration shall be equitably adjusted to reflect such event so as to provide Parent and the holders of Shares the same economic effect as contemplated
by this Agreement prior to such event.
SECTION 2.2 Treatment of Options and Other Equity-Based Awards.
(a) At the Effective Time, each Company Stock Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall be cancelled at the Effective
Time in exchange for the right of the holder of such Company Stock Option to receive, for each Share subject to such Company Stock Option, an amount in cash, without interest and subject to deduction
for any required withholding Tax, equal to the excess, if any, of the Merger Consideration over the applicable exercise price, with the aggregate amount of such payment rounded down to the nearest
cent.
(b) At
the Effective Time, each RSU, whether vested or unvested, that is outstanding immediately prior to the Effective Time, shall become fully vested and shall be
cancelled and converted at the Effective
Time into the right of the holder of such RSU to receive, for each RSU, an amount in cash, without interest and subject to deduction for any required withholding Tax, equal to the Merger
Consideration, with the aggregate amount of such payment rounded up to the nearest cent.
(c) At
the Effective Time, each Company Phantom Unit, whether vested or unvested, that is outstanding immediately prior to the Effective Time, shall become fully vested and
shall be cancelled and converted at the Effective Time into the right of the holder of such Company Phantom Unit to receive, for each Company Phantom Unit, an amount in cash, without interest and
subject to deduction for any required withholding Tax, equal to the Merger Consideration, with the aggregate amount of such payment rounded up to the nearest cent.
(d) As
promptly as practicable following the Effective Time (and, in any event, not later than the third Business Day thereafter), the Surviving Company shall pay through
its payroll system the amounts due and payable under this Section 2.2(d) to each holder of Company Stock Options, RSUs and Company Phantom Units.
(e) With
respect to the Company 2016 Employee Share Purchase Plan (the "ESPP"), the Company will take all actions reasonably necessary to
provide that (i) no new Offering (as defined in the ESPP) shall commence following the date of this agreement, (ii) no individual participating in the ESPP shall be permitted to
(A) increase the amount of his or her rate of payroll contributions thereunder from the rate in effect as of the date of this agreement, or (B) make separate non-payroll contributions to
the ESPP on or following the date of this agreement, and (iii) no individual who is not participating in the ESPP as of the date of this agreement may commence participation in the ESPP. No
later than three Business Days prior to the Effective Time, the outstanding offering that is in progress on such date shall terminate and be the final offering under the ESPP and the accumulated
payroll deductions of each participant under the ESPP will be returned to the participant by the Surviving Company pursuant to the terms of the ESPP, without the issuance of any Shares.
A-3
Table of Contents
(f) Prior
to the Effective Time, the Company shall deliver all required notices to each holder of Company Stock Options, RSUs or Phantom Stock Units setting forth each
holder's rights pursuant to the respective Company Stock Plan and stating that such Company Stock Options, RSUs or Phantom Stock Units shall be treated in the manner set forth in this
Section 2.2.
(g) Prior
to the Effective Time, the Company and the Company Board or any committee thereof, as applicable, shall take all actions necessary to effectuate the provisions of
this Section 2.2 and to ensure that, as of the Effective Time, (i) the Company Stock Plans and the ESPP shall terminate and (ii) no holder of a
Company Stock Option, RSU, Company Phantom Unit or other Person shall have any
rights with respect to any equity incentive award to acquire the capital stock or shares, as applicable, of the Company, the Surviving Company or any of their Subsidiaries, except the right to receive
the payment contemplated by this Section 2.2 in cancellation and settlement thereof.
SECTION 2.3 Exchange and Payment.
(a) Prior to the Effective Time, Parent shall enter into an agreement (in form and substance reasonably acceptable to the Company) with a reputable bank or trust company
reasonably acceptable to the Company (which may be the Company's transfer agent) to act as paying agent in connection with the Merger (the "Paying Agent"). At or prior to
the Effective Time, Parent shall deposit (or cause to be deposited) with the Paying Agent, to be held in trust for the benefit of the holders of the Shares, cash in an amount sufficient to pay the
aggregate Merger Consideration in accordance with this Article (the "Payment Fund"). The Payment Fund shall not be used for any purpose other than to fund payments of the
Merger Consideration due pursuant to this Article.
(b) Promptly
after the Effective Time (and after receipt by the Paying Agent from the Company's transfer agent of all information reasonably necessary to enable the Paying
Agent to effect the mailing set forth in this Section 2.3(b)), the Surviving Company shall cause the Paying Agent to mail to each holder of record of an outstanding
certificate (a "Certificate"), if any, that immediately prior to the Effective Time represented outstanding Shares (i) a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the Certificates held by such Person shall pass, only upon proper delivery of the Certificates to the Paying Agent) and
(ii) instructions for use in effecting the surrender of such Certificate in exchange for the Merger Consideration payable with respect thereto. Upon surrender of a Certificate to the Paying
Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each Share formerly represented by such Certificate, and the Certificate so surrendered shall forthwith be cancelled.
(c) The
Paying Agent shall issue and deliver to each holder of uncertificated Shares represented by book entry ("Book-Entry Shares"), if any,
the Merger Consideration for each such Book-Entry Share, upon receipt of an "agent's message" by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably
request), and such Book-Entry Shares shall then be cancelled.
(d) No
interest will be paid to or accrued for the benefit of holders of Certificates or Book-Entry Shares on the Merger Consideration payable in respect of such
Certificates or Book-Entry Shares.
(e) If
payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate or Book-Entry Share is registered, it
shall be a condition of payment that such Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer or such Book-Entry Share shall be properly transferred
and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder
A-4
Table of Contents
of
the Certificate or Book-Entry Share surrendered or shall have established to the satisfaction of Parent and the Paying Agent that such tax either has been paid or is not applicable.
(f) Until
surrendered as contemplated by this Section 2.3, each Certificate and Book-Entry Share shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration payable in respect of Shares theretofore represented by such Certificate or Book-Entry Shares, as applicable, without any
interest thereon.
(g) All
cash paid upon the surrender for exchange of Certificates or Book-Entry Shares in accordance with the terms of this Article shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares formerly represented by such Certificates or Book-Entry Shares.
(h) The
Paying Agent shall invest any cash included in the Payment Fund as directed by Parent; provided, that (i) no
investment of such cash shall have maturities that could prevent or delay payments to be made pursuant to this Agreement and (ii) such investments in all events shall be in short-term
obligations of the United States of America with maturities of no more than 30 days, or guaranteed by, and backed by the full faith and credit of, the United States of America. If for any
reason (including investment losses) the cash in the Payment Fund is insufficient to fully satisfy all of the payment obligations to be made by the Paying Agent hereunder, Parent shall promptly
deposit cash into the Payment Fund in an amount which is equal to such deficiency. Any interest and other income resulting from such investments shall be payable to the Surviving Company.
(i) At
any time following the first anniversary of the Effective Time, the Surviving Company shall be entitled to require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto) which have been made available to the Paying Agent and which have not been disbursed to holders of Certificates or Book-Entry Shares, and
thereafter such holders shall be entitled to look to Parent and the Surviving Company (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates or Book-Entry Shares.
(j) The
Surviving Company shall pay all charges and expenses of the Paying Agent in connection with the exchange of Shares for the Merger Consideration.
(k) If
any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit, in form and substance reasonably acceptable to Parent and the Paying
Agent, of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Paying Agent, the posting by such Person of a bond in such amount as
Parent or the Paying Agent may determine is reasonably necessary as indemnity against any claim that may be made against it or the Surviving Company with respect to such Certificate, the Paying Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement.
(l) None
of Parent, the Surviving Company, the Paying Agent or any other Person shall be liable to any Person in respect of any portion of the Payment Fund properly
delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificates or Book-Entry Shares shall not have been exchanged prior to the date on which
the related Merger Consideration would escheat to or become the property of any Governmental Entity, such Merger Consideration shall, to the extent permitted by applicable Law, become the property of
the Surviving Company, free and clear of all claims or interest of any Person previously entitled thereto.
A-5
Table of Contents
SECTION 2.4 Withholding Rights.
Parent, the Surviving Company and the Paying Agent shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement, including the consideration otherwise
payable to any holder of Shares, Company Stock Options, RSUs or Company Phantom Units, such amounts as Parent, the Surviving Company or the Paying Agent are required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of state, local or non-U.S. tax Law. Except with
respect to payments in the nature of compensation to be made to employees or former employees of the Company, if Parent, the Surviving Company or the Paying Agent determines that an amount is required
to be deducted and withheld, Parent shall use reasonable best efforts to provide the payee, at least three Business Days prior to the date the applicable payment is scheduled to be made:
(a) with written notice of the intent to deduct and withhold, which shall include a copy of the calculation of the amount to be deducted and withheld; and (b) a reasonable opportunity to
provide forms or other evidence that would exempt such amounts from withholding (or reduce such withholding). To the extent that amounts are so withheld, such withheld amounts shall be paid over to
the appropriate taxing authority and treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
SECTION 2.5 Dissenting Shares.
At or from the Effective Time, all Dissenting Shares shall automatically be cancelled and shall cease to exist or be outstanding, and each holder of Dissenting Shares shall cease to be a
shareholder of the Company (and shall not be a shareholder of the Surviving Company) and shall cease to have any rights thereto (including any right to receive such holder's portion of the aggregate
Merger Consideration pursuant to Section 2.1(a)), subject to and except for such rights as are granted under Section 179 of the BVI Act. If any holder of
Shares (other than a holder of Shares who consented in writing to the Company Shareholder Approval) fails to give written notice of its election to dissent from the Merger under Section 179 of
the BVI Act within twenty (20) days immediately following the date of the Shareholder Notice, or otherwise fails validly to dissent in accordance with the terms of
Section 179 of the BVI Act, then the rights of such holder under Section 179 of the BVI Act shall cease to exist, and the underlying Shares shall be cancelled in accordance with
Section 2.1(a), and shall entitle the holder thereof only to receive compensation in accordance with such Section 2.1(a). The
Company shall give Parent prompt notice, and in any event notice within one Business Day, of any notice or purported notice received by the Company of any shareholder's intent to exercise and/or
exercise of rights pursuant to Section 179 of the BVI Act, the withdrawal of any such notice and any other documents served upon the Company pursuant to or in connection with Section 179
of the BVI Act or a shareholder's dissent or appraisal rights. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent or as otherwise required by an order,
decree, ruling or injunction of a court of competent jurisdiction, make any payment with respect to any such exercise of dissenter's rights or offer to settle or settle any such rights.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth (a) in the Company SEC Documents filed or furnished prior to the date of this Agreement (but excluding any risk
factors and any disclosures included in any "forward-looking statements" disclaimer or other statements that are similarly non-specific and predictive or forward-looking in nature, other than specific
factual information contained therein), or (b) in the disclosure letter delivered by the Company to Parent contemporaneously with the execution of this Agreement (the "Company
Disclosure Letter") prepared in accordance with Section 8.16, the Company represents and warrants to Parent and Merger Sub as follows:
SECTION 3.1 Organization, Standing and Power.
(a) Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing (with respect to jurisdictions that
A-6
Table of Contents
recognize
such concept) under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each
jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except, with respect to clause (iii),
for any such failures to be so qualified or licensed or in good standing as, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.
(b) The
Company has previously furnished or otherwise made available to Parent a true and complete copy of the Company Memorandum and the Company Articles and the
organizational documents of each Subsidiary of the Company, each as amended to the date of this Agreement. The Company is not in violation of any provision of the Company Memorandum or the Company
Articles in any material respect.
SECTION 3.2 Authority; Execution; Delivery.
(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to the approval of this
Agreement and the transactions contemplated hereby pursuant to resolutions to be considered at a duly convened and constituted meeting of the shareholders of the Company by the holders of at least
two-thirds of the votes of those shareholders of the Company entitled to vote and voting on those resolutions (the "Company Shareholder Approval"), to consummate the
transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to approve this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the consummation of the Merger, to obtaining the Company Shareholder Approval. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors' rights
generally or by general principles of equity (collectively, the "Equitable Exceptions")).
(b) Prior
to the execution hereof, the Board of Directors of the Company (the "Company Board"), at a meeting duly called and held at which all
directors of the Company were present, in person or via telephone, duly and unanimously adopted, in accordance with the BVI Act, the Company Memorandum and the Company Articles (and acting upon the
unanimous recommendation of the Special Committee), resolutions (i) approving and authorizing the Company to execute and deliver the Transaction Documents, and approving the Merger and the
other transactions contemplated by this Agreement, (ii) determining that the Merger and the other transactions contemplated by the Transaction Documents are in the best interest of the Company,
(iii) recommending that the holders of the Shares
adopt a resolution authorizing this Agreement and the Plan of Merger by approving the Company Shareholder Approval, and (iv) submitting this Agreement, the Plan of Merger, the Articles of
Merger, the Merger and other transactions contemplated by this Agreement to the holders of Shares for their approval at the Shareholders Meeting.
(c) The
Company Shareholder Approval is the only vote or consent of the holders of any class or series of shares of the Company necessary to approve this Agreement or the
Merger or the other transactions contemplated hereby.
A-7
Table of Contents
SECTION 3.3 No Conflict; Consents and Approvals.
(a) The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will not:
(i) conflict
with or violate the Company Memorandum or the Company Articles;
(ii) assuming
that the representations and warranties of Parent and Merger Sub in Section 4.8 are accurate, and that all consents,
approvals and authorizations contemplated by paragraph (b) below have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to the Company
or any of its Subsidiaries or by which any of their assets or properties are bound; or
(iii) result
in any breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in the
loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any Company Contract; except, in the case of clauses (ii) and (iii), for any such
items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.
(b) The
execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will
not, with respect to the Company and its Subsidiaries, require any consent, approval, authorization or permit of, or action by, filing with or notification to, any Governmental Entity, except for
(i) such filings as may be required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) such filings as may be required under
any state securities or "blue sky" laws, (iii) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (iv) such
filings as are
necessary to comply with the applicable requirements of the New York Stock Exchange, (v) the filing with the Registrar of the Articles of Merger and Plan of Merger as required by the BVI Act,
and (vi) any such other consents, approvals, authorizations, Permits, actions, filings or notifications the failure of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 3.4 Capitalization.
(a) The Company is authorized to issue 250,000,000 ordinary shares of no par value ("Ordinary Shares"). As of the close of business on
December 20, 2019 (the "Measurement Time"), 31,774,577 Ordinary Shares were issued and outstanding, (B) no Ordinary Shares were held by the Company as
treasury shares, (C) 3,398,358 Ordinary Shares were subject to issuance pursuant to outstanding Company Stock Options, 626,941 Ordinary Shares were subject to issuance pursuant to outstanding
RSUs, and 51,968.98 Ordinary Shares were subject to issuance pursuant to outstanding Company Phantom Units and (D) 401,299 Ordinary Shares were reserved for issuance pursuant to the ESPP,
including 14,368 Ordinary Shares which are estimated to be subject to outstanding purchase rights under the ESPP (based on the closing price of a Share as of the Measurement Time).
(b) Except
as set forth above and except for changes since the close of business on the Measurement Time resulting from the exercise of Company Stock Options and the
settlement of RSUs or Company Phantom Units outstanding at such time, the grant of Company Stock Options or RSUs to non-officer employees or newly hired employees to the extent permitted by
Section 5.1(j) and the grant of Company Phantom Units to eligible members of the Company Board to the extent permitted by
Section 5.1(j), (i) there are not outstanding (A) any shares or other voting equity securities of the Company, (B) any securities of the
Company convertible into or exchangeable or exercisable for shares or voting equity securities of the Company, (C) any options or other rights to acquire from the Company, and no obligation of
the Company to issue, any shares, voting equity securities or securities convertible into or exchangeable or exercisable for shares or voting equity securities of the Company, or (D) stock
appreciation rights, "phantom"
A-8
Table of Contents
stock
rights, performance units, interests in or rights to the ownership or earnings of the Company or other equity equivalent or equity-based awards or rights; (ii) there are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any shares, voting equity securities or securities convertible into or exchangeable or exercisable for shares or voting equity
securities of the Company; and (iii) there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued
shares of the Company to which the Company is a party.
(c) No
Ordinary Shares of the Company are owned by any Subsidiary of the Company.
(d) All
outstanding Ordinary Shares of the Company are, and all shares reserved for issuance will be, when issued, duly authorized, validly issued, fully paid and
nonassessable, and are not, and will not be, subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right
under any provision of the BVI Act, the Company Memorandum, the Company Articles or any Contract to which the Company is a party or is otherwise bound.
(e) The
Company does not have outstanding any bonds, debentures, notes or other indebtedness having the right to vote (or convertible into, or exchangeable or exercisable
for, securities having the right to vote) with the holders of Ordinary Shares of the Company on any matter.
(f) There
are no stockholder agreements, voting trusts, investor rights agreements, registration rights agreements or other analogous agreements or understandings to which
the Company is a party and that relate to any of the Ordinary Shares of the Company.
(g) Section 3.4(g)
of the Company Disclosure Letter sets forth a true and complete list of all holders, as of the Measurement Time, of
outstanding Company Stock Options, RSUs and Company Phantom Units, indicating, as applicable, the type of award granted, the number of Shares subject to such award, the name of the Company Stock Plan
under which such award was granted, the date of grant, the exercise or purchase price of such award (if applicable) and the expiration date of such award.
(h) The
Company has made available to Parent true and complete copies of all Company Stock Plans and the forms of all stock option agreements evidencing outstanding Company
Stock Options and restricted stock unit agreements evidencing outstanding RSUs. No Company Stock Option or RSU was granted pursuant to an agreement that is materially different than the forms made
available to Parent. Each Company Stock Option, RSU and Company Phantom Unit was granted in compliance, in all material respects, with all applicable Laws and the terms and conditions of the Company
Stock Plan pursuant to which such award was granted.
SECTION 3.5 Subsidiaries.
(a) Section 3.5(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date hereof, of each Subsidiary of the
Company and its jurisdiction of incorporation or organization. Except as set forth on Section 3.5(a) of the Company Disclosure Letter, the Company does not,
directly or indirectly, own or hold any capital stock, membership interests or other ownership interests in any other Person.
(b) Each
of the outstanding shares of capital stock of each of the Company's Subsidiaries have been duly authorized and validly issued, and where applicable, are fully paid
and nonassessable, and all such shares are owned by the Company or another wholly-owned Subsidiary of the Company and are owned free and clear of all Liens, except where any such failure to own any
such shares free and clear, individually or in the aggregate, is not, and would not reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole.
A-9
Table of Contents
(c) There
are no options, warrants, convertible securities or other rights or Contracts of any character obligating any of the Subsidiaries to issue or sell any equity
interests. There are no outstanding contractual obligations of any Subsidiary to repurchase, redeem or otherwise acquire any equity interests in such Subsidiary or to make any investment (in the form
of a loan, capital contribution or otherwise) in any other Person. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to any
of the Subsidiaries. There are no voting trusts, proxies or other Contracts with respect to the voting of the equity interests of the Subsidiaries or any investor rights, registration rights,
stockholder or other Contract relating to, binding on or otherwise affecting the equity interests of any of the Subsidiaries.
SECTION 3.6 SEC Reports; Financial Statements.
(a) The Company has filed, furnished or otherwise transmitted all forms, reports, statements, certifications and other documents required to be filed or furnished by it with the
Securities and Exchange Commission (the "SEC") since December 31, 2017, including any certification or statement required by: (i) Rule 13a-14 or
Rule 15d-14 under the Exchange Act (and Section 302 of the Sarbanes-Oxley Act); (ii) Section 906 of the Sarbanes-Oxley Act; and (iii) any other rule or regulation
promulgated by the SEC or applicable to the Company SEC Documents filed on or after December 31, 2017 (all such items filed or furnished since such date, collectively, the
"Company SEC Documents"). Each Company SEC Document, as of its respective date or, if amended, as of the date of the last such amendment, complied as to form in all
material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as the case may be, each as in
effect on the date so filed or furnished. None of the Company SEC Documents, as of their respective dates or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date
of such amendment or superseding filing, contained any untrue statement of a material fact or omitted to state a 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.
(b) The
audited consolidated financial statements of the Company included in the Company's Annual Report on Form 10-K included in the Company SEC Documents
(i) have been prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or as permitted by Form 10-K), (ii) comply as to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, and (iii) fairly present, in all
material respects, the consolidated financial position of the Company and its Subsidiaries at the respective dates thereof and the results of their operations and cash flows for the periods indicated.
The unaudited consolidated financial statements of the Company included in the Company's Quarterly Reports on Form 10-Q included in the Company SEC Documents (A) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or as permitted by Form 10-Q), (B) comply as to form
in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, and (C) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the results of their operations and cash flows for the periods indicated (subject to normal
year-end adjustments).
(c) The
Company's "internal controls over financial reporting" (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) are sufficient to provide
reasonable assurances: (i) that transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles;
(ii) that transactions are executed only in accordance with the authorization of management; and (iii) regarding prevention or timely detection of the unauthorized acquisition, use or
disposition of the Company's properties or assets. The Company's
A-10
Table of Contents
"disclosure
controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are reasonably designed to ensure that (i) all information (both financial and
non-financial) 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 to the individuals responsible for
preparing such reports within the time periods specified in the rules and forms of the SEC and (ii) all such information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of the Company required under the
Exchange Act with respect to such reports.
(d) Since
December 31, 2017, the Company has disclosed to the Company's auditors and audit committee (i) all significant deficiencies and material weaknesses
in the design or operation of the Company's internal control over financial reporting and (ii) all fraud, whether or not material, that involves management or other employees who have a
significant role in the Company's internal control over financial reporting.
(e) Since
December 31, 2017, the Company has been in compliance in all material respects with the applicable listing and corporate governance rules and regulations of
the NYSE.
SECTION 3.7 No Undisclosed Liabilities.
Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except for liabilities and obligations
(a) reflected in the "liabilities" column of the Company's consolidated balance sheet included in its Form 10-Q with respect to the period ended September 30, 2019 (or disclosed
in the notes thereto), (b) incurred in the ordinary course of business since September 30, 2019, (c) for performance of obligations arising under the Company Contracts and not
arising under or resulting from any breach or non-performance of such Company Contract, (d) incurred pursuant to the transactions contemplated by this Agreement or any potential related
transactions, or (e) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.8 Absence of Certain Changes or Events.
Between September 30, 2019 and the date of this Agreement, (a) except for actions undertaken in connection with the potential sale of the Company, the business of the
Company and its Subsidiaries has been conducted in the ordinary course of business consistent with past practice in all material respects, (b) the Company and its Subsidiaries have not taken
any action that, if taken after the date hereof, would constitute a violation of Sections 5.1(c), 5.1(d),
5.1(e), 5.1(f), 5.1(g), 5.1(i), 5.1(j),
5.1(k), 5.1(l), 5.1(m), 5.1(n), 5.1(o) and
5.1(p) and (c) there has not been any event, change, circumstance, occurrence, effect or state of facts that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect.
SECTION 3.9 Litigation.
There is no Action pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries, other than any such Action that, individually or in
the aggregate, is not, and would not reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries nor any of their
respective assets is subject to any judgment, order, injunction, rule or decree of any Governmental Entity, except for those that, individually or in the aggregate, are not, and would not reasonably
be expected to be, material to the Company and its Subsidiaries, taken as a whole.
SECTION 3.10 Compliance with Laws.
(a) The Company and each of its Subsidiaries are and, since December 31, 2017, have been in compliance with all Laws applicable to them, except for any instances of
non-compliance that, individually or the aggregate, are not, and would not reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole. Since December 31, 2017,
neither the Company nor any of its Subsidiaries has received a written notice or other written communication from a Governmental Entity alleging a violation of Law that has resulted in, or would
A-11
Table of Contents
reasonably
be expected to result in, material liability to the Company and its Subsidiaries taken as a whole.
(b) The
Company and its Subsidiaries have in effect all permits, licenses, exemptions, authorizations, franchises, orders and approvals of all Governmental Entities
(collectively, "Permits") necessary for them to own, lease or operate their properties and to carry on their businesses as now conducted, except for any Permits the
absence of which, individually or the aggregate, are not, and would not reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole. All such Permits of the Company
and its Subsidiaries are in full force and effect, except where the failure to be in full force and effect, individually or the aggregate, are not and would not reasonably be expected to be, material
to the Company and its Subsidiaries, taken as a whole.
(c) Neither
the Company nor any of its Subsidiaries, nor any director or officer or, to the Company's Knowledge, employee, agent, or other person while acting on behalf or
for the benefit of the Company or any of its Subsidiaries:
(i) has
offered, provided, or authorized the provision of any money, property, contribution, gift, entertainment or other thing of value, directly or indirectly, to any
government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any political party or party official or
candidate for political office), or any other person acting in an official capacity, to influence official action or secure an improper advantage, or to encourage the recipient to breach a duty of
good faith or loyalty or the polices of his/her employer, or otherwise in violation of any Anti-Bribery Law;
(ii) is
a Sanctioned Person nor has engaged in, nor is it now engaged in, any dealings or transactions with or for the benefit of any Sanctioned Person, nor has otherwise
violated Sanctions; nor
(iii) is
party to any actual or threatened legal proceedings or outstanding enforcement actions relating to any breach or suspected breach of Anti-Bribery Laws, Sanctions,
or Export Control Laws.
SECTION 3.11 Benefit Plans; Employees.
(a) Section 3.11(a)(i)
of the Company Disclosure Letter sets forth a true and complete list of each material Company Plan, other than
Foreign Plans, and Section 3.11(a)(ii) of the Company Disclosure
Letter sets forth a true and complete list of each material Foreign Plan. "Company Plan" means each "employee benefit plan" (within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")) and all stock purchase, stock option, equity or equity-based incentive, severance,
retention, employment, consulting, change-in-control, fringe benefit, bonus, incentive, deferred compensation, medical, dental, vision, life, disability, retirement and all other employee benefit
plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the
transactions contemplated by this Agreement or otherwise), whether formal or informal, under which any current or former employee, director or independent contractor of the Company or its Subsidiaries
has any present or future right to benefits or the Company or its Subsidiaries has any present or future liability. "Foreign Plan" means each Company Plan that primarily
covers current or former employees, directors or independent contractors of the Company or its Subsidiaries based outside of the United States and/or that is subject to any Law other than U.S.,
federal, state or local law (other than any plan or program that is required by statute or maintained by a Governmental Authority to which the Company or its Subsidiaries contributes pursuant to
applicable Law).
A-12
Table of Contents
(b) With
respect to each Company Plan, the Company has furnished or made available to Parent a current, accurate and complete copy of the plan document and any amendments
thereto and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination, advisory or opinion letter of the Internal Revenue
Service (the "IRS"), if applicable; (iii) any summary plan description and all summaries of material modification; and (iv) for the two most recent years
(A) the Form 5500 and attached schedules, (B) audited financial statements of such Company Plan, and (C) actuarial valuation reports; (iv) any non-routine
communications to or from a Governmental Entity dated within the two years prior to the date of this Agreement; and (v) a written summary of the material terms of any unwritten material Company
Plan.
(c) Each
Company Plan intended to be qualified under Section 401(a) of the Code has received a favorable determination, advisory or opinion letter, as applicable,
from the IRS that it is so qualified (or the deadline for obtaining such a letter has not expired as of the date of this Agreement) and to the Knowledge of the Company, nothing has occurred since the
date of such letter that would reasonably be expected to cause the loss of such qualified status of such Company Plan. Each Foreign Plan, if required to be registered or approved by a Governmental
Authority, has been registered or approved and has been maintained in good standing with applicable regulatory authorities, and nothing has occurred since the date of the most recent approval or
application therefor relating to any such Foreign Plan that would reasonably be expected to adversely affect any such approval or good standing.
(d) None
of the Company, its Subsidiaries, or any other entity which, together with the Company or any of its Subsidiaries, would be treated as a single employer under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") has any liability in respect of or has in the past six years sponsored, maintained,
contributed to or had any liability in respect of (i) any defined benefit plan (as defined in Section 3(35) of ERISA, whether or not such plan is subject to ERISA), (ii) any plan
subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA (including a "multiemployer plan," as defined in Section 3(37) of ERISA), (iii) any "multiple employer
plan" (as defined in Section 413(c) of the Code), or (iv) any "multiple employer welfare arrangement" (within the meaning of Section 3(40) of ERISA). None of the Company Plans
provide for, and neither the Company nor any of its Subsidiaries has any liability in respect of, post-employment life or health insurance benefits or coverage for any current or former employee,
director or independent contractor or any beneficiary thereof, except as may be required under Part 6 of the Subtitle B of Title I of ERISA, or similar state Laws and at the sole expense of
such individual, or to the extent there are employer-provided payments for COBRA coverage pursuant to a Company Plan set forth on Section 3.11(a) of the Company Disclosure
Letter. No event has occurred and no condition exists that would, by reason of the Company's affiliation with any of its ERISA Affiliates, subject the Company or any of its Subsidiaries
to any material Tax, fine, Lien, penalty or other Liability imposed by ERISA, the Code or other applicable Law.
(e) With
respect to the Company Plans, except to the extent that the inaccuracy of any of the representations set forth in this paragraph (e), individually or in the
aggregate, has not had and would not reasonably be expected to result in material liability to the Company or its Subsidiaries, taken as a whole:
(i) each
Company Plan has been established, funded and administered in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and
other applicable Laws, and no prohibited transaction, as described in Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Company Plan, and all
contributions required to be made under the terms of any Company Plan or by applicable
A-13
Table of Contents
Law
have been made or have been accrued in accordance with the terms of the applicable Company Plan and applicable Laws; and
(ii) there
is no Action (including any investigation, audit or other administrative proceeding) by the Department of Labor, the Pension Benefit Guaranty Corporation, the IRS
or any other Governmental Entity or by any plan participant or beneficiary pending, or to the Knowledge of the Company, threatened, relating to the Company Plans, any fiduciaries thereof with respect
to their duties to the Company Plans or the assets of any of the trusts under any of the Company Plans (other than routine claims for benefits); and
(iii) each
Company Plan that is subject to Section 409A of the Code has complied in form and operation with the requirements of Section 409A of the Code as in
effect from time-to-time.
(f) Neither
the execution and delivery of this Agreement by the Company nor the consummation of the transactions contemplated hereby (either alone or in combination with any
other event) will (i) result in any payment becoming due to any current or former employee, director or independent contractor of the Company or any of its Subsidiaries, (ii) increase
the compensation or benefits payable, including equity benefits, to any current or former employee, director or independent contractor of the Company or any of its Subsidiaries or under any Company
Plan, (iii) result in the acceleration of the time of payment, funding or vesting of any compensation or benefits, including equity benefits, to any current or former employee, director or
independent contractor of the Company or any of its Subsidiaries or under any Company Plan, (iv) require any contributions or payments to fund any obligations under any Company Plan or
(v) create any limitation or restriction on the right of the Company or its Subsidiaries to merge, amend or terminate any Company Plan. No amount that has been or could be received (whether in
cash, property, the vesting of property or otherwise) as a result of or in connection with the consummation of the transactions contemplated by this Agreement (either alone or in combination with any
other event), by any current or former employee, officer, director or other service provider of the Company or any of its Subsidiaries could be characterized as an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code). No Company Plan provides for the gross-up or reimbursement of Taxes under Section 409A or Section 4999 of the Code.
(g) Neither
the Company nor any of its Subsidiaries is (i) a party to or otherwise bound by any collective bargaining agreement or other Contract with a labor union
or other labor organization, or (ii) as of the date of this Agreement, engaged in any negotiation with any labor union or other labor organization. As of the date hereof, neither the Company
nor any of its Subsidiaries is the subject of any material proceeding asserting that the Company or any of its Subsidiaries has committed an "Unfair Labor Practice" (as defined under the National
Labor Relations Act) or seeking to compel it to bargain with any labor union or other labor organization nor is there pending or, to the Knowledge of the Company, threatened in writing, nor has there
been since December 31, 2018 and through the date hereof any material labor strike, walk-out, work stoppage or lockout involving the Company or any of its Subsidiaries. Since
December 31, 2018 and through the date hereof, to the Knowledge of the Company, there have been no activities or proceedings of any labor union to organize any of the employees of the Company
or any of its Subsidiaries.
SECTION 3.12 Taxes.
(a) All
income and other material Tax Returns required to be filed by or on behalf of the Company and each of its Subsidiaries have been timely filed (after giving effect to
any extensions of time in which to make such filings), and all such Tax Returns are true and complete in all material respects and all material Taxes due and owing by the Company and each of its
Subsidiaries have been paid whether or not shown due on any such Tax Return.
A-14
Table of Contents
(b) The
Company and each Subsidiary have complied in all material respects with all applicable Laws relating to the payment, collection, withholding and remittance of Taxes
(including information reporting requirements) and neither the Company nor any of its Subsidiaries is delinquent in the payment or withholding of any material Tax.
(c) No
Liens for Taxes exist with respect to any assets or properties of the Company or any of its Subsidiaries, except for Permitted Liens.
(d) There
are no audits, examinations, investigations, inquiries or other proceedings now pending or, to the Knowledge of the Company, threatened against or otherwise with
respect to the Company or any of its Subsidiaries, in each case, with respect to any material Tax, and neither the Company nor any of its Subsidiaries has received from a Governmental Entity a written
notice thereof; neither the Company nor any of its Subsidiaries is or has been a party to a "listed transaction," as such term is defined in Treasury Regulations Section 1.6011-4(b) or
otherwise identified as a tax avoidance transaction.
(e) In
the last five years prior to the date of this Agreement, the Company has not been a party to any distribution in which the parties to such distribution treated such
distribution as one to which Section 355 of the Code applied.
(f) The
Company has not received written notice of any claim made by a Governmental Entity in a jurisdiction where the Company or any Subsidiary does not file a Tax
Return that the Company or such Subsidiary, as applicable, is subject to taxation by that jurisdiction; neither the Company nor any Subsidiary has requested or agreed to waive or otherwise extended
the statutory period of limitations applicable to the assessment of any material Taxes or material Tax deficiencies against the Company or such Subsidiary, in each case which remains outstanding.
(g) Neither
the Company nor any Subsidiary will be required to include any material amounts of income in, or exclude any material item of deduction from, taxable income for
any period (or portion thereof) ending after the Closing Date as a result of: (i) a change in method of accounting made prior to the Closing, (ii) closing agreement, advance pricing
agreement or other agreement with any Governmental Entity relating to Taxes entered into prior to the Closing, (iii) an installment sale or open transaction disposition entered into on or prior
to the Closing, (iv) a prepaid amount received prior to the Closing, (v) an election under Section 108(i) of the Code, (vi) an income inclusion pursuant to
Section 951 or 951A of the Code;
(h) The
Company has no liability pursuant to Section 965 of the Code; neither the Company nor any Subsidiary has any liability for the Taxes of any other Person
pursuant to Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law), by reason of having been a member of an affiliated, consolidated, combined, unitary,
group relief or similar Tax group, or as a transferee or successor by contract or otherwise.
For
purposes of this Section 3.12, any reference to the Company or any of the Subsidiaries shall be deemed to include any Person that merged with or was liquidated
or converted into the Company or any Subsidiary, as applicable. Notwithstanding anything to the contrary herein, neither the Company nor any of its Subsidiaries makes any representation or warranty
regarding the extent that any Tax asset or attribute would reduce the Tax liability of Parent, the Surviving Company or any of their respective Affiliates for any taxable period (or portion thereof)
beginning after the Closing Date, including the ability of Parent or any of its Affiliates to utilize any such Tax attributes after the Closing.
As
used in this Agreement:
"Taxes"
means U.S. federal, state, provincial, local or non-U.S. taxes of whatever kind or nature imposed by a Governmental Entity, including all interest,
penalties and any additions imposed with respect to such amounts.
A-15
Table of Contents
"Tax
Returns" means all U.S. or non-U.S. (whether national, federal, state, provincial, local or otherwise) returns, declarations, statements, reports,
schedules, forms and information returns relating to Taxes, including any amended tax return and any attachments thereto.
SECTION 3.13 Contracts.
(a) Section 3.13 of the Company Disclosure Letter lists, as of the date hereof, each of the following types of Contracts to which the Company
or any of its Subsidiaries is a party or by which any of their respective properties or assets is bound and under which any party thereto has material continuing rights or obligations (in each case,
excluding any Company Plan and any purchase order or analogous instrument entered into with customers or suppliers in the ordinary course of business) (such Contracts, the "Company
Contracts"):
(i) any
such Contract that would be required to be filed by the Company as a "material contract" pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act;
(ii) any
such Contract, with material obligations remaining to be performed, or material liabilities continuing, after the date of this Agreement relating to the
acquisition, development, sale or disposition of any business unit that is material to the Company and its Subsidiaries, taken as a whole;
(iii) any
such Contract that contains a put, call, right of first refusal or similar right pursuant to which the Company of any of its Subsidiaries would be required to
purchase or sell, as applicable, any material equity interests of any Subsidiary of the Company, or which grants a right to sell to or purchase from the Company or any of its Subsidiaries any material
asset (other than in the ordinary course of business);
(iv) any
such Contract that limits the ability of the Company or any of its Subsidiaries to compete in any material respect in any line of business or with any Person or in
any geographic area, except for customer, client, distributor, reseller or sales representative agreements that are terminable for convenience upon not less than 90 days' notice;
(v) any
such Contract governing any material joint venture, partnership or similar arrangement;
(vi) any
such Contract constituting indebtedness for borrowed money and having an outstanding principal amount in excess of $500,000;
(vii) any
such Contract which is a mortgage, security agreement, capital lease or similar agreement, in each case, that creates or grants a Lien on any property or assets of
the Company or its Subsidiaries with a value in excess of $1,000,000;
(viii) any
such Contract pursuant to which the Company or any of its Subsidiaries has continuing material indemnification obligations to any Person that would reasonably be
expected to result in payments in excess of $1,000,000, except for (x) any vendor or content licensing Contract entered into in the ordinary course of business or (y) non-disclosure
agreements;
(ix) any
such Contract between the Company or any of its Subsidiaries on the one hand, and any Affiliate of the Company (other than any Subsidiary of the Company) on the
other hand, that is required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act;
(x) any
such Contract involving any resolution or settlement of any actual or threatened Action (A) involving payments greater than $500,000 or (B) which
imposes material continuing obligations on the Company or any of its Subsidiaries or that provides for any material continuing injunctive or other non-monetary relief, in each case, other than
confidentiality obligations;
A-16
Table of Contents
(xi) any
such Contract with any Governmental Entity (excluding Permits) involving the purchase or sale of goods or services for an amount in excess of $1,000,000 per year;
or
(xii) each
Contract pursuant to which the Company or any of its Subsidiaries, collectively in the aggregate and taken as a whole, (x) received in excess of $2,000,000
in the 12 month period prior to the date hereof or (y) expect to receive in excess of $2,000,000 in the 12 month period following the date hereof.
(b) (i)
Each Company Contract is valid and binding on the Company and its Subsidiaries party thereto and, to the Knowledge of the Company, each other party thereto, and is
in full force and effect and enforceable against the Company and its Subsidiaries party thereto and, to the Knowledge of the Company, each other party thereto in all material respects in accordance
with its terms (except to the extent that enforceability may be limited by the applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors'
rights generally or by general principles of equity); (ii) the Company and each of its Subsidiaries and, to the Knowledge of the Company, each other party thereto has performed all obligations
required to be performed by it under each Company Contract; and (iii) there is no default under any Company Contract by the Company or
any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto, except, in the case of clauses "(i)," "(ii)" and "(iii)", as, individually or in the aggregate, had not had and
would not reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent true and complete copies of all Company Contracts, including all amendments thereto.
SECTION 3.14 Personal and Real Property.
(a) Except for such exceptions that, individually or in the aggregate, are not, and would not reasonably be expected to be, material to the Company and its Subsidiaries, taken as
a whole, the Company or one of its Subsidiaries has good and valid title to, or in the case of leased tangible assets, a valid leasehold interest in, all of its tangible assets, personal property,
fixtures, equipment (and components thereof) and structures used or leased by the Company or any of its Subsidiaries in connection with the conduct of the Company's business, as conducted on the date
of this Agreement, free and clear of all Liens, other than Permitted Liens, and all such personal property and assets, fixtures, equipment (and components thereof) and structures are in good operating
condition and repair in all material respects, subject to normal wear and tear.
(b) Section 3.14(b)
of the Company Disclosure Letter sets forth a true and complete list of all real property owned by the Company or any
of its Subsidiaries (the "Owned Real Property") and all material property leased by the Company or any of its Subsidiaries involving the payment of rental obligations for
an amount in excess of $250,000 per year, except for leases with a remaining term of less than one year from the date of this Agreement (the "Leased Real Property").
Except for such exceptions that, individually or in the aggregate, are not, and would not reasonably be expect to be, material to the Company and its Subsidiaries, taken as a whole, each of the
Company and its Subsidiaries (i) has good and marketable title in fee simple to all Owned Real Property and (ii) has good and marketable leasehold title to all Leased Real Property, in
each case, free and clear of all Liens except Permitted Liens. Except for such exceptions that, individually or in the aggregate, are not, and would not reasonably be expected to be, material to the
Company and its Subsidiaries, taken as a whole, no parcel of Owned Real Property or Leased Real Property is subject to any governmental decree or order to be sold or is being condemned, expropriated
or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the Knowledge of the Company, has any such condemnation, expropriation or taking been proposed in
writing to the Company or any of its Subsidiaries. All leases of Leased Real Property and all amendments and modifications thereto are in full force and effect, and there exists no default under any
such lease by the Company, any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto, except, in each case, as, individually or in the
A-17
Table of Contents
aggregate,
is not, and would not reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole.
SECTION 3.15 Intellectual Property.
(a) The Company Registered IP is subsisting and enforceable and, to the Knowledge of the Company, is valid. The Company or one of its Subsidiaries exclusively owns and possesses,
free and clear of all Liens (excluding any Permitted Liens), all right, title and interest in and to (A) the Company Registered IP and (B) all other Intellectual Property owned or
purported to be owned by the Company or any of its Subsidiaries ((A) and (B) collectively "Owned Intellectual Property"). The Company and its Subsidiaries own, or
have the right to use, all material Intellectual Property used in, held for use in or necessary for the conduct of the business of the Company and its Subsidiaries.
(b) Each
of the Company and its Subsidiaries has taken commercially reasonable steps to (i) protect its rights in its Company Registered IP and (ii) maintain
the confidentiality of all material proprietary information of the Company or its Subsidiaries that derives economic value from not being generally known to other Persons (including all source code
constituting material Owned Intellectual Property), including taking commercially reasonable steps to safeguard any such information that is accessible through computer systems or networks. All
Intellectual Property that was created by employees or contractors of the Company or any of its Subsidiaries within the scope of their employment or engagement that is material to the business of the
Company or any of its Subsidiaries is owned by the Company or its applicable Subsidiary either by operation of law or pursuant to a binding and enforceable agreement.
(c) (i)
To the Knowledge of the Company, none of the Company or any of its Subsidiaries, the conduct and operation of the business of the Company or any of its Subsidiaries
or any Owned Intellectual Property during the past six years (A) has infringed upon or is infringing upon any Patents or any other Intellectual Property of any third party or (B) has
misappropriated or violated or is misappropriating or violating any Trade Secrets or other Intellectual Property of any third party, (ii) since December 31, 2018, neither the Company nor
any of its Subsidiaries has received any written (or, to the Knowledge of the Company, other) notice or claim (A) asserting that any such infringement, misappropriation or violation has
occurred or is occurring or (B) contesting the use, ownership, validity or enforceability of any Owned Intellectual Property or the use of any Licensed Intellectual Property, and
(iii) to the Knowledge of the Company, no third party is infringing upon any Owned Intellectual Property.
(d) Neither
the Company nor any of its Subsidiaries owns or purports to own any software constituting Owned Intellectual Property that is material to the Company and its
Subsidiaries, taken as a whole. All
software constituting Owned Intellectual Property is used for internal purposes only by the Company and its Subsidiaries.
(e) No
funding, facilities or personnel of any Governmental Entity or educational institution has been or is being used to develop or create, in whole or in part, any
material Owned Intellectual Property.
(f) The
Company or one of its Subsidiaries owns, or has a valid and enforceable right to access, all Company IT Systems. The Company IT Systems are adequate for the conduct
of the business of the Company and its Subsidiaries. To the Knowledge of the Company, there has been no unauthorized access to or breach of any Company IT Systems. Within the two years prior to the
date of this Agreement, there have been no failures, data loss, outages or unscheduled downtime affecting any Company IT Systems that have caused a material disruption in the conduct of the business
of the Company or any of its Subsidiaries. None of the software owned by the Company or, to the Knowledge of the Company, any other software included in the Company IT Systems, contains any
contaminants, viruses, worms, Trojan horses or bugs that (i) materially disrupt or adversely affect the functionality of any such software, except as disclosed in their
A-18
Table of Contents
documentation,
or (ii) enable any Person to access without authorization any Company IT Systems or any source code constituting Owned Intellectual Property.
(g) The
execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will
not result in: (i) the loss or impairment of, or any Lien on, any material Owned Intellectual Property or material Licensed Intellectual Property; or (ii) the grant, assignment or
transfer of, or the requirement to grant, assign or transfer, to any other Person of any license, ownership or other right or interest in, to or under any material Owned Intellectual Property.
SECTION 3.16 Environmental Matters.
(a) Except as disclosed in Section 3.16 of the Company Disclosure Letter, or for such matters that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect:
(i) The
Company and each of its Subsidiaries are, and for the past three years have been, in compliance with all applicable Environmental Laws, which compliance includes
obtaining, maintaining and complying with all Permits required under applicable Environmental Laws to conduct the business of the Company and the Company Subsidiaries.
(ii) Neither
the Company nor any of its Subsidiaries has received any written notice from any Governmental Entity or any other Person that alleges that either the Company or
any of its Subsidiaries (x) is in violation of any Environmental Law or (y) has any liability arising under applicable Environmental Laws, the subject of which is unresolved.
(iii) Neither
the Company nor any of its Subsidiaries, nor to the Knowledge of the Company, any other Person, has disposed of or released any Hazardous Materials at, on or
under any facility currently or formerly owned or operated by the Company or its Subsidiaries or any third-party site, in each case in a manner that would reasonably be expected to result in the
Company or any Subsidiary incurring material liability for investigation costs, cleanup costs, response costs, corrective action costs, personal injury, property damage, natural resources damages or
attorney fees under any Environmental Laws.
(iv) Neither
the Company nor any of its Subsidiaries is subject to any outstanding judgment, order or decree of any Governmental Entity under Environmental Laws with respect
to which either the Company or its Subsidiaries have any future obligations other than in the ordinary course of business. Neither the Company nor its Subsidiaries has agreed to indemnify any Person
or assumed by Contract the liability of any third party arising under Environmental Law other than ordinary course lease provisions.
(b) The
Company has made available to Parent copies of all material environmental reports, audits, assessments, liability analyses, memoranda and studies that are in the
Company's possession, regarding the Company or its Subsidiaries with respect to their compliance with, or liabilities under, Environmental Law.
SECTION 3.17 Takeover Restrictions.
Assuming the accuracy of the representations and warranties of Parent and Merger Sub set forth in Section 4.4(c), no "business combination," "fair
price," "moratorium," "control share acquisition" or similar antitakeover provision under Law or the Company Memorandum ("Takeover Restrictions") applies to this Agreement
or any of the transactions contemplated hereby.
SECTION 3.18 Brokers.
No broker, investment banker, financial advisor or other Person, other than Citigroup Global Markets Inc. ("Citi") and UBS Securities LLC
("UBS"), is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.
A-19
Table of Contents
SECTION 3.19 Opinion of Financial Advisor.
Each of Citi and UBS has rendered its separate oral opinion to the Special Committee, to be confirmed by delivery of a written opinion to the Special Committee, dated as of the date
hereof, to the effect that, as of the date of such written opinion and based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications
on the review undertaken by each of Citi and UBS, respectively, as set forth in their respective written opinions, the Merger Consideration is fair, from a financial point of view, to the holders of
Shares (other than Parent and its Affiliates).
SECTION 3.20 Exclusivity of Representations and Warranties.
Other than the representations and warranties of Parent and Merger Sub expressly set forth in Article IV or any certificate delivered pursuant to
Section 6.2(d), which the Company is relying upon, the Company is not, in entering into this Agreement or in consummating any of the transactions contemplated
hereby, relying in any respect on, and Parent and Merger Sub and their Affiliates shall have no liability to the Company with respect to, any other representation, warranty, statement, document,
prediction or other piece of information, written or oral, express or implied, made or provided by Parent, Merger Sub, any of their Affiliates or any of their Representatives of any of the foregoing,
and the Company, on behalf of itself and its Affiliates, agrees that it will not bring any Action in respect of any such other representation, warranty, statement, document, prediction or other piece
of information.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub, jointly and severally, represent and warrant to the Company as follows:
SECTION 4.1 Organization, Standing and Power.
(a) Each of Parent and Merger Sub (i) is an entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under
the Laws of the jurisdiction of its organization or incorporation, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction
in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except, with respect to clause (iii), for any such
failures to be so qualified or licensed or in good standing as, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) Parent
has previously furnished to the Company a true and complete copy of the certificate of incorporation and bylaws of Parent and of the memorandum of association and
articles of association of Merger Sub, in each case as amended to the date of this Agreement. Neither Parent nor Merger Sub is in violation of any provision of its certificate of incorporation, bylaws
or memorandum of association and articles of association, as applicable, in any material respect.
SECTION 4.2 Authority.
(a) Each of Parent and Merger Sub has all necessary corporate or similar power and authority to execute and deliver this Agreement, to perform its obligations hereunder and,
subject (in the case of Merger Sub) to the approval of this Agreement by Parent in its capacity as the sole shareholder of Merger Sub, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by each of Parent and Merger Sub and the consummation by each of Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate or similar action on the part of Parent and Merger Sub and no other corporate or similar proceedings on the part of Parent or Merger Sub are necessary to approve
this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Merger, to the approval of this Agreement by Parent in its capacity as the sole
shareholder of Merger Sub. This Agreement has been duly executed and delivered by each of
A-20
Table of Contents
Parent
and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a valid and binding obligation of each of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting
the enforcement of creditors' rights generally or by general principles of equity).
(b) Prior
to the date hereof, the Board of Directors of Merger Sub adopted resolutions (i) determining that the terms of this Agreement, the Merger and the other
transactions contemplated hereby are in the best interests of Merger Sub's sole shareholder, (ii) approving and declaring advisable this Agreement and the transactions contemplated hereby,
including the Merger, (iii) directing that this Agreement be submitted to Parent for approval, and (iv) recommending that Parent vote in favor of the approval of this Agreement.
(c) The
approval of this Agreement and the Plan of Merger by Parent in its capacity as the sole shareholder of Merger Sub is the only vote or consent of the holders of any
class or series of ordinary shares of Merger Sub necessary to approve this Agreement or the Merger or the other transactions contemplated hereby.
SECTION 4.3 No Conflict; Consents and Approvals.
(a) The execution, delivery and performance of this Agreement by each of Parent and Merger Sub, and the consummation by each of Parent and Merger Sub of the transactions
contemplated hereby, do not and will not:
(i) conflict
with or violate the organizational documents of Parent or Merger Sub;
(ii) assuming
that the representations and warranties of the Company in Article III are correct and all consents, approvals and
authorizations contemplated by paragraph (b) below have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Parent or Merger Sub or by
which any of their assets or properties are bound; or
(iii) result
in any breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in the
loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any Contract to which Parent or Merger Sub is a party or by which their assets or
properties are bound;
except,
in the case of clauses (ii) and (iii), for any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse
Effect.
(b) The
execution, delivery and performance of this Agreement by each of Parent and Merger Sub, and the consummation by each of Parent and Merger Sub of the transactions
contemplated hereby, do not and will not, with respect to Parent and Merger Sub, require any consent, approval, authorization or permit of, or action by, filing with or notification to, any
Governmental Entity, except for (i) such filings as may be required under any state securities or "blue sky" laws, (ii) the filings required under the HSR
Act, (iii) the filing with the Registrar of the Articles of Merger and Plan of Merger as required by the BVI Act, (iv) compliance with applicable requirements of the Exchange Act and
(v) any such other items the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.4 Ownership and Operations of Parent and Merger Sub.
(a) Merger
Sub has been formed solely for the purpose of engaging in the transactions contemplated hereby and, prior to the Effective Time, will have engaged in no other
business activities and will have incurred no liabilities or obligations other than in connection herewith.
A-21
Table of Contents
(b) All
of the issued and outstanding ordinary shares of Merger Sub are owned directly by Parent.
(c) None
of Parent, Merger Sub nor any of their Affiliates (i) owns, directly or indirectly, beneficially or of record, any Shares or (ii) holds any rights to
acquire or vote any Shares, except pursuant to this Agreement. None of Parent, Merger Sub or any of their Affiliates is an "interested member" of the Company, as such term is used in
Section 4.2 of the Company Memorandum.
SECTION 4.5 Financing.
(a) Parent has delivered to the Company complete and correct unredacted (except in the case of the Debt Fee Letter, which may be redacted in a customary manner solely with respect
to fee amounts, yield or interest rate caps, original issue discount amounts and "flex" provisions so long as such redacted information does not adversely affect the conditionality, availability of
the Debt Financing or reduce the aggregate principal amount thereof) copies of the following, including all annexes, exhibits, schedules and other attachments thereto: (i) commitment letter,
dated as of the date hereof, between Parent and Affiliates of Advent International Corporation that are party thereto (such Persons are collectively referred to as
"Sponsor") (the "Equity Commitment Letter"), pursuant to which Sponsor has committed, upon the terms and subject to the conditions set forth
therein, to provide equity financing in an amount set forth therein (the "Equity Financing"), (ii) commitment letter, dated as of the date hereof, between AI Aqua
Merger Sub, Inc., a Delaware corporation and an Affiliate of Parent (and any Person to whom the Debt Commitment Letter is assigned in accordance with the terms thereof, the
"Borrower"), and the Debt Financing Sources party thereto (collectively, the "Lender Parties") (the "Debt Commitment
Letter" and together with the Equity Commitment Letter, the "Financing Commitments"), pursuant to which the Lender Parties have committed, upon the terms
and subject to the conditions set forth therein, to provide debt financing in an amount set forth therein (the "Debt Financing" and together with the Equity Financing, the
"Financing") and (iii) fee letter, dated as of the date hereof, between the Borrower and the Debt Financing Sources party thereto (the "Debt Fee
Letter").
(b) Assuming
the funding of the net proceeds from the Financing Commitments, at the Closing, Parent will have the funds necessary to consummate the Merger and the other
transactions contemplated herein, including without limitation, payment in cash of the aggregate Merger Consideration on the Closing Date, the aggregate amounts payable to holders of Company Stock
Options, RSUs and Company Phantom Units, repayment of the Paid Off Indebtedness and all related fees and expenses, in each case with cash and cash equivalents.
(c) In
no event shall the receipt or availability of any funds or financing by or to Parent, Borrower, Merger Sub or any of their respective Affiliates or any other
financing transaction (including, without limitation, the Financing Commitments) be a condition to any of the obligations of Parent or Merger Sub hereunder.
(d) None
of the Financing Commitments has been amended or modified as of the date of this Agreement, and, as of the date of this Agreement, the respective commitments
contained therein have not been terminated, replaced, withdrawn or rescinded, nor is any such amendment, modification, termination, replacement, withdrawal or rescission currently contemplated or the
subject of current discussions (in each case, other than in connection with or arising from the Best Efforts Debt Refinancing) or otherwise amended, restated, amended and restated, waived,
supplemented or otherwise modified in any respect. No lender has notified Parent or Merger Sub in writing of its intention to terminate or withdraw the Financing Commitments, and Parent does not know
of any facts or circumstances that may be expected to result in any of the conditions set forth in the Financing Commitments not being satisfied. As of the date hereof, the Financing Commitments are
in full force and effect and constitute the legal, valid and binding obligation of Parent, Borrower and Merger Sub, as applicable, and the other parties to the Equity Commitment
A-22
Table of Contents
Letter
and, to the knowledge of Parent, the other parties to the Debt Commitment Letter, in each case, subject to the Equitable Exceptions. To the knowledge of the Parent, the Borrower or Merger Sub,
there are no other agreements, side letters or arrangements (other than the Debt Fee Letter) relating to the Financing Commitments or the Financing.
(e) The
Financing Commitments contain all of the conditions precedent to the obligations of the parties thereto. There are no conditions precedent or other contingencies,
arrangements or agreements related to the funding of the full amount of the Financing (including any "flex" provisions contained in the Debt Fee Letter), other than as expressly set forth in the
Financing Commitments and the Debt Fee Letter, that would reasonably be expected to adversely affect (x) the ability of Parent or Borrower to satisfy any of the conditions to the Debt Financing
or the Equity Financing within its control or, (y) the availability of the Debt Financing or the Equity Financing on the Closing Date (other than by virtue of the imposition of original issue
discount, which may be funded at the election of Borrower as provided in the Debt Fee Letter and/or by an increase in the amount of the Equity Financing).
(f) As
of the date hereof, no event has occurred that (with or without notice or lapse of time, or both) would constitute a breach or default under the Financing Commitments
or result in a failure of any condition of the Financing Commitments or, to the knowledge of the Parent, the Borrower or Merger Sub, result in any portion of the Financing being unavailable on the
Closing Date, and neither Parent nor Merger Sub is aware of any fact, event or other occurrence that makes any of the representations or warranties of Parent or Merger Sub in the Equity Financing
Commitments and of the Borrower in the Debt Financing Commitments inaccurate in any material respect.
(g) As
of the date hereof and assuming (x) the truth and accuracy of the representations set forth in Article III in a manner that
would satisfy the condition set forth in Section 6.3(a) and (y) the satisfaction of the condition set forth in
Section 6.3(b), and other than as a result of the incurrence of the Best Efforts Debt Financing in lieu of the Debt Financing Commitments, Parent and Merger Sub
have no reason to believe that any of the conditions in the Financing Commitments will fail to be timely satisfied or that the full amount of the Financing will not be funded at the Closing.
(h) Parent,
Borrower and Merger Sub have fully paid any and all commitment fees or other fees required by the terms of the Financing Commitment to be paid on or before the
date of this Agreement.
SECTION 4.6 Solvency.
Assuming satisfaction of the conditions to Parent's and Merger Sub's obligation to consummate the Merger, immediately after giving effect to the transactions contemplated by this
Agreement (including the Merger, the Financing (or Best Efforts Debt Financing, as applicable), any repayment of existing indebtedness contemplated by this Agreement, the Financing Commitment or the
Best Efforts Debt Financing, and the payment of all related fees and expenses), the Surviving Company will be Solvent. With respect to the Surviving Company, "Solvent"
means that, as of any date of determination, (a) the amount of the "fair saleable value" of the assets of the Surviving Company and its Subsidiaries, taken as a whole, exceeds, as of such date,
the sum of all "debts" of the Surviving Company and its Subsidiaries, taken as a whole, including contingent liabilities, as such quoted terms are generally determined in accordance with applicable
federal Law governing determinations of the insolvency of debtors; (b) the Surviving Company will not have, as of such date, an unreasonably small amount of capital for the operation of the
business in which it is engaged or proposed to be engaged; and (c) the Surviving Company will be able to pay its debts, including contingent liabilities, as they mature.
A-23
Table of Contents
SECTION 4.7 Brokers.
No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Merger Sub or any of their Affiliates.
SECTION 4.8 Regulatory Status.
As of the date hereof, neither Parent nor Merger Sub is aware of any fact or circumstance relating to its or any of its Affiliates' (including any portfolio company Affiliate) respective
businesses, assets, liabilities, operations or legal status that would reasonably be expected to impair the ability of the parties to obtain, the expiration of any waiting period applicable to Parent,
Merger Sub or their Affiliates under any Antitrust Law applicable to the transactions contemplated by this Agreement or any authorization, consent, order, declaration or approval of any Governmental
Entity in the United States required for the consummation of the transactions contemplated by this Agreement.
SECTION 4.9 Exclusivity of Representation and Warranties.
(a) Other than the representations and warranties of the Company expressly set forth in Article III or any certificate delivered pursuant to
Section 6.3(d), which Parent and Merger Sub are relying upon, Parent and Merger Sub are not, in entering into this Agreement or in consummating any of the
transactions contemplated hereby, relying in any respect on, and the Company and its Affiliates shall have no liability to Parent and Merger Sub and their Affiliates with respect to, any other
representation, warranty, statement, document, prediction or other piece of information, written or oral, express or implied, made or provided by the Company or any of its Affiliates, or any
Representative of any of the foregoing (including any management presentation, any discussions regarding due diligence and any projections or other forecasts as to future performance), and each of
Parent and Merger Sub, on behalf of itself and its Affiliates, agrees that it will not bring any Action in respect of any such other representation, warranty, statement, document, prediction or other
piece of information.
(b) Nothing
in this Section 4.9 is intended to modify or limit in any respect Parent's and Merger Sub's reliance on any of the
representations or warranties of the Company in Article III.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of the Company.
Between the date of this Agreement and the Effective Time, except as contemplated by this Agreement, as set forth in Section 5.1 of the Company Disclosure
Letter, as required by Law, or as Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), the Company shall, and shall
cause each of its Subsidiaries to, conduct its business in the ordinary course of business in all material respects, and the Company shall and shall cause its Subsidiaries to use commercially
reasonable efforts to preserve intact in all material respects their business. Between the date of this Agreement and the Effective Time, except as contemplated by this Agreement, as set forth in
Section 5.1 of the Company Disclosure Letter, as required by Law, or as Parent shall otherwise consent in writing (which consent, with respect to
Sections 5.1(f), 5.1(h), 5.1(j)(i) and 5.1(l) only, shall not be unreasonably
withheld, conditioned or delayed), neither the Company nor any of its Subsidiaries shall:
(a) amend
or otherwise change the Company Memorandum, Company Articles, certificate of incorporation or bylaws or any similar governing instruments;
(b) issue,
deliver, sell, pledge, dispose of or encumber any of its Ordinary Shares, ownership interests or other voting securities, or any options, warrants, convertible
securities or other rights to acquire any of its Ordinary Shares, ownership interests or other voting securities, except for (i) the issuance of Shares upon the exercise of Company Stock
Options in accordance with the terms thereof, (ii) the issuance of Shares upon the settlement of RSUs in accordance with the
A-24
Table of Contents
terms
thereof, (iii) the issuance of Shares upon the settlement of Company Phantom Units in accordance with the terms thereof, (iv) the issuance of Shares under the ESPP in accordance
with the terms thereof, (v) the operation of the ESPP as required by the terms thereof and this Agreement, and (vi) the issuance of shares by a wholly-owned Subsidiary of the Company to
the Company or another wholly-owned Subsidiary of the Company, in each of clauses "(i)" through "(iv)," pursuant to award or rights outstanding on the date of this Agreement;
(c) declare,
set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its Ordinary Shares, except for
any dividend or distribution by a Subsidiary of the Company to the Company or a Subsidiary of the Company;
(d) reclassify,
combine, split, subdivide, redeem, purchase or otherwise acquire any Ordinary Shares of the Company, other than the acquisition of Shares in connection with
a cashless or net exercise of Company Stock Options or in order to pay Taxes in connection with the vesting or exercise of any other equity awards (including Company Stock Options, RSUs and Company
Phantom Units);
(e) (i)
acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division
thereof or any assets, in each case, having a purchase price in excess of $2,500,000 individually, other than purchases of inventory and other assets in the ordinary course of business or pursuant to
existing Contracts; or (ii) sell or otherwise dispose of (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business
organization or division thereof or any assets in each case, having a purchase price in excess of $2,500,000 individually, other than sales or dispositions of inventory and other assets in the
ordinary course of business or pursuant to existing Contracts;
(f) other
than in the ordinary course of business, enter into, terminate, waive any right under or amend in any material respect any Company Contract or any Contract which
if entered into prior to the date hereof would be a Company Contract;
(g) mortgage,
pledge or subject to any material Lien or security interest (other than Permitted Liens) any material asset of the Company or any of its Subsidiaries to secure
indebtedness for borrowed money;
(h) make
any capital expenditures in excess of $1,000,000 per month in the aggregate, other than capital expenditures that are budgeted in the Company's capital expenditure
budget set forth on Schedule 5.1(h);
(i) (i)
other than for borrowings under the Company's revolving credit facility and other incurrences of indebtedness in the ordinary course of business, incur, assume or
otherwise become liable for any indebtedness for borrowed money, or amend or modify in any material respect or refinance any indebtedness for borrowed money (other than the Paid Off Indebtedness), or
(ii) make any loans, advances (other than travel advances to employees in the ordinary course of business) or capital contributions to, or investments in, any other Person, other than the
Company or any direct or indirect wholly-owned Subsidiary of the Company;
(j) except
as required by any Company Plan or Contract in existence on the date hereof, or applicable Law, (i) increase the compensation or benefits of any of its
current or former employees, directors, officers or independent contractors, (ii) grant any transaction bonus, retention, severance or termination pay to any current or former employee,
director, officer or independent contractor, (iii) enter into any employment, consulting or severance agreement or arrangement with any of its directors or officers, or any of its employees or
independent contractors at the level of vice-president and above, (iv) establish, adopt, enter into or amend in any material respect or terminate any Company Plan or any arrangement that would
be a
A-25
Table of Contents
Company
Plan if it were in effect on the date of this Agreement, (v) grant any equity or equity-based awards or (vi) hire, promote or terminate (other than for cause) any officer or
employee at the level of vice-president and above;
(k) make
any material change in any accounting principles, except as may be required by Law or GAAP or any official interpretations thereof;
(l) settle
or compromise (or amend a settlement or compromise of) any Actions in excess of $250,000, net of insurance, or claims for equitable relief;
(m) other
than as required by applicable Law, (i) make, change or revoke any material Tax election, (ii) amend any Tax Return with respect to any material Tax,
(iii) change any annual Tax accounting period or adopt or change any material method of Tax accounting, (iv) surrender any right to claim a material Tax refund, (v) enter into any
closing agreement relating to any material Tax, including pursuant to Section 7121 of the Code (or any similar provision of state, local or foreign Law) or enter into any material settlement or
compromise of any material Tax liability or (vi) or incur a material Tax liability outside the ordinary course of business;
(n) adopt
or enter into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
(o) sell,
assign, transfer, license, sublicense, covenant not to sue with respect to or otherwise dispose of any Intellectual Property (other than non-exclusive licenses of
Intellectual Property granted in the ordinary course of business consistent with past practice); or
(p) commit
to take any of the actions described in the preceding paragraphs (a) through (o).
SECTION 5.2 No Solicitation
(a) No Solicitation. The Company and its Subsidiaries and its and their respective
directors, officers and employees shall, and the Company shall use its reasonable best efforts to cause its and its Subsidiaries' other Representatives to (i) immediately cease all discussions
and negotiations with respect to any Acquisition Proposal and (ii) thereafter not directly or indirectly, (A) initiate, solicit, induce or knowingly facilitate, encourage or assist any
inquiry or the making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry or the making of any proposal or offer that could reasonably be expected to lead to an Acquisition
Proposal or Acquisition Inquiry, (B) engage in, enter into, continue or otherwise participate in any discussion or negotiation regarding, or furnish or otherwise provide access to any
non-public information concerning the Company or its Subsidiaries to any Person in connection with or in response to, any Acquisition Proposal or Acquisition Inquiry, or (C) otherwise cooperate
with, knowingly assist, participate in or knowingly facilitate any effort or attempt to make any Acquisition Proposal or Acquisition Inquiry. Notwithstanding the foregoing, if prior to obtaining the
Company Shareholder Approval, (i) the Company receives a bona fide written
Acquisition Proposal from any Person that was unsolicited (and not withdrawn), (ii) such Acquisition Proposal did not result from a breach of this
Section 5.2, (iii) the Company Board (and, if a special committee has been formed, acting upon the recommendation of such special committee to take such
action) determines in good faith (after consultation with its financial advisors and its outside legal counsel) that such Acquisition Proposal constitutes a Superior Proposal or could reasonably be
expected to lead to a Superior Proposal, and (iv) the Company Board (and, if a special committee has been formed, acting upon the recommendation of such special committee to take such action)
determines in good faith (after consultation with its outside legal counsel) that the failure to take such action would be inconsistent with the fiduciary duties of the Company Board under applicable
Law, then the Company and its Representatives may provide non-public information concerning the Company and its Subsidiaries in response to a request therefor by such Person if prior to furnishing any
such non-public information to, or entering into discussions or negotiations with, such Person, the
A-26
Table of Contents
Company:
(A) gives Parent written notice of the identity of such Person and of the Company's intention to furnish non-public information to, or enter into discussions or negotiations with, such
Person, and (B) receives from such Person, and delivers to Parent a copy of, an executed confidentiality agreement with customary limitations on the use and disclosure of all non-public written
and oral information furnished to such Person and other provisions not materially less favorable to the Company in the aggregate than the provisions of the Confidentiality Agreement (it being
understood that such confidentiality agreement (i) need not prohibit the making of an Acquisition Proposal, (ii) may contain any standstill or similar provision and (iii) shall
expressly provide that nothing therein shall restrict the Company from complying with the provisions of this Section 5.2) and, substantially concurrently with the
furnishing of such non-public information to such Person, the Company furnishes such non-public information to Parent (to the extent such non-public information has not been previously furnished by
the Company to Parent). Notwithstanding anything to the contrary contained in this Agreement, the Company and its Subsidiaries and its and their Representatives may (without any determination by the
Company Board or any committee thereof or consultation with its financial advisors or outside legal counsel) direct any Person to this Agreement, including the specific provisions of this
Section 5.2. Notwithstanding anything to the contrary, the Company: (i) agrees that it will not, and shall ensure that each of its Subsidiaries will not
release or permit the release of any Person from, or amend, waive or permit the amendment or waiver of any provision of, any "standstill" or similar agreement or provision to which the Company or any
of its Subsidiaries is or becomes a party or under which the Company or any of its Subsidiaries has or acquires any rights, and (ii) will use its reasonable best efforts to enforce or cause to
be enforced each such agreement or provision at the request of Parent.
(b) No Adverse Recommendation Change. Neither the Company Board nor any committee
thereof shall: (i) withhold, withdraw or modify in any manner adverse to Parent, or permit the withholding, withdrawal or modification in a manner adverse to Parent of, the Company
Recommendation (an "Adverse Recommendation Change"); (ii) recommend the approval, acceptance or adoption of, or approve, recommend or adopt, any Acquisition
Proposal; (iii) approve or recommend, or cause or
permit the Company or any of its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option
agreement, joint venture agreement, partnership agreement or other analogous agreement or Contract constituting, or which provides for, contemplates or is intended or would reasonably be expected to
result directly or indirectly in, an Acquisition Transaction; or (iv) resolve, agree in writing or publicly propose to, or permit the Company or any of its Subsidiaries or any Representative of
the Company or any of its Subsidiaries to agree or publicly propose to, take any of the actions referred to in this Section 5.2(b)(i) through
(iv).
(c) Notwithstanding
the foregoing or anything else to the contrary in this Agreement (including Section 5.3 and
Section 5.5), at any time prior to obtaining the Company Shareholder Approval, the Company Board (or, if a special committee shall have been formed, acting upon the
recommendation of such special committee to take such action) may make an Adverse Recommendation Change (and in the case of clause (i) below, may also take action pursuant to
Section 7.1(c)(ii)):
(i) if:
(A) the Company receives an unsolicited, bona fide, written Acquisition Proposal that is made to the Company and is not withdrawn;
(B) such
Acquisition Proposal did not result from a material breach of any of the provisions of this Section 5.2;
A-27
Table of Contents
(C) the
Company provides Parent, at least 24 hours (or such shorter notice period provided to the members of the Company Board or, if applicable, the special
committee) prior to any meeting of the Company Board (or, if applicable, the special committee) at which the Company Board (or, if applicable, the special committee) will consider and determine
whether such Acquisition Proposal is a Superior Offer, with a written notice specifying the date and time of such meeting, the material terms and conditions of the Acquisition Proposal that is the
basis of the potential action by the Company Board (or, if applicable, the special committee) (including a copy of any draft Contract relating to such Acquisition Proposal) and the identity of the
Person making such Acquisition Proposal;
(D) the
Company Board (or, if applicable, the special committee) determines in good faith, after having consulted with its financial advisors and outside legal counsel, that
such Acquisition Proposal constitutes a Superior Proposal;
(E) the
Company Board (or, if applicable, the special committee) determines in good faith, after having consulted with its financial advisors and outside legal counsel,
that, in light of such Superior Proposal, the failure to effect an Adverse Recommendation Change or take action pursuant to Section 7.1(c)(ii) would be inconsistent
with the fiduciary obligations of the Company Board under applicable Law;
(F) no
less than four calendar days prior to effecting an Adverse Recommendation Change or taking action pursuant to Section 7.1(c)(ii),
the Company delivers to Parent in writing (a "Recommendation Change Notice"): (1) stating that the Company has received a Superior Proposal that did not result from
or arise out of a breach of Section 5.2; (2) stating that the Company Board intends to effect an Adverse Recommendation Change or take action pursuant to
Section 7.1(c)(ii) and describing any intended modification of the Company Recommendation or action pursuant to
Section 7.1(c)(ii); (3) specifying the material terms and conditions of such Superior Proposal, including the identity of the Person making such Superior
Proposal; and (4) attaching copies of the most current and complete draft of any proposed definitive Contract relating to such Superior Proposal and all other material documents and
communications relating to such Superior Proposal;
(G) throughout
the period between the delivery of such Recommendation Change Notice and any Adverse Recommendation Change or action pursuant to
Section 7.1(c)(ii), the Company engages (to the extent requested by Parent) in good faith negotiations with Parent to amend this Agreement or enter into an
alternative transaction with Parent; and
(H) at
the time of the Adverse Recommendation Change or action pursuant to Section 7.1(c)(ii), the Company Board (or, if applicable, the
special committee) determines in good faith, after consulting with the Company's financial advisor and outside legal counsel, that the failure to effect an Adverse Recommendation Change or take action
pursuant to Section 7.1(c)(ii) would be inconsistent with the fiduciary obligations of the Company Board under applicable Law in light of such Superior Proposal
(after taking into account any changes to the terms of this Agreement that Parent irrevocably agreed in writing to make as a result of the negotiations required by clause "(G)" above or otherwise); or
(ii) if:
(A) there shall arise after the date of this Agreement an Intervening Event that leads the Company Board (or, if a special committee shall have been formed,
acting upon the recommendation of such special committee to take such action) to consider effecting an Adverse Recommendation Change;
A-28
Table of Contents
(B) the
Company provides Parent, at least 48 hours prior to any meeting of the Company Board at which the Company Board will consider and determine whether such
Intervening Event requires the Company Board to effect an Adverse Recommendation Change, with a written notice specifying the
date and time of such meeting, the reasons for holding such meeting and a reasonably detailed description of such Intervening Event;
(C) the
Company Board (or, if applicable, the special committee) determines in good faith, after having consulted with its financial advisors and outside legal counsel,
that, in light of such Intervening Event, the failure to effect an Adverse Recommendation Change would be inconsistent with the fiduciary obligations of the Company Board under applicable Law;
(D) no
less than four calendar days prior to effecting an Adverse Recommendation Change, the Company delivers to Parent a written notice: (1) stating that an
Intervening Event has arisen; (2) stating that it intends to effect an Adverse Recommendation Change in light of such Intervening Event and describing any intended modification of the Company
Recommendation; and (3) containing a reasonably detailed description of such Intervening Event;
(E) throughout
the period between the delivery of such notice and any Adverse Recommendation Change, the Company engages (to the extent requested by Parent) in good faith
negotiations with Parent to amend this Agreement or enter into an alternative transaction with Parent; and
(F) at
the time of the Adverse Recommendation Change, the Company Board (or, if applicable, the special committee) determines in good faith, after consulting with the
Company's financial advisor and outside legal counsel, that the failure to effect an Adverse Recommendation Change would be inconsistent with the fiduciary obligations of the Company Board under
applicable Law in light of such Intervening Event (after taking into account any changes to the terms of this Agreement proposed by Parent as a result of the negotiations required by clause "(E)"
above or otherwise).
For
purposes of clause "(i)" of this Section 5.2(c), any change in the form or amount of the consideration payable in connection with a Superior Proposal, and any
other material change to any of the terms of a Superior Proposal, will be deemed to be a new Superior Proposal, requiring a new Recommendation Change Notice and a new advance notice period; provided,
however, that the advance notice period applicable to any such change to a Superior Proposal
pursuant to clause "(i)(F)" of this Section 5.2(v) shall be three calendar days rather than four calendar days. Any and all information regarding any negotiations
that take place pursuant to clause "(i)(F)" or clause "(ii)(E)" of this Section 5.2(c) (including the existence and terms of any proposal made by or on behalf of
Parent or the Company during such negotiations) shall be subject to the Confidentiality Agreement. The Company shall ensure that any Adverse Recommendation Change (x) does not change or
otherwise affect the approval of this Agreement or the Voting Agreement by the Company Board or any other approval of the Company Board and (y) does not have the effect of causing any corporate
takeover statute or other similar statute (including any "moratorium," "control share acquisition," "business combination" or "fair price" statute) under applicable Law to be applicable to this
Agreement, the Voting Agreement, the Merger or any of the other transactions contemplated by this Agreement.
(d) Notice to Parent. If the Company or any of its Representatives receives an
Acquisition Proposal or Acquisition Inquiry, then the Company shall promptly (and in any event within 48 hours) (i) advise Parent in writing of such Acquisition Proposal or Acquisition
Inquiry (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry) and (ii) provide Parent with a copy of the applicable written Acquisition
Proposal (or if oral, a summary of the material terms and conditions thereof) and all material
A-29
Table of Contents
documents
received by the Company or any of its Representatives setting forth the material terms and conditions of such Acquisition Proposal or Acquisition Inquiry. The Company shall keep Parent
reasonably informed in all material respects on a reasonably current basis of the status and material developments, discussions or negotiations regarding any such Acquisition Proposal or Acquisition
Inquiry and shall promptly (and in any event within 48 hours) provide Parent with a copy of material documentation and material terms and conditions (including any change in price or form of
consideration or other material amendment thereto); provided, that it is understood and agreed that all such information and communications shall be
subject to the Confidentiality Agreement.
(e) Certain Permitted Disclosure. Nothing contained in this
Section 5.2 shall be deemed to prohibit the Company or the Company Board or any committee thereof from (i) taking and disclosing to its shareholders a
position contemplated by Rule 14d-9 and Rule 14e-2 under the Exchange Act, or making any "stop-look-and-listen" communication or similar communication of the type contemplated pursuant
to Rule 14d-9 under the Exchange Act or (ii) if required by applicable Law, issuing a press release disclosing the Company has received a bona fide, written Acquisition Proposal that the
Company Board has determined in compliance with Section 5.2(a) could reasonably be expected to lead to a Superior Proposal (provided that (A) such
Acquisition Proposal did not result from a breach of Section 5.2(a) and (B) the Company provides Parent notice, and a copy of such press release, a
reasonable time in advance of such release); provided that any such disclosure shall be deemed to be an Adverse Recommendation Change if the Company
fails to expressly and publicly reaffirm the Company Recommendation in such disclosure or similar communication. For the avoidance of doubt, in no event shall the issuance of a "stop-look-and-listen"
communication pursuant to Rule 14d-9 of the Exchange Act (or similar statement pursuant to any requirement of applicable Law), without more, constitute an Adverse Recommendation Change.
(f) Definitions. For purposes of this Agreement:
(i) "Acquisition
Inquiry" means an inquiry, indication of interest or request for information (other than an inquiry, indication of interest or
request for information made or submitted by Parent or any of its Subsidiaries) that would reasonably be expected to lead to an Acquisition Proposal.
(ii) "Acquisition
Proposal" means any proposal or offer for an Acquisition Transaction.
(iii) "Acquisition
Transaction" means any transaction or series of transactions involving (A) a merger, reorganization, consolidation,
share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries whose businesses constitute at least 15% of the
net revenues or assets of the Company and its Subsidiaries, taken as a whole, or (B) the acquisition in any manner, directly or indirectly, of at least 15% of the equity securities or assets of
the Company and its Subsidiaries, taken as a whole, in each case other than the Merger.
(iv) "Intervening
Event" means a material event, change, circumstance, occurrence, effect or state of facts that was not known to the Company
Board prior to the execution of this Agreement (or, if known, the consequences of which were not known nor reasonably foreseeable), which event, change, circumstance, occurrence, effect or state of
facts, or any consequence thereof, becomes known to the Company Board after the date hereof; provided, however, that in no event shall the receipt,
existence or terms of an Acquisition Proposal or any matter relating thereto constitute an Intervening Event.
A-30
Table of Contents
(v) "Superior
Proposal" means a bona fide written Acquisition Proposal (with the percentages set forth in the definition of "Acquisition
Transaction" changed from 15% to 80%) that the Company Board or any committee thereof determines in its good faith judgment (A) is reasonably likely to be consummated in accordance with its
terms, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal, and (B) if consummated, would result in a transaction more favorable
to the Company's shareholders from a financial point of view than the Merger.
SECTION 5.3 Preparation of Proxy Statement; Shareholders Meeting; Vote of Parent. (a) No later than 30 days after the date hereof, the Company shall prepare and file a proxy statement in connection with the Shareholders
Meeting (such proxy statement, together with any exhibits, supplements or amendments thereto, the "Proxy Statement") in preliminary form with the SEC. Parent, Merger Sub
and the Company shall cooperate with each other in the preparation of the Proxy Statement. The Company shall (i) cause the Proxy Statement and the filing and any dissemination thereof to comply
in all material respects with the applicable requirements of the Exchange Act and (ii) cause the Proxy Statement to not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, that no covenant is
made by the Company with respect to information relating to, or supplied by or on behalf of Parent or Merger Sub for
inclusion or incorporation by reference in the Proxy Statement. Parent and Merger Sub shall furnish to the Company the information relating to them required by the Exchange Act to be set forth in the
Proxy Statement, which such information shall be true, correct and complete in all material respects. The Company and Parent shall cooperate and consult with each other with respect to the timing of
running one or more broker searches for the record date of the Shareholders Meeting.
(b) If,
at any time prior to obtaining the Company Shareholder Approval, any information relating to the Merger, the Company, Parent, Merger Sub or any of their respective
Affiliates, directors or officers should be discovered by the Company or Parent that should be set forth in an amendment or supplement to the Proxy Statement so that such document would not contain
any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party
that discovers such information shall promptly notify the other parties hereto and the Company shall promptly file with the SEC an appropriate amendment or supplement describing such information and,
to the extent required by applicable Law, disseminate such amendment or supplement to the shareholders of the Company.
(c) The
Company shall consult with Parent (and, if requested by Parent, its counsel), and Parent (and, if requested by Parent, its counsel) shall be given a reasonable
opportunity to review and comment on the Proxy Statement (including each amendment or supplement thereto) before it is filed with the SEC and the Company shall give reasonable and good faith
consideration to any comments made by Parent (and, if requested by Parent, its counsel). The Company shall provide Parent (and, if requested by Parent, its counsel) with any comments (written or oral)
that may be received from the SEC with respect to the Proxy Statement as promptly as practicable after receipt thereof. The Company shall use reasonable best efforts to resolve all SEC comments as
promptly as practicable. Parent (and, if requested by Parent, its counsel) shall be given a reasonable opportunity to review any proposed responses and provide comments to such responses, to which
reasonable and good faith consideration shall be given by the Company.
(d) As
promptly as reasonably practicable following the clearance of the Proxy Statement by the SEC, the Company shall (i) establish the earliest reasonable
practicable record date for a special meeting of its shareholders to be held solely for the purpose of obtaining the Company Shareholder Approval (the "Shareholders
Meeting") (and shall not change such record date without the written consent of Parent, which shall not be unreasonably withheld, conditioned or
A-31
Table of Contents
delayed),
(ii) give notice of the Shareholders Meeting and mail the Proxy Statement, (iii) except to the extent that the Company Board shall have effected an Adverse Recommendation
Change in compliance with the terms of this Agreement, include in the Proxy Statement the recommendation of the Company Board that the shareholders of the Company vote in favor of the adoption of this
Agreement and approval of the Merger and the other transactions contemplated hereby (the "Company Recommendation") and use reasonable best efforts to solicit proxies in
favor of the adoption of this Agreement and approval of the Merger and the other transactions contemplated hereby, and (iv) hold the Shareholders Meeting; provided, however, that the Company may postpone or adjourn the Shareholders Meeting from its originally
noticed date for a reasonable period (A) in order to solicit additional proxies so as to establish a quorum, but only until there are a sufficient number of shares present or represented to
obtain such quorum or (B) to allow time for the filing or dissemination of any supplemental or amended disclosure documents which the Company Board has determined in good faith is required to
be filed or disseminated under applicable Law. The Company's obligation to call, give notice of and hold the Shareholders Meeting in accordance with this
Section 5.3(d) shall not be limited or otherwise affected by the making, commencement, disclosure, announcement or submission of any Superior Proposal or other
Acquisition Proposal, by any Intervening Event or by any Adverse Recommendation Change. Without limiting the generality of the foregoing, the Company agrees that: (i) unless this Agreement is
terminated in accordance with Section 7.1, the Company shall not submit any Acquisition Proposal to a vote of its shareholders (other than the Merger); and
(ii) except as otherwise provided in this Section 5.3(d), the Company shall not (without Parent's prior written consent) adjourn, postpone or cancel (or
propose to adjourn, postpone or cancel) the Shareholders Meeting. Following receipt of Company Shareholder Approval, the Company shall promptly deliver notice (the "Shareholder
Notice") to each shareholder of the Company who gave written objection to the Merger in accordance with Section 179(2) of the BVI Act and each shareholder of the Company from
whom written objection was not required in accordance with Section 179(2) of the BVI Act, which notice shall include the notice to shareholders required by Section 179 of the BVI Act of
the approval of the Merger. The Company shall (i) give Parent a reasonable opportunity to review and comment on all materials to be submitted to the shareholders of the Company, including the
Shareholder Notice, and (ii) consider in good faith, and incorporate therein, all comments reasonably proposed by Parent.
(e) Immediately
after the execution and delivery of this Agreement, Parent, in its capacity as the sole shareholder of Merger Sub, shall adopt this Agreement.
SECTION 5.4 Access to Information; Confidentiality.
(a) From the date hereof until the Closing Date, upon reasonable notice, the Company shall afford Parent and its Representatives reasonable access to the properties, assets,
offices, facilities, books and records of the Company and its Subsidiaries and shall furnish Parent and the Debt Financing Sources with such financial, operating and other data and information
relating to the Company and its Subsidiaries as Parent may reasonably request; provided, however, that
any such access or furnishing of information shall be conducted at Parent's expense, during normal business hours, under the supervision of the Company's personnel and in such a manner as not to
unreasonably interfere with the normal operations of the Company and its Subsidiaries. Notwithstanding anything to the contrary in this Section 5.4, neither the
Company nor any of its Subsidiaries shall be required to disclose any information to Parent or its Representatives or any Debt Financing Source if such disclosure would (a) jeopardize any
attorney-client or other legal privilege (provided that the Company shall use its commercially reasonable efforts to allow for such access or disclosure
(or as much of it as possible) in a manner that does not result in a loss of attorney-client or other legal privilege or develop an alternative method of providing such information to Parent), or
(b) contravene any Law or Contract (provided that the Company shall use its commercially reasonable efforts to provide such access or make such
disclosure in a manner that does not contravene Law or Contract or develop an alternative method of providing such information to
A-32
Table of Contents
Parent).
Prior to the Closing, Parent shall not and shall cause its Affiliates and its and their Representatives and the Debt Financing Sources not to use any information obtained pursuant to this
Section 5.4 for any purpose unrelated to the Merger and the transactions contemplated hereby. No investigation pursuant to this
Section 5.4 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto.
Notwithstanding anything herein to the contrary, Parent and Merger Sub shall not, and shall cause their respective Representatives not to, contact any partner, licensor, licensee, customer or supplier
of the Company in connection with the Merger or any of the transactions contemplated hereby without the Company's prior written consent (such consent not to be unreasonably withheld, conditioned or
delayed), and Parent and Merger Sub acknowledge and agree that any such contact shall be arranged by and with a representative of the Company participating.
(b) Parent
and Merger Sub shall hold all documents and other information concerning the Company and its Subsidiaries furnished to Parent or Merger Sub in connection with
this Agreement or the transactions contemplated hereby in accordance with the letter agreement, dated as of October 1, 2019, between the Company and Culligan International Company (the
"Confidentiality Agreement"), which Confidentiality Agreement shall remain in full force and effect in accordance with its terms.
SECTION 5.5 Efforts to Consummate the Merger.
(a) Upon the terms and subject to the conditions of this Agreement, each of the parties 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 necessary, proper or advisable (under Law or otherwise) in order to consummate the Merger and the other transactions contemplated by this Agreement, including by
using and by causing its Affiliates to use its and their reasonable best efforts to:
(i) prepare
and file all forms, registrations and notices required under, and seek any consents, authorizations or other approvals required under, any Law or by any
Governmental Entity in connection with the Merger and the other transactions contemplated hereby;
(ii) provide
as promptly as possible and advisable all information and documentary materials that may be requested pursuant to the HSR Act (including pursuant to any "Second
Request");
(iii) obtain
all required consents, approvals or waivers from any third Person, including as required under any Contract; and
(iv) resolve
all objections asserted with respect to this Agreement or the Merger or other transactions contemplated hereby under any Law.
Without
limiting the generality of the foregoing, each of the parties shall prepare and file as promptly as practicable (and in any event no later than the 15th Business Day hereafter) an
appropriate Notification and Report Form under the HSR Act. Parent shall pay all filing fees under the HSR Act.
(b) Subject
to applicable Law relating to the exchange of information, the parties shall keep each other reasonably apprised of the status of the matters addressed in this
Section 5.5 and shall cooperate with each other in connection with such matters, including by:
(i) cooperating
with each other in connection with filings or other written submissions required or advisable under any Law and liaising with each other in relation to each
step of the procedure before the relevant Governmental Entities in the United States and as to the contents of all communications with such Governmental Entities in the United States. To the extent
permitted by Law, each party shall be given a reasonable opportunity to review and comment on any filing or other written materials being submitted to any Governmental Entity in the United States
before submission, and the submitting party shall give reasonable and
A-33
Table of Contents
good
faith consideration to any comments made by the other party; provided, however, that either party
may limit disclosure of any sensitive business information exchanged pursuant to this paragraph (b) (including contents of draft or final copies of submissions) to the other party's outside
counsel;
(ii) furnishing
to the other party all information within its possession that is required for any application or other filing to be made by the other party pursuant to
applicable Law in the United States;
(iii) promptly
notifying each other of any material communications from or with any Governmental Entity in the United States with respect to the Merger or other transactions
contemplated by this Agreement and ensuring to the extent permitted by Law and the applicable Governmental Entity that each of the parties has the opportunity to attend any meeting or phone call with
or other appearance before any Governmental Entity; provided, however, that either party may limit
attendance at such meeting or phone call to outside counsel of the other party; and
(iv) consulting
and cooperating with one another in connection with all analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted to any Governmental Entity in the United States.
(c) The
obligations of Parent and Merger Sub under this Section shall include Parent and Merger Sub (i) proposing, negotiating, committing to and effecting, by
consent decree, hold separate order or otherwise (A) the sale, divesture, license or other disposition of any asset or business of Parent, Merger Sub or any of their Affiliates or
(B) the sale, divesture, license or other disposition, contemporaneously with or subsequent to the Effective Time, of any asset or business of the Company or its Subsidiaries;
(ii) permitting the Company and its Subsidiaries to sell, divest, license or otherwise dispose any of its or their assets or businesses prior to the Effective Time; (iii) entering into
any conduct of business arrangement with respect to its or its Affiliates' assets or businesses or the Company or its Subsidiaries' assets or businesses; and (iv) modifying, relinquishing,
waiving or terminating any of its or its Affiliates or the Company's or its Subsidiaries' existing relationships, ventures and contractual rights, in any such case of (i) through (iv), so as to
obtain the expiration of any applicable waiting period in the United States with respect to any Antitrust Law in the United States, to obtain any required consent or other approval from any
Governmental Entity in the United States under any Antitrust Law, or to prevent the entry of, or have vacated, lifted, reversed or otherwise overturned, any applicable injunction, judgment or other
order issued under any Antitrust Law in the United States; provided, however, that Parent and Merger Sub
shall not be required to (or to cause their Subsidiaries to) take (and the Company shall not take, without the prior written consent of Parent) the actions set forth in clauses (i) through
(iv) if such actions, considered collectively, would reasonably be expected to result in a material adverse effect on the Company and its Subsidiaries, taken as a whole.
(d) Parent
and Merger Sub shall not, and shall cause their Affiliates not to, acquire or agree to acquire any assets (including any equity interest in any Person) if such
acquisition or agreement would reasonably be expected to (i) materially increase the risk of not obtaining any required expiration of any waiting period or any consent or other approval
necessary under any Antitrust Law in the United States for the Merger or other transactions contemplated hereby or (ii) materially increase the risk of any Governmental Entity in the United
States entering or not vacating, lifting, reversing or otherwise overturning any injunction, judgment or other order under any Antitrust Law in the United States that would prevent, prohibit, restrict
or delay the consummation of the Merger or other transactions contemplated hereby.
A-34
Table of Contents
(e) Notwithstanding
anything to the contrary herein (but subject to the last sentence of this Section 5.5(e)), the Company shall control
the defense and settlement of all Shareholder Litigation initiated against the Company, the Company Board or any of its or their Representatives. The Company shall promptly notify Parent in writing
of, and shall give Parent the opportunity to participate in the defense and settlement of, any Shareholder Litigation. Without otherwise limiting the Indemnified Persons' rights with regard to the
right of counsel, following the Effective Time, the Indemnified Persons shall be entitled to continue to retain Goodwin Procter LLP or such other counsel selected by such Indemnified Persons
prior to the Effective Time to defend any Shareholder Litigation. No compromise or full or partial settlement of any Shareholder Litigation shall be agreed to by the Company without Parent's prior
written consent (which shall not to be unreasonably withheld, delayed or conditioned).
SECTION 5.6 Financing.
(a) Neither Parent nor Merger Sub shall agree or permit (and Parent and Merger Sub shall cause their Affiliates to not agree or permit) to any amendment, replacement, supplement
or other modification of, or waive any of its rights or any rights in favor of the Company under, any Financing Commitment or any definitive agreements related to any Financing Commitment (including
the Debt Fee Letter), in each case, without the prior written consent of the Company, if such amendment, replacement, supplement or other modification or waiver (x) reduces the aggregate amount
of the Financing below the amount required to consummate the transactions contemplated hereby on the Closing Date or (y) amends, supplements or otherwise modifies the conditions precedent to
the Financing Commitments or adds or imposes new terms or conditions in a manner that would reasonably be expected to (i) materially delay, impede or impair the Closing or prevent the Closing
or (ii) adversely impact the ability of Parent, Merger Sub or any of their Affiliates to enforce their rights under the Financing Commitments or the ability of Parent, Merger Sub, Borrower or
their Affiliates to perform their obligations hereunder on a timely basis; it being understood and agreed that Parent, Merger Sub or any of their Affiliates may, without the consent of the Company,
amend or otherwise modify the Debt Commitment Letter to add lenders, lead arrangers, bookrunners, syndication agents or similar entities that have not executed the Debt Commitment Letter on the date
of this Agreement so long as such amendment or modification does not have the effects described in clauses (x) or (y) above. Parent and Merger Sub shall promptly deliver to the Company
copies of any such amendment, restatement, amendment and restatement, replacement, supplement, modification, waiver or consent. Each of Parent and Merger Sub shall, and shall cause any of their
Affiliates, as applicable, to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to consummate and obtain the Financing on the
terms and conditions described in the Financing Commitments (as such terms may be modified or adjusted in accordance with the terms of, and within the limits of, the "flex" provisions contained in the
Debt Fee Letter, as applicable) including (i) using its reasonable best efforts to (u) enforce its rights under the Financing Commitments; provided, however that nothing contained in this
Section 5.6 shall require either Parent or Merger Sub to bring any
enforcement action or proceeding against any Debt Financing Source to enforce its respective rights under the Debt Commitment Letter to procure Debt Financing pursuant to the Debt Commitment Letter
and Debt Fee Letter, (v) maintain in full force and effect the Financing Commitments in accordance with the terms and subject to the conditions thereof, (w) negotiate and enter into
definitive agreements with respect thereto on the terms and conditions contained therein, (x) satisfy on a timely basis all conditions applicable to the Borrower in such definitive agreements
that are within its control and (y) cause Borrower to contribute or otherwise transfer the proceeds of the Debt Financing to Parent to permit Parent and Merger Sub to consummate the
transactions contemplated by this Agreement; and (ii) at the request of the Company, fully enforcing the Equity Financing Sources' obligations (and the rights of Parent and the Company) under
the Equity Commitment Letter, including by filing one or more lawsuits against the Equity Financing Sources to fully enforce the Equity Financing Sources' obligations (and the rights of Parent and the
Company) thereunder. Upon any amendment, replacement, supplement or modification of the Equity
A-35
Table of Contents
Commitment
Letter or Debt Commitment Letter in accordance with this Section 5.6(a), the terms "Equity Commitment Letter" and "Debt Commitment Letter" shall mean the
Equity Commitment Letter and Debt Commitment Letter, as applicable, as so amended, replaced, supplemented or
modified in accordance with this Section 5.6(a). Parent and Merger Sub shall keep the Company reasonably informed of any material developments concerning the
Financing that would reasonably be expected to adversely affect (x) the ability of Parent or Borrower to satisfy any of the conditions to the Debt Financing or the Equity Financing or
(y) the availability of the Debt Financing or the Equity Financing (other than by virtue of the imposition of original issue discount, which may be funded at the election of Borrower as
provided in the Debt Fee Letter and/or by an increase in the amount of the Equity Financing); provided, neither Parent, the Borrower nor Merger Sub
shall be required to provide information to the extent that the provision thereof would violate any attorney-client privilege, law, rule or regulation or any confidentiality obligation binding on
Parent or Merger Sub and/or any of their respective affiliates.
(b) In
the event any portion of the Debt Financing becomes unavailable on the terms and conditions contemplated in the Debt Commitment Letter (as such terms may be modified
or adjusted in accordance with the terms of, and within the limits of, the "flex" provisions contained in the Debt Fee Letter) for any reason, Parent and Merger Sub shall, and Parent shall cause the
Borrower to, cooperate and use their reasonable best efforts to obtain, as promptly as practicable, financing from alternative sources (the "Alternative Debt Financing")
in an amount sufficient to consummate the transactions contemplated by this Agreement to occur on the Closing Date and on terms and conditions not materially less favorable in the aggregate to Parent
and Merger Sub than as set forth in the Debt Commitment Letter in effect as of the date hereof (and such terms and conditions shall not contain any conditions precedent to the Debt Financing that
would reasonably be expected to materially delay or prevent the consummation of the transactions contemplated hereby); provided nothing herein or in any
other provision of this Agreement shall require, and in no event shall the reasonable best efforts of Parent and the Merger Sub be deemed or construed to require, (A) Parent, Merger Sub or any
of their Affiliates to waive any term or condition of this Agreement, (B) Parent, Merger Sub or any of their Affiliates to pay fees or other amounts that, taken as a whole, materially exceed
the aggregate fees and other amounts contemplated to be paid by the Debt Commitment Letter and the Debt Fee Letter as of the date of this Agreement, or (C) seek any additional equity financing
or commitments. In the event that Alternative Debt Financing is arranged in accordance with this Section 5.6(b), the term "Debt Commitment Letter" shall mean the
commitment letters for such Alternative Debt Financing (as amended, replaced, supplemented or modified in accordance with Section 5.6(a)). In the event that
Alternative Debt Financing shall be obtained pursuant to this Section 5.6(b), the parties shall comply with the covenants in
Section 5.6(a) with respect to such Alternative Debt Financing mutatis mutandis. Parent shall keep the Company
informed on a current basis in reasonable detail of the status of its efforts to obtain and consummate the Alternative Debt Financing.
(c) Parent
and Merger Sub shall keep the Company reasonably informed of the status of Parent's, the Borrower's and Merger Sub's efforts to obtain the Financing and to
satisfy the conditions thereof, and giving the Company prompt notice of any material change (adverse or otherwise) with respect to the Financing. Without limiting the generality of the foregoing,
Parent and Merger Sub shall notify the Company promptly (and in any event within one Business Day) if at any time prior to the Closing:
(i) any
Financing Commitment is terminated for any reason whether or not such attempted or purported termination is valid;
(ii) Parent,
the Borrower or Merger Sub obtains knowledge of any breach or default or any threatened breach or default (or any event or circumstance that, with or without
due
A-36
Table of Contents
notice,
lapse of time or both, would reasonably be expected to give rise to any breach or default) by any party to any of the Financing Commitments;
(iii) Parent,
the Borrower or Merger Sub receives any written communication from any Person with respect to any (A) actual, potential or threatened breach, default,
termination or repudiation by any party to any of the Financing Commitments or (B) dispute or disagreement between or among any parties to any of the Financing Commitments;
(iv) any
Equity Financing Source or Debt Financing Source refuses to provide, or notifies Parent or Merger Sub (in writing) an intent to refuse to provide, all or any
portion of the Financing Commitments contemplated by the Equity Commitment Letter or the Debt Commitment Letter, respectively, on the terms set forth therein; or
(v) Parent,
the Borrower or Merger Sub, for any reason, no longer believes in good faith that it will be able to obtain all or any portion of the Financing Commitments on
the terms described in the Equity Commitment Letter or the Debt Commitment Letter, as applicable.
Promptly
after receipt of written notice by Parent and Merger Sub from the Company, Parent and Merger Sub shall provide any information reasonably requested in writing by the Company relating to any
circumstance referred to in clause (i) through (v) of the immediately preceding sentence; provided, none of Parent, the Borrower nor
Merger Sub shall be required to provide information to the extent that the provision thereof would violate any attorney-client privilege, law, rule or regulation or any confidentiality obligation
binding on Parent or Merger Sub and/or any of their respective Affiliates.
(d) It
is understood and agreed that after the date of this Agreement, Parent intends to pursue, and the Company will use its reasonable best efforts to assist in accordance
with Section 5.6(e), debt financing which may be comprised of a senior secured cash flow revolver, a senior secured term loan facility and/or senior unsecured notes
(the "Best Efforts Debt Financing"), in lieu of the Debt Financing, to effect the Parent Refinancing, satisfy in full the Paid Off Indebtedness, to finance the
transactions
contemplated hereby and to pay related fees and expenses; provided, however, that notwithstanding
anything to the contrary in this Agreement, the conditions set forth in Article VI, to the extent applicable to Company's obligations under Section 5.6 in
respect of any Best Efforts Debt Financing only, shall be deemed to be satisfied with respect thereto notwithstanding that the Company has breached or otherwise failed to comply with its obligations
in respect of the Best Efforts Debt Financing only and no such breach or failure shall constitute or be deemed to be a breach for purposes of this Agreement, including for purposes of
Article VII, or otherwise form the basis of a failure to effect the Closing by Parent.
(e) Prior
to the Closing, the Company shall, to the extent Parent and Merger Sub may reasonably request in connection with the Debt Financing and/or the Best Efforts Debt
Financing, use its reasonable best efforts to, and shall cause its Subsidiaries to cause its and their respective officers, employees and advisors to, use reasonable best efforts to provide to Parent
and Merger Sub such cooperation as is customary for such debt financings, including:
(i) cooperating
in the preparation of any confidential information memorandum, lender presentations, rating agency presentations and/or other investor slides and the
execution and delivery of any definitive financing documents (including any loan agreement, pledge and security documents, any hedging agreement, control agreements and related deliverables (including
any schedules and exhibits thereto)) as may be reasonably requested by Parent;
(ii) making
senior management of the Company reasonably available for a reasonable number of meetings, conference calls and sessions with ratings agencies at mutually
agreeable times and upon reasonable notice (but no more than one in-person bank meeting);
A-37
Table of Contents
(iii) cooperating
with Debt Financing Sources and their respective advisors in performing their due diligence;
(iv) as
promptly as reasonably practicable, furnishing Parent, Merger Sub and Debt Financing Sources with (x) the Required Information and, in connection with the
Best Efforts Debt Financing, such other information that is otherwise reasonably necessary in connection with Parent's Debt Financing;
(v) cooperating
and assisting Parent and the Borrower in connection with Parent's and/or the Borrower's preparation of customary pro forma financial statements reflecting
the Merger and the Financing and/or the Best Efforts Debt Financing (it being understood and agreed that the Company shall not be
required to provide any information regarding any post-Closing or pro forma cost savings, synergies, capitalization, ownership or other post-Closing pro forma adjustments (or otherwise prepare pro
forma financial information or post-Closing financial information));
(vi) (A)
ensuring that the chief financial officer (or other similar financial officer) of the Company executes prior to the Closing customary "authorization" letters as
pertaining to the Company in connection with bank information memoranda authorizing the distribution of information to prospective lenders and identifying any portion of such information that
constitutes material, nonpublic information regarding the Company or its Subsidiaries or their respective securities and (B) providing information and supporting details reasonably requested by
Parent to enable Borrower's delivery of a solvency certificate in the form required by the Debt Commitment Letter or by the Best Efforts Debt Financing documentation;
(vii) facilitating
the pledging of collateral and the perfection of the applicable security interests (including obtaining insurance certificates with customary endorsements
as required by the Debt Financing and/or a Best Efforts Debt Financing);
(viii) ensuring
that the syndication efforts in respect of the debt Financing and/or the Best Efforts Debt Financing benefit from the existing lending relationships of the
Company;
(ix) furnishing
Parent, the Borrower and the Debt Financing Sources promptly, and in any event no later than three Business Days prior to the Closing Date, with all
documentation and other information required by regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including the PATRIOT Act and 31 C.F.R.
§ 1010.230, that has been reasonably requested by Parent and/or the Borrower at least ten Business Days prior to the Closing Date or such other time periods as are specified in the
Best Efforts Debt Financing documentation;
(x) causing
the taking of corporate and other actions by the Company and its Subsidiaries that are reasonably necessary to permit the consummation of the Debt Financing or
the Best Efforts Debt Financing on the Closing Date and to permit the proceeds thereof to be made available to the Borrower as of the Closing; it being understood and agreed that (A) no such
corporate or other action will take effect prior to the Closing and (B) any such corporate or other action will only be required of the directors, members, partners, managers or officers of the
Companies who retain their respective positions as of the Closing;
(xi) consenting
to the reasonable use of the logos of the Company and its Subsidiaries in connection with the Debt Financing and/or the Best Efforts Debt Financing in a
manner that is customary for financing transactions; it being understood that such logos will not be used in a manner that is intended to or reasonably likely to harm or disparage the Company or its
Subsidiaries or the reputation or goodwill of the Company or its Subsidiaries;
A-38
Table of Contents
(xii) assisting
Parent or its Affiliates in obtaining corporate and facilities ratings in connection with the Debt Financing and/or the Best Efforts Debt Financing; and
(xiii) delivering
notices of prepayment or redemption within the time periods required by the relevant agreements governing the Company's existing Indebtedness to be paid
off at the Closing;
provided, that nothing in this Agreement shall require such cooperation to the extent it would, in the Company's reasonable
judgment, materially interfere with the business or operations of the Company or its Subsidiaries (it being understood and agreed that the actions specified in clauses "(i)" through "(xiii)" of this
Section 5.6(e) do not interfere with the business or operations of the Company or its Subsidiaries; provided, further, that notwithstanding
anything in this Agreement to the contrary, (x) none of the stockholders of the Company, the Company nor any of the
Company's Subsidiaries or Affiliates shall (1) be required to pay any commitment or other similar fee, (2) have any liability or obligation under any loan agreement or any related
document or any other agreement or document related to the Financing (or Alternative Debt Financing) or Best Efforts Debt Financing, unless and until the Closing occurs, (3) incur any other
liability in connection with the Financing (or any Alternative Debt Financing) or Best Efforts Debt Financing, (4) other than with respect to the provision of information
as described in clause "(vii)" above, be required to enter into, deliver or perform under any agreement, certificate or other document with respect to the Debt Financing (other than the authorization
letters pursuant to clause "(vii)" of this Section 5.6(e)) that is not contingent upon the Closing or that would be effective prior to or simultaneous with the
Closing, (5) be required to waive or amend any terms of this Agreement or agree to pay any fees or reimburse any expenses with respect to its obligations under
Section 5.6(e) prior to the Closing for which it has not received prior reimbursement or is not otherwise indemnified by or on behalf of Parent, (6) be
required to give any indemnities in connection with the Debt Financing that are effective prior to the Closing, (7) be required to provide any information the disclosure of which is prohibited
or restricted under applicable Law (provided that the Company shall use its reasonable best efforts to provide such information in a manner that does not contravene Law or develop an alternative
method of providing such information) and if any information is being withheld on such basis, shall inform Parent that information is being so withheld, (8) provide any legal opinion or other
opinion of counsel, (9) be required to take any action that would result in a material default or breach under any material agreement to which the Company is a party or (10) be required
to provide access to or disclose information to the extent that the provision thereof would violate any attorney-client privilege, law, rule or regulation or any confidentiality obligation binding on
the Company or any of its Affiliates, and (y) except as set forth in this Section 5.6(e), no person that is a director or officer of the Company or any of
its Subsidiaries shall be required to take any action in such capacity with respect to the Financing or Best Efforts Debt Financing prior to the Closing. Parent shall reimburse the Company for all
reasonable and documented expenses incurred by the Company and its Subsidiaries in connection with its compliance with this Section 5.6(e), promptly upon receipt of
the Company's written request therefor.
(f) It
is the intention of the parties to work together following the date of this Agreement to effect the Best Efforts Debt Financing. In the event that the Best Efforts
Debt Financing is not obtained on or prior to the Closing Date, the Parties will utilize the Debt Financing Commitments in accordance with Section 4.5(b). Parent
and Merger Sub acknowledge and agree that the availability of or obtaining of the Financing or the Best Efforts Debt Financing or the receipt of proceeds therefrom is not a condition to the Closing.
(g) On
or prior to the Closing Date, the Company shall deliver to Parent and Merger Sub a fully executed payoff letter in customary form with respect to the debt for
borrowed money described in Section 5.6(g) of the Company Disclosure Letter (the "Paid Off Indebtedness") specifying the aggregate
amount of the obligations of the Company and its Subsidiaries (including principal, interest, fees, expenses, prepayment penalties or payments and other amounts payable)
A-39
Table of Contents
that
will be outstanding as of the Closing Date. At or prior to Closing, Parent shall have caused the Paid Off Indebtedness to be repaid in full or arranged for such Paid Off Indebtedness to be paid
in full
substantially concurrently with the Closing, in either case, other than indemnity obligations for which no claim has been made and other inchoate obligations which expressly survive the pay off and
discharge of such indebtedness.
(h) Prior
to the Closing and at the request of Parent, the Company will cooperate and use reasonable best efforts to assist Parent in connection with the preparation and
filing by the Company of a Current Report on Form 8-K to the extent necessary for the materials used in connection with the Debt Financing and/or a Best Efforts Debt Financing to avoid
containing any material non-public information with respect to the Company and its Subsidiaries.
(i) Prior
to Closing, the Company shall timely file all SEC Documents required to be filed by the rules and regulations of the SEC.
(j) Parent
shall indemnify and hold harmless the Company from and against any and all losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are
suffered or incurred by any of them in connection with actions taken at the request of Parent and Merger Sub in accordance with Section 5.6(e) by them.
SECTION 5.7 Employment and Employee Benefits Matters; Other Plans.
(a) Without limiting any additional rights that any current employee of the Company or any of its Subsidiaries (each, a "Company Employee") may have
under any Company Plan, except as otherwise agreed in writing between Parent and a Company Employee, Parent shall cause the Surviving Company and each of its Subsidiaries, for a period commencing at
the Effective Time and ending 12 months thereafter, to provide any Company Employee terminated during that 12-month period with 100% of the severance payments and benefits required under the
Company Plans set forth on Schedule 5.7(a) of the Company Disclosure Letter as in effect on the date of this Agreement.
(b) Without
limiting any additional rights that any Company Employee may have under any Company Plan, except as otherwise agreed in writing between Parent and a Company
Employee, Parent shall cause the Surviving Company and each of its Subsidiaries, for the period commencing at the Effective Time and ending 12 months thereafter, to maintain for any Company
Employee who remains employed by the Company or any of its Subsidiaries (i) annual salary/wage rate, annual cash bonus opportunities, and commission opportunities that are each no less
favorable than provided to such Company Employees immediately prior to the Effective Time, and (ii) employee benefits (solely including, health, welfare and defined contribution retirement
benefits, but excluding change in control benefits, retention bonuses, equity-based incentive awards and defined benefit retirement benefits) that, in the aggregate, are substantially comparable to
the employee benefits maintained for and provided to such Company Employees under Company Plans immediately prior to the Effective Time.
(c) As
of and after the Effective Time, Parent will, or will cause the Surviving Company to, give Company Employees full credit for purposes of eligibility and vesting and
benefit accruals (but not for purposes of benefit accruals under any defined benefit pension plans), under (x) any severance-related provisions of existing Company Plans described in
Section 5.7(a) above and (y) any benefit (including vacation) plans, programs, policies and arrangements maintained for the benefit of Company Employees as
of and after the Effective Time by Parent, its Subsidiaries or the Surviving Company (each, a "Parent Plan") for the Company Employees' service with the Company, its
Subsidiaries and their predecessor entities to the same extent recognized by the Company immediately prior to the Effective Time under a comparable Company Plan, except to the extent such recognition
would result in the duplication of benefits. With respect to each Parent Plan that is a "welfare benefit plan" (as defined in Section 3(1) of ERISA), Parent and its Subsidiaries shall use
commercially reasonable efforts to (i) cause to be waived any pre-existing
A-40
Table of Contents
condition
or eligibility limitations and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed
to, Company Employees under similar plans maintained by the Company and its Subsidiaries during the plan year immediately prior to the Effective Time.
(d) From
and after the Effective Time, except as otherwise agreed in writing between Parent and a Company Employee or as otherwise provided in this Agreement, Parent will
honor, and will cause its Subsidiaries to honor, in accordance with its terms, each existing employment, change in control, retention, severance and termination protection agreement between the
Company or any of its Subsidiaries and any officer, director or employee of that company that is set forth on Section 3.11(a) of the Company Disclosure Letter and the Company Key Executive
Severance Plan with respect to all employees of the Company and its Subsidiaries who are participants under such plan.
(e) Neither
Parent nor the Surviving Company or their Subsidiaries following the Effective Time shall, at any time prior to 90 days after the Effective Time, take any
action that would result in a "mass layoff" or "plant closing" as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988, as amended
("WARN"), or comparable conduct under any applicable state Law, affecting in whole or in part any facility, site of employment, operating unit or employee of the Surviving
Company or its Subsidiaries without complying fully with the requirements of WARN or such applicable state Law; provided, that, this Section 5.7(e)
shall not apply to a "mass layoff" or "plant closing" that arises as a result of, based
on, or otherwise relates to the sale of any assets owned by the Surviving Company or its Subsidiaries.
(f) Nothing
contained in this Section 5.7, express or implied, is intended to require Parent or its Subsidiaries, including the Surviving
Company, to continue to employ any of the Company Employees for any specific period of time or to confer upon any Person that is not a party to this Agreement any right, benefit or remedy of any
nature whatsoever under this Agreement, including any right to employment or continued employment for any period of time by reason of this Agreement, or any right to a particular term or condition of
employment. Notwithstanding anything to the contrary contained in this Agreement, no provision of this Agreement is intended to, or does, (i) constitute the establishment of, or an amendment
to, any Company Plan or any employee benefit plan of Parent or its Affiliates or (ii) limit the right of Parent or its Affiliates to amend or terminate any Company Plan or any other employee
benefit plan; provided, however, that nothing in this Agreement limits Parent's or its Affiliates'
obligations to comply with the terms of any Company Plan.
SECTION 5.8 Takeover Restrictions.
If any Takeover Restriction is or becomes applicable to this Agreement, the Merger or any of the other transactions contemplated hereby, each of the Company and Parent and their
respective Boards of Directors shall take all action necessary to ensure that the Merger and the other transactions contemplated hereby may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Takeover Restriction on this Agreement, the Merger and the other transactions contemplated hereby.
SECTION 5.9 Notification of Certain Matters.
The Company and Parent shall promptly notify each other of (a) any notice or other communication received by such party or any of its Affiliates from any Governmental Entity in
connection with the Merger or the other transactions contemplated hereby or from any Person alleging that the consent of such Person is or may be required in connection with the Merger or the other
transactions contemplated hereby and (b) any Action commenced or threatened in writing against, relating to or involving the Merger or the other transactions contemplated hereby; provided,
however, that no such notification shall affect any of the representations, warranties,
covenants, rights or remedies, or the conditions to the obligations of, the parties hereunder.
A-41
Table of Contents
SECTION 5.10 Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time, the Surviving Company shall and shall cause its Subsidiaries to, and Parent shall cause the Surviving Company and its Subsidiaries to,
indemnify and hold harmless each present and former director, officer and employee of the Company and its Subsidiaries (each an "Indemnified Person") against any and all
costs, expenses (including reasonable attorneys' fees), judgments, fines, penalties, taxes, losses, claims, damages or other liabilities incurred in connection with any Action or threatened Action,
whether civil, criminal, administrative or investigative, whether formal or informal, arising out of or pertaining to matters existing or occurring on or prior to the Closing Date (including the
Merger, the Financing, the Best Efforts Debt Financing and the other transactions contemplated hereby), whether asserted or claimed prior to, on or after the Closing Date, to the fullest extent that
the Company and its Subsidiaries would have been permitted under applicable Law, including with respect to the advancement of expenses.
(b) For
a period of six years from the Effective Time, the memorandum of association and articles of association (or comparable organizational documents) of the Surviving
Company and each of its Subsidiaries shall contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors, officers and
employees than are presently set forth in the memorandum of association and articles of association (or comparable organizational documents) of such entity, and no such provisions shall be amended,
repealed or otherwise modified during such period in any manner adverse to any such individuals.
(c) Prior
to the Closing Date, the Company shall purchase a "tail" directors' and officers' liability insurance policy for the Company and its Subsidiaries and their present
and former directors, officers and employees who are currently covered by the directors' and officers' liability insurance coverage currently maintained by the Company that shall provide such
directors, officers and employees with coverage for six years following the Closing Date of not less than the existing coverage and have other terms not less favorable to the insured persons than the
directors' and officers' liability insurance coverage currently maintained by the Company and its Subsidiaries; provided, however, that in no event shall
the Company pay with respect to such tail policy in respect of any one policy year more than 300% of the aggregate
annual premium most recently paid by the Company prior to the date of this Agreement net of any return premium received from the coverage currently maintained by the Company and its Subsidiaries (the
"Maximum Amount"); provided, that if the Company is unable to obtain the insurance required by this
Section 5.10(c), it shall be entitled to obtain comparable insurance as possible for each year within such six-year period for an annual premium equal to the
Maximum Amount. Following the Closing, the Surviving Company shall and shall cause its Subsidiaries to, and Parent shall cause the Surviving Company and its Subsidiaries to, maintain such policy in
full force and effect, and continue to honor the obligations thereunder.
(d) From
and after the Effective Time, the Surviving Company shall, and shall cause its Subsidiaries to, and Parent shall cause the Surviving Company and its Subsidiaries
to, honor in accordance with its terms, each indemnification agreement (including as may be contained in any employment agreement or arrangement) in effect between the Company or any of its
Subsidiaries and any Indemnified Person as of the date hereof.
(e) In
the event that the Surviving Company or Parent or any of their respective successors or assigns (i) consolidates with or merges into any other Person and is
not the continuing or surviving corporation or entity or (ii) transfers or otherwise conveys all or a majority of its assets to any Person, then proper provision shall be made so that the
successors and assigns of the Surviving Company or Parent, or the holder of their assets, as the case may be, shall succeed to the obligations set forth in this
Section 5.10.
A-42
Table of Contents
(f) This
Section 5.10 is intended to be for the benefit of, and shall be enforceable by, each of the Persons entitled to indemnification.
The indemnification, advancement of expenses and exculpation provided for herein shall not be deemed exclusive of any other rights to which any such Person may be entitled, whether pursuant to Law,
contract or otherwise.
SECTION 5.11 Rule 16b-3.
The Company shall be permitted to take such steps as may be reasonably necessary or advisable to cause dispositions of Company equity securities (including derivative securities)
pursuant to the Merger and other transactions contemplated by this Agreement by each individual who is a director or officer of the Company to be exempt under Rule 16b3 under the
Exchange Act.
SECTION 5.12 Public Announcements.
Each of Parent and Merger Sub, on the one hand, and the Company, on the other hand, shall consult with each other before issuing, and give each other a reasonable opportunity to review
and comment upon, any press release or other analogous public statement with respect to this Agreement, the Merger and the other transactions contemplated hereby and shall not issue any such press
release or make any other analogous public statement prior to such consultation unless Parent or Merger Sub, on the one hand, and the Company, on the other hand shall have approved such disclosure or
such disclosing party shall have been advised in writing by its outside legal counsel that such disclosure is required by applicable Law, court process or rule or regulation of the NYSE; provided,
however, that notwithstanding the foregoing, the Company shall not be required to consult with Parent or Merger Sub before issuing any press release or making any other public statement
(i) with respect to an Adverse Recommendation Change effected in accordance with Section 5.2(b) or (ii) with respect to any press release regarding an
Acquisition Proposal issued in compliance with Section 5.2(e). Parent and the Company agree that the press release announcing the execution of this Agreement shall
be a joint release of Parent and the Company. Nothing in this Section 5.12 shall limit the ability of any party hereto to make disclosures that are consistent in
all material respects with the prior public disclosures by the parties regarding the Merger and the other transactions contemplated by this Agreement.
SECTION 5.13 Register of Members.
On the Business Day immediately preceding the Closing, the Company shall deliver to Parent a certified copy of its register of members as of the day immediately prior to the Closing Date
and cause the register of members of the Company to be closed, and there shall be no further registration of transfers on the register of members of the Company after that time.
SECTION 5.14 BVI Registered Agent.
On or prior to the Closing, the Company shall deliver to Parent evidence reasonably satisfactory to Parent that the registered agent of the Company in the British Virgin Islands will
recognize the authority of Parent to give instructions in relation to the Surviving Company with effect from the Effective Time, including for the purposes of updating the corporate records of the
Company to reflect the Merger and the changes to the Company Board contemplated by Section 1.5.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The obligation of each party to effect the Merger is subject to the satisfaction or, to the extent permitted by applicable Law, waiver at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. The Company Shareholder Approval shall have been
obtained.
(b) No Injunctions or Legal Restraints; Illegality. No temporary restraining order,
preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction in the United States or any Specified Jurisdiction shall be in effect, and no
A-43
Table of Contents
Law
shall have been enacted, entered, promulgated, enforced or deemed applicable by any Governmental Entity of the United States or any Specified Jurisdiction that, in any case, prohibits or makes
illegal the consummation of the Merger.
(c) Antitrust. Any applicable waiting period (and any extension thereof, including
any agreements or commitments by the parties not to consummate the transactions, including any timing agreements) under the HSR Act relating to the transactions contemplated by this Agreement shall
have expired or been terminated.
SECTION 6.2 Conditions to the Obligations of the Company.
The obligation of the Company to effect the Merger is also subject to the satisfaction, or to the extent permitted under applicable Law, waiver by the Company, at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. Each of the representations and warranties of
Parent and Merger Sub set forth in Article IV shall be true and correct as of the date of this Agreement and as of the Closing Date as if made as of the Closing
Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except for any inaccuracies of such representations and
warranties the circumstances giving rise to which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect
(provided, that for purposes of determining the accuracy of such representations and warranties, all references to the terms "material" or "in all
material respects" and any reference to "Parent Material Adverse Effect" (and variations thereof) shall be disregarded).
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Effective Time.
(c) Officers' Certificate. The Company shall have received a certificate signed by
an executive officer of Parent certifying as to the matters set forth in paragraphs (a) and (b) above.
SECTION 6.3 Conditions to the Obligations of Parent and Merger Sub.
The obligation of Parent and Merger Sub to effect the Merger is also subject to the satisfaction, or waiver by Parent, at or prior to the Effective Time of the following conditions:
(a) Representations
and Warranties.
(i) Each
of the representations and warranties of the Company set forth in Section 3.4(a) through
Section 3.4(d) (Capitalization) shall, except for any de minimis inaccuracies, be true and correct as of the date of
this Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such
earlier date);
(ii) each
of the representations and warranties of the Company set forth in Section 3.8(c) (Absence of Certain Changes or Events) shall
be true and correct in all respects as of the date of this Agreement;
(iii) each
of the representations and warranties of the Company set forth in Section 3.2 (Authority; Execution; Delivery),
Section 3.6(a) through 3.6(d) (SEC Reports; Financial Statements), Section 3.17 (Takeover
Restrictions) and Section 3.18 (Brokers) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made
as of the Closing Date (except to the extent which representations and warranties expressly relate to an earlier date, in which case as of such earlier date); provided, that for purposes of determining
the accuracy of such representations and warranties all references to the terms "material" or "in all
material respects" and any reference to "Material Adverse Effect" (and variations thereof) shall be disregarded; and
A-44
Table of Contents
(iv) each
of the remaining representations and warranties of the Company set forth in Article III shall be true and correct as of the
date of this Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of
such earlier date), except for any inaccuracies of such representations and warranties the circumstances giving rise to which, individually or in the aggregate, have not had and would not reasonably
be expected to have a Material Adverse Effect; provided, that for purposes of determining the accuracy of such representations and warranties in this
clause "(iv)," all references to the terms "material" or "in all material respects" and any reference to "Material Adverse Effect" (and variations thereof) shall be disregarded.
(b) Performance of Obligations of the Company. The Company shall have performed in
all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, other than with respect to obligations under
Section 5.6 with respect to the Best Efforts Debt Financing.
(c) Absence of Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any event, change, circumstance, occurrence, effect or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse
Effect.
(d) Officers' Certificate. Parent shall have received a certificate signed by an
executive officer of the Company certifying as to the matters set forth in paragraphs (a) through (c) above.
SECTION 6.4 Frustration of Closing Conditions.
None of the parties hereto may rely on the failure of any condition set forth in this Article to be satisfied if such failure was caused by such party's breach of this Agreement.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination.
This Agreement may be terminated, and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Company Shareholder Approval has been obtained
(with any termination by Parent also being an effective termination by Merger Sub):
(a) by
mutual written consent of Parent and the Company;
(b) by
either Parent or the Company:
(i) if
the Merger shall not have been consummated on or before June 23, 2020 (the "Outside Date"); provided, that neither party shall have the right to terminate this Agreement pursuant to this
Section 7.1(b)(i) if
such party's breach of any representation, warranty, covenant or agreement set forth in this Agreement has been the proximate cause of, or resulted in, the failure of the Closing to have occurred on
or before the Outside Date, other than with respect to the Company, obligations under Section 5.6 with respect to the Best Efforts Debt Financing;
(ii) if
any court of competent jurisdiction or other Governmental Entity of competent jurisdiction shall have issued a judgment, order, injunction, rule or decree, or taken
any other action restraining, enjoining or otherwise prohibiting consummation of the Merger, and such judgment, order, injunction, rule, decree or other action shall have become final and
nonappealable; provided, that neither party shall have the right to terminate this Agreement pursuant to this
Section 7.1(b)(ii) if such party's breach of any representation, warranty, covenant or agreement set forth in this Agreement has been the proximate cause of, or
resulted in, the issuance, promulgation, enforcement or entry of any such order, other than
A-45
Table of Contents
with
respect to the Company, obligations under Section 5.6 with respect to the Best Efforts Debt Financing; or
(iii) if
the Company Shareholder Approval shall not have been obtained at the Shareholders Meeting duly convened or at any adjournment or postponement thereof at which a
vote on the approval of this Agreement was taken;
(c) by
the Company:
(i) if
Parent or Merger Sub has breached or failed to perform any of its covenants or other agreements set forth in this Agreement, or if any representation or warranty of
Parent or Merger Sub is untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the Effective Time, (A) would result in
the failure of any of the conditions set forth in Section 6.1 or 6.2 and (B) has not been cured prior to the date that is the
30th calendar day following the date that the Company delivers Parent notice of such breach or inaccuracy; provided, that the Company shall not
have the right to terminate this Agreement pursuant to this paragraph (i) if it is then in material breach of any of its covenants or other agreements set forth in this Agreement, other than
with respect to obligations under Section 5.6 with respect to the Best Efforts Debt Financing;
(ii) subject
to compliance with Section 5.2(c), at any time prior to the time the Company Shareholder Approval is obtained, if:
(A) the Company Board authorizes the Company, subject to complying with the terms of this Agreement, to enter into an acquisition agreement in connection with a Superior Offer (an
"Alternative Acquisition Agreement"); (B) concurrently with the termination of this Agreement, the Company enters into an Alternative Acquisition Agreement; and
(C) the Company, concurrently with the termination of this Agreement, pays to Parent or its designees the Breakup Fee;
(iii) if:
(A) all of the conditions set forth in Section 6.1 and Section 6.3 (other than any
conditions that by their terms are to be satisfied at the Closing, provided that each such condition is then capable of being satisfied at a Closing on such date, assuming for purposes hereof that the
date of termination is the Closing Date) have been satisfied or validly waived; (B) the Company has irrevocably certified in writing that all of the conditions set forth in
Section 6.2 have been satisfied or waived and that, if Parent performs its obligation within its control to effect the Closing hereunder and the Debt Financing is
funded the Company will take such steps as are within its control to effect the Closing; (C) Parent failed to consummate the Closing on the date the Closing should have occurred pursuant to
Section 1.2; and (D) Parent fails to consummate the Closing by the third Business Day immediately following the irrevocable written notice delivered pursuant
to subsection (B) of this Section 7.1(c)(iii).
(d) by
Parent:
(i) if
the Company has breached or failed to perform any of its covenants or other agreements set forth in this Agreement, other than with respect to obligations under
Section 5.6 with respect to the Best Efforts Debt Financing, or if any representation or warranty of the Company is untrue, which breach or failure to perform or to
be true, either individually or in the aggregate, if occurring or continuing at the Effective Time, (A) would result in the failure of any of the conditions set forth in
Section 6.1 or 6.3 and (B) has not been cured prior to the date that is the 30th calendar day following the date that
Parent or Merger Sub delivers Company notice of such breach or inaccuracy; provided, that Parent shall not have the right to terminate this Agreement
pursuant to this paragraph (i) if it is then in material breach of any of its covenants or other agreements set forth in this Agreement; or
(ii) if
a Triggering Event shall have occurred.
A-46
Table of Contents
SECTION 7.2 Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article, this Agreement shall immediately become void and of no effect; provided,
however, that:
(a) Section 5.4(b)
(Access to Information; Confidentiality), Section 5.6(e) (Financing),
Section 5.12 (Public Announcements), this Section, Section 7.3 (Fees and Expenses),
Article VIII (General Provisions) and the Confidentiality Agreement shall survive the termination of this Agreement;
(b) Subject
to Section 7.3 and 7.4, no such termination shall relieve any party from any liability or
damages resulting from a pre-termination willful and material breach of this Agreement or fraud, in which case the non-breaching party shall be entitled to all rights and remedies available at law or
in equity; and
(c) in
the case of any damages sought by the Company from Parent or Merger Sub, such damages may be based on the consideration that would have otherwise been payable to the
shareholders and equity award holders of the Company pursuant to this Agreement, or based on loss of market value or price of the Shares and implied value of any equity awards.
SECTION 7.3 Fees and Expenses.
(a) Generally. Except as otherwise expressly provided in this Agreement (including
this Section 7.3), all fees and expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated hereby shall be paid by the
party incurring such fees or expenses, whether or not the Merger is consummated.
(b) Breakup Fee. In the event that:
(i) this
Agreement is terminated (A) by Parent pursuant to Section 7.1(d)(ii) or (B) by the Company pursuant to
Section 7.1(c)(ii); or
(ii) (A)
an Acquisition Proposal shall have been disclosed, announced, commenced, submitted (in the case of Section 7.1(b)(iii),
publicly) or made (in the case of Section 7.1(b)(iii), publicly), (B) this Agreement is terminated by the Company or Parent pursuant to
Section 7.1(b)(i), Section 7.1(b)(iii) or by Parent pursuant to Section 7.1(d)(i), and
(C) within twelve months after the date of such termination, the Company enters into a definitive agreement contemplating an Acquisition Transaction (whether or
not related to such Acquisition Proposal) and such Acquisition Transaction is subsequently consummated, or an Acquisition Transaction is otherwise consummated
(provided, that for purposes of this paragraph (ii), (A) each reference to "15%" in the definition of "Acquisition Transaction" shall be
deemed to be a reference to "35%") and (B) a capital raising equity offering by the Company shall not constitute an "Acquisition Transaction";
then,
in any such event, the Company shall pay to Parent the Breakup Fee. "Breakup Fee" means a payment in cash of a non-refundable fee in the amount of $34,132,500. In no
event shall the Company be required to pay the Breakup Fee on more than one occasion. In the event that Parent shall become entitled to receive payment of the Breakup Fee plus any payment obligations
pursuant to Section 7.3(d), the receipt of the payment of the Breakup Fee and any such other obligations (if received) shall be deemed to be liquidated damages, and
the Company shall not have any other liability or obligation to Parent, Merger Sub or any of their Affiliates relating to or arising out of this Agreement or the failure of the Merger or any other
transaction contemplated hereby to be consummated, and in such event, Parent and Merger Sub shall not seek to recover any money damages or obtain any equitable relief from the Company.
A-47
Table of Contents
(c) Breakup Fee Payment Procedures. Payment of the Breakup
Fee shall be made by wire transfer of same day funds to the accounts designated by Parent (i) within two Business Days after termination in the case of termination of this Agreement pursuant to
Section 7.1(d)(ii), (ii) concurrently with the termination of this Agreement pursuant to Section 7.1(c)(ii) and
(iii) simultaneously with consummation of such Acquisition Transaction, in the case of a Breakup Fee payable pursuant to Section 7.3(b)(ii).
(d) Costs of Recovery. Each of the parties acknowledges that the agreements
contained in this Section 7.3 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, the other parties would
not enter into this Agreement. Accordingly, if Company fails to pay the Breakup Fee due pursuant to this Section 7.3 and, in order to obtain such payment, Parent
commences a suit that results in a judgment against Company for the amounts (or any portion thereof) set forth in this Section 7.3, Company shall pay to Parent its
documented costs and expenses (including reasonable and documented attorneys' fees and expenses) in connection with such suit, together with interest on the amounts due from the date such payment was
required to be made until the date of payment at the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made.
SECTION 7.4 Parent Termination Fee; Other Parent Obligations.
(a) Parent Termination Fee. Upon termination of this Agreement pursuant to
Section 7.1(c)(i) or Section 7.1(c)(iii), Parent shall pay or cause to be paid to the Company (including by enforcing its rights
under the Equity Financing Commitment to require funding of the Aggregate Termination Fee Commitment thereunder) (A) the Parent Termination Fee and (B) any amounts to which the company
is entitled pursuant to Section 5.6 (the "Financing Cooperation Expenses"). "Parent Termination Fee" means
a payment in cash of a non-refundable fee in the amount of $54,611,815. In no event shall Parent be required to pay the Parent Termination Fee on more than one occasion. In the event that the Company
shall become entitled to receive payment of the Parent Termination Fee from Parent plus any payment obligations pursuant to Section 7.4(c), the receipt of the
Parent Termination Fee from Parent and any such other obligations (if received) shall be deemed to be liquidated damages and not a penalty, and Parent shall not have any other liability or obligation
to the Company or any of its Affiliates relating to or arising out of this Agreement or the failure of the Merger or any other transaction contemplated hereby to be consummated, and in such event, the
Company shall not seek to recover any money damages or obtain any equitable relief from Parent or any of its Affiliates. Nothing contained herein shall affect Parent's obligation to pay to the Company
any Financing Cooperation Expenses.
(b) Parent Termination Fee Payment Procedures. Payment of the Parent Termination
Fee shall be made by wire transfer of same day funds to the account designated by the Company within two Business Days after termination of this Agreement pursuant to
Section 7.1(c)(i) or Section 7.1(c)(iii).
(c) Costs of Recovery. Each of the parties acknowledges that the agreements
contained in this Section 7.4 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, the other parties would
not enter into this Agreement. Accordingly, if Parent fails to pay the Parent Termination Fee due pursuant to this Section 7.4 or the Financing Cooperation Expenses
and, in order to obtain such payment, the Company commences a suit that results in a judgment against Parent for the amounts (or any portion thereof) set forth in this
Section 7.4, Parent shall pay to the Company its documented costs and expenses (including reasonable and documented attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts due from the date such payment was required to be made until the date of payment at the prime lending rate as published in The Wall Street Journal in
effect on the
A-48
Table of Contents
date
such payment was required to be made. Notwithstanding any other provision of this Agreement and without limiting the Company's remedies under Section 8.7, the
parties agree that the payment of the Parent Termination Fee by the Parent, together with any amounts owed pursuant to Section 5.6 or this
Section 7.4(c), shall be the sole and exclusive remedy (whether based in contract, tort or strict liability, by the enforcement of any assessment, by any legal or
equitable proceeding, by virtue of any statute, regulation or applicable Laws or otherwise) available to the Company against the Parent for all losses and damages suffered as a result of the failure
of the transactions contemplated by this Agreement, the Debt Financing, the Debt Commitment Letter and Debt Fee Letter (and the termination thereof) to be consummated or for a breach or failure to
perform hereunder or otherwise in the event the Parent Termination Fee becomes due and payable, and, upon payment of the Parent Termination Fee and any amounts owed pursuant to
Section 5.6 and this Section 7.4(c) and under the letter of even date hereof between Parent, the Company and Merger Sub, the
Parent shall have no further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby, and none of the Debt Financing Sources shall have any further
liability or obligation relating to or arising out of this Agreement or the Financing Commitments or the transactions contemplated hereby or thereby (or the abandonment or termination thereof) or any
matters forming the basis for such termination upon payment of such amount. In addition, without modifying or qualifying in any way the preceding sentence or implying any intent contrary thereto, the
Company hereby waives any rights or claims against the Debt Financing Sources and hereby agrees that in no event shall the Debt Financing Sources have any liability or obligation to the Company and in
no event shall the Company seek or obtain any other damages of any kind against any Debt Financing Source (including consequently, special, indirect or punitive damages), in each case, relating to or
arising out of this Agreement, the Debt Financing, the Financing Commitments or the transactions contemplated hereby or thereby.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Amendment or Supplement.
This Agreement may be amended, modified or supplemented by the parties at any time prior to the Effective Time, whether before or after the Company Shareholder Approval has been
obtained; provided, however, that after the Company Shareholder Approval has been obtained, no amendment
may be made that pursuant to applicable Law requires further approval or adoption by the shareholders of the Company without such further approval or adoption. This Agreement may not be amended,
modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the
parties in interest at the time of the amendment.
SECTION 8.2 Extension of Time; Waiver.
At any time prior to the Effective Time, Parent and Merger Sub, on the one hand, and the Company, on the other hand, to the extent permitted by applicable Law, may (a) extend the
time for the performance of any of the obligations or acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party set forth in this Agreement or
any document delivered pursuant to this Agreement or (c) subject to applicable Law, waive compliance by the other party with any of the covenants or conditions contained in this Agreement; provided,
however, that after the Company Shareholder Approval has been obtained, no waiver may be made
that pursuant to applicable Law requires further approval or adoption by the shareholders of the Company without such further approval or adoption. Any agreement on the part of a party to any such
waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party. No failure or delay of any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power,
or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power.
A-49
Table of Contents
SECTION 8.3 Nonsurvival.
None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for
those covenants and agreements that by their terms apply or are to be performed in whole or in part after the Effective Time.
SECTION 8.4 Notices.
All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of receipt, if delivered personally, (b) on the date of
receipt, if delivered by e-mail during normal business hours on a Business Day or, if delivered outside of normal business hours on a Business Day, on the first Business Day thereafter, (c) on
the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier, or (d) on the earlier of confirmed receipt or the fifth
Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(i) if
to the Company, to:
Aquaventure
Holdings Limited
c/o Conyers Corporate Services (B.V.I.) Limited
Commerce House, Wickhams Cay 1
P.O. Box 3140 Road Town
British Virgin Islands VG1110
Attention: General Counsel
with
a copy (which shall not constitute notice) to:
Goodwin
Procter LLP
100 Northern Avenue
Boston, MA 02210
Attention: Mark H. Burnett, Esq.
James A. Matarese, Esq.
Blake Liggio, Esq.
E-mail: mburnett@goodwinlaw.com; jmatarese@goodwinlaw.com;
bliggio@goodwinlaw.com
(ii) if
to Parent, Merger Sub or the Surviving Company, to:
Culligan
International Company
9399 W. Higgins Rd, Ste 1100
Rosemont, IL 60018
Attention: John Griffith
with
a copy (which shall not constitute notice) to:
Weil,
Gotshal & Manges LLP
100 Federal Street, 34th Floor
Boston, MA 02110
Attention: Ramona Y. Nee
Email: ramona.nee@weil.com
and
Weil,
Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: James R. Griffin
Email: james.griffin@weil.com
A-50
Table of Contents
SECTION 8.5 Certain Definitions.
For purposes of this Agreement:
"Action"
means any action, suit or proceeding by or before any Governmental Entity, and any other analogous arbitration, mediation or other proceeding.
"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, such first Person.
"Anti-Bribery
Laws" means anti-bribery and anti-corruption laws, regulations or ordinances applicable to the Company and its Subsidiaries and their
respective operations from time to time, including without limitation (a) the U.S. Foreign Corrupt Practices Act of 1977 (as amended); (b) the United Kingdom Bribery Act;
(c) anti-bribery legislation promulgated by the European Union and implemented by its member states; and (d) legislation adopted in furtherance of the OECD Convention on Combating
Bribery of Foreign public Officials in International Business.
"Antitrust
Law" means the Sherman Act, the Clayton Act, the HSR Act, the Federal Trade Commission Act and all other federal, state and foreign statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines and other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition through merger or acquisition.
"Business
Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York City or
the British Virgin Islands.
"Company
IP Contract" means any material Contract to which the Company or any of its Subsidiaries is a party or by which any the Company or any of its
Subsidiaries is bound or under which any the Company or any of its Subsidiaries has any right or interest that (i) contains any assignment or license of, or any covenant not to sue with respect
to, any material Intellectual Property or (ii) otherwise pertains to any material Licensed Intellectual Property, material Owned Intellectual Property or any material Intellectual Property
developed by, with or for the Company or any of its Subsidiaries (in each case excluding (A) non-exclusive licenses to generally commercially available off-the-shelf software that is licensed
on standard and non-negotiable commercial terms and (B) licenses for open source Software).
"Company
IT Systems" means all computer systems, software, hardware, networks, interfaces, platforms, databases, websites and equipment used by or on behalf
of the Company or any of its Subsidiaries.
"Company
Phantom Unit" means any phantom shares of the Company granted under the Company Independent Directors' Deferred Compensation Program.
"Company
Registered IP" means, collectively, all registered Trademarks, Patents, registered Copyrights, pending applications to register or obtain any of the
foregoing, and Internet domain names, in each case, owned or purported to be owned by the Company or any of its Subsidiaries.
"Company
Stock Option" means an option to purchase a Share granted under a Company Stock Plan.
"Company
Stock Plans" means, collectively, the Company 2016 Share Option and Incentive Plan, the Company Amended and Restated Equity Incentive Plan, the
Quench USA Holdings LLC 2014 Equity Incentive Plan, the Quench USA, Inc. 2008 Stock Plan Incentive Stock Option Plan, and the Company Independent Directors' Deferred Compensation
Program.
"Contract"
means any contract, agreement, commitment, deed, mortgage, lease, license or other legally binding understanding or arrangement.
A-51
Table of Contents
"Control",
including the terms "Controlled by" and "under common Control with", means the
possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or
executor, as general partner or managing member, by Contract or otherwise.
"Debt
Financing Sources" means the lenders, agents, purchasers, underwriters and/or arrangers of the Debt Financing and/or the Best Efforts Debt Financing,
together with their respective affiliates, officers, directors, employees, partners, controlling persons, agents and representatives and their successors and assigns, including any successors or
assigns via joinder agreements or credit agreements relating thereto.
"Dissenting
Shares" means each Share in respect of which the holder thereof has duly and validly exercised a right of dissent in accordance with
section 179 of the BVI Act.
"Equity
Financing Sources" means each of the parties set forth on Schedule A to that certain Equity Commitment Letter by and among the Parent and the
parties set forth on Schedule A thereto.
"Existing
First Lien Parent Credit Facility" means that certain Syndicated Facility Agreement, dated as of December 13, 2016 (as amended, restated,
amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof), among AI Aqua (Luxembourg) S.à.r.l., a private limited liability
company (société à responsabilité limitée) organized under the laws of
Luxembourg, AI Aqua Merger Sub, Inc., a Delaware corporation, AI Aqua Zip Bidco Pty Ltd, organized under the laws of New South Wales, Morgan Stanley Senior Funding, Inc., in its
capacities as administrative agent and as collateral agent (in such capacities) and as an Issuing Bank and the Swingline Lender (in each case, as defined therein) and Royal Bank of Canada as an
Issuing Bank.
"Existing
Second Lien Parent Credit Facility" means that certain Second Lien Credit Agreement, dated as of December 13, 2016 (as amended, restated,
amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof), among AI Aqua (Luxembourg) S.à.r.l., a private limited liability
company (société à responsabilité limitée) organized under the laws of
Luxembourg, AI Aqua Merger Sub, Inc., a Delaware corporation and Cortland Capital Market Services LLC, in its capacities as administrative agent and as collateral agent.
"Export
Control Laws" means (a) the U.S. Export Administration Act, the U.S. Export Administration Regulations, the U.S. Arms Export Control Act, the
U.S. International Traffic in Arms Regulations, and their respective implementing rules and regulations; (b) the U.K. Export Control Act 2002 (as amended and extended by the Export Control
Order 2008) and its implementing rules and regulations; and (c) other similar export control laws or restrictions applicable to the Company or any of its Subsidiaries from time to time.
"Environmental
Laws" means all applicable federal, state, local and foreign Laws concerning the protection of the environment, natural resources, or the
protection of human health and safety (as such relates to exposure to Hazardous Materials), or emissions, discharges, releases or threatened releases, or the manufacture, storage, disposal,
transportation, or use, of Hazardous Materials.
"Governmental
Entity" means any federal, national, supranational, state, provincial, local or other government, or any governmental, regulatory,
self-regulatory or administrative authority, branch, agency, organization or commission, or any court, tribunal, or arbitral or judicial body (including any grand jury).
"Hazardous
Materials" means any substance, material or waste that is defined, characterized, listed or otherwise regulated as "toxic," "hazardous"
"pollutant," "contaminant," or words of similar effect under Environmental Laws.
A-52
Table of Contents
"Inside
Date" means March 31, 2020; provided, however,
that if the audited consolidated balance sheets and statements of operations, comprehensive income and equity and cash flows of the Company and its Subsidiaries as and for the year ended
December 31, 2019 (together, the "2019 Audited Financial Statements") are not delivered to Parent on or prior to March 6, 2020 (the "Targeted Audit Delivery
Date"), then the Inside Date shall be extended by the number of days elapsed from the Target Audit Delivery Date through the date the 2019 Audited Financial Statements are delivered to
Parent (such date, the "Extended Inside Date"); provided, further, that if
the Extended Inside Date is not a Business Day, the Extended Inside Date shall be automatically extended to the next Business Day following the Extended Inside Date.
"Intellectual
Property" means all intellectual property and all worldwide rights, title and interest in, to or under any intellectual property, including all
of the following: (i) patents and patent applications, provisional patent applications, substitutions, divisions, continuations, continuations-in-part, divisions, reissues, renewals,
extensions, reexaminations, patents of addition, supplementary protection certificates, utility models, inventors' certificates, rights of priority or the like, and any foreign equivalents of any of
the foregoing (collectively, "Patents"); (ii) trademarks, service marks, brand names, trade dress rights, logos, corporate names, trade names, and other source or
business identifiers, and all registrations, applications for registration, renewals and extensions of any of the foregoing, together with all of the goodwill associated with any of the foregoing
(collectively, "Trademarks"); (iii) copyrights (registered or unregistered), works of authorship, registrations and applications for registration, renewals,
extensions and reversions of any of the foregoing and moral rights (collectively, "Copyrights"); (iv) Internet domain names; (v) trade secrets and other
confidential and proprietary information, including know-how, technology, discoveries, improvements, formulae, technical information, techniques, inventions (whether or not patentable or reduced to
practice), designs, drawings, procedures, processes, models and systems (collectively "Trade Secrets"); (vi) software; and (vii) data and databases.
"Knowledge"
means, with respect to the Company, the actual knowledge of the individuals listed on Section 8.5 of the Company Disclosure
Letter, after due inquiry.
"Law"
means any statute, law, ordinance, regulation, rule, injunction, judgment, award, ruling or order of any Governmental Entity.
"Licensed
Intellectual Property" means all Intellectual Property to which the Company or any of its Subsidiaries has been granted a license or other consent
or permission to use, practice or otherwise exploit,
"Lien"
means any charge, mortgage, lien, pledge, security interest or other analogous right or claim.
"Material
Adverse Effect" means any fact, change, effect, event or occurrence that, individually or in the aggregate, would, or would reasonably be expected
to, (i) materially and adversely affect the business, results of operations, assets or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or
(ii) prevent, materially impede or materially delay the performance by the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated by this
Agreement; except that for purposes of the foregoing clause "(i)", in no event shall any of the following (alone or in combination), or any effect to the extent arising out of or resulting from any of
the following (alone or in combination), be taken into account in determining whether a "Material Adverse Effect" has occurred or may, would or could occur: (A) any national, international, or
regional economic, financial, social or political conditions (including changes therein) in general, including the results of elections, trade disputes or the imposition of trade restrictions, tariffs
or similar taxes, (B) changes in any financial, credit, capital or securities markets or conditions in the United States or any other country or region in the world, or changes therein,
including any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on
A-53
Table of Contents
any
securities exchange or over-the-counter market operating in the United States or any other country or region in the world; (C) changes in interest, currency or exchange rates or the price
of any commodity, security or market index, (D) changes in legal or regulatory conditions, including changes or proposed changes in Law, GAAP or other accounting principles or requirements, or
in standards, guidance, interpretations or enforcement thereof, (E) any change in the market price or trading volume or ratings of any securities of the Company, or any failure of the Company
to meet any internal or public projections, forecasts, guidance, budgets, predictions or estimates of, or relating to, the Company or any of its Subsidiaries for any period (it being understood that,
in each case, the underlying causes of such change or failure may, if they are not otherwise specifically excluded from the definition of Material Adverse Effect pursuant to this proviso, be taken
into account in determining whether a Material Adverse Effect has occurred), (F) the occurrence, escalation, outbreak or worsening of any hostilities, war, police action, acts of terrorism,
sabotage or military conflicts, whether or not pursuant to the declaration of an emergency or war, (G) the occurrence of any force majeure events, including any earthquakes, floods, hurricanes,
tropical storms, fires or other natural or manmade disasters, any epidemic, pandemic or other similar outbreak (including any non-human epidemic, pandemic or other similar outbreak) or any other
national, international or regional calamity, (H) the execution or announcement of this Agreement, including the impact thereof on the relationships, contractual or otherwise, of the Company
with employees, customers, investors, contractors, lenders, suppliers, vendors, partners, licensors, licensees, payors, Governmental Entities or other third parties related thereto (it being
understood and agreed that this clause (H) shall not apply with respect to any representation or warranty the purpose of which is to address the consequences of the execution and delivery of
this Agreement or the consummation of the transaction contemplated by this Agreement, or the identity of Parent or any of its Affiliates as the acquiror of the Company), (I) any action taken at
the written request of Parent after the date hereof, (J) any demand or Action for appraisal of the fair value of Shares pursuant to the BVI Act in connection herewith, (K) any actual or
potential sequester, stoppage, shutdown, default or similar event or occurrence by or involving any Governmental Entity in
the United States affecting a national or federal government as a whole, (L) any matters fully disclosed, including the consequences thereof, in the Company Disclosure Letter in accordance with
Article III, (other than matters included in the Company Disclosure Schedule in response to listing requirements), and (M) changes in general conditions in
an industry in which the Company and its Subsidiaries operate or in any specific jurisdiction or geographical area in the United States or elsewhere in the world; except that, with respect to
subclauses (A), (B), (C), (D), (F) and (G), such facts, changes, effects, events or occurrences shall be taken into account to the extent they, individually or in the aggregate,
disproportionately affect the Company or its Subsidiaries, taken as a whole, compared to other similarly situated companies in the industry in which the Company operates (in which case only the
incremental disproportionate impact or impacts may be taken into account in determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect).
"Parent
Material Adverse Effect" means any event, change, circumstance, occurrence, effect or state of facts that materially impairs, or prevents or
materially delays, the ability of Parent and Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement.
"Parent
Refinancing" the payment in full of the obligations of Parent and its Subsidiaries under the Existing First Lien Parent Credit Facility and the
Existing Second Lien Parent Credit Facility (other than unasserted contingent obligations that expressly survive the payment in full of the obligations thereunder and letters of credit which have been
backstopped or cash collateralized in the manner required by the Existing First Lien Parent Credit Facility).
"Permitted
Lien" means (a) statutory Liens arising by operation of Law with respect to a liability which is not delinquent, (b) Liens for Taxes
not yet due or delinquent or the validity or amount of which is being contested in good faith, in each case, for which there are appropriate reserves in accordance with GAAP, (c) materialmen's,
mechanics', carriers', workers', warehousemen's, repairers',
A-54
Table of Contents
landlords',
lessors' and other similar Liens relating to obligations as to which there is no default, or the validity or amount of which is being contested in good faith, (d) pledges, deposits
or other Liens securing the performance of bids, trade contracts, leases or statutory obligations (including workers' compensation, unemployment insurance or other social security legislation),
(e) with respect to real property, any Lien or other requirement or restriction arising under any zoning, entitlement, building, conservation restriction and other land use and environmental
Law which do not interfere with the current use and operation of the Owned Real Property or Leased Real Property, (f) Liens arising under securities Laws, and (g) all such other
exceptions, restrictions, options, easements, immaterial imperfections of title, charges and rights-of-way that do not materially interfere with the use of the property or asset in question as it is
employed in the Company and its Subsidiaries.
"Person"
means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any
Governmental Entity.
"Representatives"
means directors, officers, employees, investment bankers, attorneys, accountants and other advisors, agents and representatives.
"Required
Information" means (a) all financial statements and other documents and information required by clauses "(a)" and "(b)(i)" of numbered
paragraph 6 of Exhibit C to the Debt Commitment Letter and (b) all financial and other information regarding the Company and its Subsidiaries that is reasonably required in order
for the Parent and/or the Borrower to complete and deliver a customary confidential information memorandum (other than the portions thereof customarily provided by Debt Financing Sources) to syndicate
the Debt Financing under the Debt Commitment Letter.
"RSU"
means a restricted share unit granted under a Company Stock Plan that is subject only to time-based vesting.
"Sanctioned
Person" means a person that is (a) the subject of Sanctions; (b) normally located in, resident of, or organized under the laws of a
country or territory which is the subject of country- or -territory-wide Sanctions (including without limitation Cuba, Iran, North Korea, Syria, or the Crimea region); or (c) majority-owned or
controlled by any of the foregoing.
"Sanctions"
means those trade, economic and financial sanctions laws, regulations, embargoes, and restrictive measures (in each case having the force of law)
administered, enacted or enforced from time to time by (a) the United States (including without limitation the Department of Treasury, Office of Foreign Assets Control), (b) the European
Union and enforced by its member states; (c) the United Nations; (d) Her Majesty's Treasury; or (e) other similar governmental bodies with regulatory authority over the Company or
any Subsidiary from time to time.
"Sarbanes-Oxley
Act" means. the Sarbanes-Oxley Act of 2002, as it may be amended from time to time
"Shareholder
Litigation" means any claim or proceeding (including any class action or derivative litigation) asserted or commenced by, on behalf of or in the
name of, against or otherwise involving the Company, the Company Board, any committee thereof and/or any of the Company's directors or officers relating directly or indirectly to the Agreement, the
Merger or any related transaction (including any such claim or proceeding based on allegations that the Company's entry into the Agreement or the terms and conditions of the Agreement or any related
transaction constituted a breach of the fiduciary duties of any member of the Company Board, any member of the board of directors of any of the Company's Subsidiaries or any officer of the Company or
any of its Subsidiaries).
"Special
Committee" means the special committee of the Company Board.
"Specified
Jurisdiction" means each of the Virgin Islands of the United States, the British Virgin Islands, the Republic of Trinidad and Tobago, the Republic
of Peru and Curacao.
A-55
Table of Contents
"Subsidiary" means, with respect to any Person, any other Person of which stock or other equity interests having ordinary voting
power to elect more than 50% of the board of directors or other governing body are owned, directly or indirectly, by such first Person.
"Transaction
Documents" means this Agreement, the Plan of Merger and the Articles of Merger, including all schedules, annexes, exhibits, attachments and
appendices thereto.
"Triggering
Event" shall be deemed to have occurred if: (a) the Company Board or any committee thereof (including the Special Committee) shall have:
(i) effected an Adverse Recommendation Change; or (ii) taken, authorized or publicly proposed any of the actions referred to in Section 5.2(b)(ii)
through (iv); (b) the Company shall have failed to include the Company Recommendation in the Proxy Statement; (c) the Company Board shall have failed to
reaffirm publicly the Company Recommendation within five Business Days after Parent reasonably requests; provided, that (i) if fewer than five
Business Days remain from the time of the request for reaffirmation to the date of the Shareholders Meeting, the reference to five Business Days shall be three business days; and (ii) Parent
shall not be entitled to request such a reaffirmation more than two times under this clause "(c);" (d) an Acquisition Proposal shall have been publicly announced, and the Company shall have
failed to issue a press release that
reaffirms the Company Recommendation within five Business Days after such Acquisition Proposal is publicly announced (provided that (i) if fewer than five Business Days remain from the date of
such announcement to the date of the Shareholders Meeting, the reference to five Business Days in this clause "(d)" shall be three Business Days prior to the Shareholders Meeting and
(ii) Parent shall not be entitled to request such a reaffirmation more than one time under this clause "(c)," with respect to the same, unamended Acquisition Proposal); and (f) the
Company or any of its Subsidiaries or any of their Representatives shall have breached any of the provisions set forth in Section 5.2 in any material respect.
SECTION 8.6 Interpretation.
When a reference is made in this Agreement to an Article, Section, paragraph, clause or Exhibit, such reference shall be to an Article, Section, paragraph, clause or Exhibit of this
Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender as the circumstances require, and in the singular or plural as the circumstances require. The
Company Disclosure Letter and all Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word "including" and words of
similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified. The words "hereof," "hereto," "hereby," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word "or" is not exclusive. The word "extent" in the phrase "to
the extent" shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply "if." The word "will" shall be construed to have the same meaning and effect as the
word "shall." The words "asset" and "property" shall be deemed to have the same meaning, and to refer to all assets and properties, whether real or personal, tangible or intangible. Any agreement,
instrument or Law defined or referred to herein means such agreement, instrument or Law as from time to time amended, modified or supplemented, unless otherwise specifically indicated. References to
any Law include references to any associated rules, regulations and official guidance with respect thereto. References to a Person are also to its predecessors, successors and assigns. Unless
otherwise specifically indicated, all references to "dollars" and "$" are references to the lawful money of the United States of America. References to "days" mean calendar days unless otherwise
specified. Each party hereto has been represented by counsel in connection with this Agreement and the transactions contemplated hereby and, accordingly, any rule of Law or any legal doctrine that
would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived. The information and disclosures contained in any
section of the
A-56
Table of Contents
Company
Disclosure Letter shall be deemed to be disclosed and incorporated by reference in and with respect to the corresponding Section of this Agreement and to all additional Sections of this
Agreement to the extent the applicability of such information and disclosure to such additional Sections is reasonably apparent on its face.
SECTION 8.7 Specific Performance.
(a) The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise breached, except as expressly provided in the following sentence. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the New York courts and,
in any action for specific performance, each party waives the defense of adequacy of a remedy at law and waives any requirement for the securing or posting of any bond in connection with such remedy,
this being in addition to any other remedy to which they are entitled at law or in equity. The parties agree that the right of specific performance is an integral part of the transactions contemplated
by this Agreement, including the Merger, and without that right, none of the Company, Parent or Merger Sub would have entered into this Agreement.
(b) The
parties further agree that (i) by seeking the remedies provided for in this Section 8.7, a party shall not in any respect
waive its right to seek any other form of relief that may be available to a party under this Agreement (including monetary damages) for breach of any of the provisions of this Agreement or in the
event that this Agreement has been terminated or in the event that the remedies provided for in this Section 8.7 are not available or otherwise are not granted, and
(ii) nothing set forth in this Section 8.7 shall require any party to institute any proceeding for (or limit any party's right to institute any proceeding
for) specific performance under this Section 8.7 prior or as a condition to exercising any termination right under Article VII
(and pursuing damages after such termination), nor shall the commencement of any Action pursuant to this Section 8.7 or anything set forth in this
Section 8.7 restrict or limit any 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 at any time.
(c) Notwithstanding
anything in this Agreement to the contrary, the parties hereby further acknowledge and agree that prior to the Closing, the Company shall be entitled to
a remedy of specific performance to cause Parent to enforce its right to cause the Equity Financing to be consummated and to effect the Closing only if (i) all of the conditions in
Section 6.1, Section 6.2 and Section 6.3 have been satisfied or waived by the party entitled
to so waive (other than those conditions that by their nature are to be satisfied at the Closing, but which conditions are capable of being satisfied if the Closing were to occur at such time),
(ii) the Company has confirmed in writing that, if specific performance is granted and the Debt Financing is funded, the Company will take such steps as are within its control to effect the
Closing; (iii) the Debt Financing (or, if applicable, the Alternative Debt Financing) has been funded or will be funded at the Closing if the Equity Financing is funded at the Closing; and
(iv) Parent has failed to cause the Closing to occur by the date the Closing is required to have occurred pursuant to Section 1.2. Notwithstanding any
provision of this Agreement to the contrary, under no circumstances shall the Company be permitted or entitled to receive both a grant of specific performance to require Parent and Merger Sub to
effect the Closing and a payment of the Parent Termination Fee.
(d) In
any Action seeking monetary damages against a party or to compel a party to specifically perform its obligations hereunder, the non-prevailing party in such Action
(after a final, non-appealable judgment of a court of competent jurisdiction) shall promptly reimburse the prevailing party its costs and expenses (including reasonable attorneys' fees and expenses)
in connection with such Action.
A-57
Table of Contents
SECTION 8.8 Entire Agreement.
This Agreement (including the Exhibits hereto), the Company Disclosure Letter, the Financing Commitment (or the Best Efforts Debt Financing, as applicable) and the Confidentiality
Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements,
communications and understandings among the parties with respect to the subject matter hereof and thereof.
SECTION 8.9 No Third Party Beneficiaries.
Except as set forth in Section 8.17 herein with respect to the Debt Financing Sources (a) Nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or
by reason of this Agreement; provided, however, that:
(i) following
the Effective Time, the provisions of Section 5.10 shall be enforceable by the Indemnified Persons as provided therein;
and
(ii) following
the Effective Time, the provisions of Article II shall be enforceable by each holder of Shares, Company Stock Options,
RSUs and Company Phantom Units solely to the extent necessary for any such Person to receive the consideration to which it is entitled pursuant to Article II.
(b) The
representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto, and may
represent an allocation of risk among the parties hereto associated with particular matters regardless of the knowledge of any of the parties hereto. Persons other than the parties hereto 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 8.10 Governing Law.
The law of the State of New York shall govern this Agreement, the interpretation and enforcement of its terms and any claim or cause of action (in law or in equity), controversy or
dispute arising out of or related to it or its negotiation, execution or performance, whether based on contract, tort, statutory or other law, in each case without giving effect to any
conflicts-of-law or other principle requiring the application of the law of any other jurisdiction, except that (a) the provisions of the BVI Act applicable to the authorization, effectiveness
and effects of the Merger will apply to the Merger and (b) the applicable Law of the BVI shall apply to the standard of conduct governing acts by the directors of the Company Board in
connection with this Agreement, including with respect to compliance with fiduciary duties.
SECTION 8.11 Submission to Jurisdiction.
Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby brought by it or its
Affiliates against any other party or its Affiliates shall be brought and determined in the federal court located in the Borough of Manhattan, City of New York, or if not able to be brought in such
court, any state court located in the Borough of Manhattan, City of New York (and appellate courts thereof). Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts
for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding. Each of the parties agrees not to and to cause its Affiliates not to commence
any action, suit or proceeding relating to this Agreement or the transactions contemplated hereby except in the courts described above in New York, other than actions in any court of competent
jurisdiction to enforce any judgment, decree or award rendered by any such court in New York. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of
process 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 action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby (a) any claim that it is not personally
subject to the jurisdiction of
A-58
Table of Contents
the
courts in New York as described herein for any reason, (b) 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 (c) that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may
not be enforced in or by such courts.
SECTION 8.12 Waiver of Jury Trial.
EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 8.13 Assignment; Successors.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any
party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided, however, that Parent may, without the consent of the Company, assign its rights and
obligations, under this Agreement to one or more Affiliates of Parent; provided, that, Parent shall
remain primarily liable for its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.14 Severability.
If any term or other provision of this Agreement is held 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 either the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any party or such party waives its rights under this Section 8.14 with respect thereto. Upon such a 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 contemplated hereby are fulfilled to the extent possible.
SECTION 8.15 Counterparts.
This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties. Delivery of an executed counterpart of this Agreement by facsimile or other electronic image scan transmission shall be effective
as delivery of an original counterpart hereof.
SECTION 8.16 Company Disclosure Letter.
The Company Disclosure Letter shall be arranged in separate parts corresponding to the numbered and lettered sections and subsections contained in this Agreement, and the information
disclosed in any numbered or lettered part shall be deemed to relate to and to qualify only the particular representation or warranty set forth in the corresponding numbered of lettered section or
subsection of this Agreement, except to the extent that (a) such information is cross-referenced in another part of the Company Disclosure Letter, or (b) it is reasonably apparent on the
face of the disclosure (without reference to any document referred to therein or any independent knowledge on the part of the reader regarding the matter disclosed) that such information qualifies
another representation and warranty in this Agreement. The mere listing of a document or other item in, or attachment of a copy thereof to, the Company Disclosure Letter will not be deemed adequate to
disclose an exception to a representation or warranty made in this Agreement (unless the representation or warranty pertains directly to the existence of the document or other items itself). The
specification of any dollar amount in the representations or warranties contained in this Agreement or the inclusion of any specific item in any section of the Company Disclosure Letter is not
intended to imply that such amounts, or higher or lower amounts or the items
A-59
Table of Contents
so
included or other items, are or are not material, and no party shall use the fact of the setting of such amounts or the inclusion of any such item in any dispute or controversy as to whether any
obligation, item or matter not described herein or included in a section of the Company Disclosure Letter is or is not material for purposes of this Agreement.
SECTION 8.17 Debt Financing Sources.
Notwithstanding anything in this Agreement to the contrary, each party hereto, on behalf of itself, its respective Subsidiaries and each of its respective controlled Affiliates hereby:
(a) agrees that any action, suit or proceeding of any kind or description, whether in contract or in tort or otherwise, involving the Debt Financing Sources, arising out of or relating to this
Agreement, the Debt Financing or any of the agreements entered into in connection with the Debt Financing and/or the Best Efforts Debt Financing or any of the transactions contemplated hereby or
thereby or the performance of any services thereunder shall be subject to the exclusive jurisdiction of any federal or state court in the Borough of Manhattan, New York, New York, so long as such
forum is and remains available, and any appellate court thereof and each party hereto irrevocably submits itself and its property with respect to any such action, suit or proceeding to the exclusive
jurisdiction of such court; (b) agrees that any such action, suit or proceeding shall be governed by and construed and enforced in accordance with the laws, rules or provisions of the State of
New York, including its statute of limitations (without giving effect to any conflicts of law principles that would result in the application of the laws of another state); (c) agrees not to
bring or support or permit any of its controlled Affiliates to bring or support any action, suit or proceeding of any kind or description, whether in law or in equity, whether in contract or in tort
or otherwise, against any Debt Financing Source in any way arising out of or relating to this Agreement, the Debt Financing, the Debt Commitment Letter, the Best Efforts Debt Financing or any of the
transactions contemplated hereby or thereby or the performance of any services thereunder in any forum other than any federal or state court in the Borough of Manhattan, New York, New York,
(d) irrevocably waives, to the fullest extent that it may effectively do so, the defense of an inconvenient forum to the maintenance of such action, suit or proceeding in any such court;
(e) knowingly, intentionally and voluntarily waives to the fullest extent permitted by applicable law trial by jury in any action, suit or proceeding brought against the Debt Financing Sources
in any way arising out of or relating to this Agreement, the Debt Financing, the Best Efforts Debt Financing or any of the transactions contemplated hereby or thereby or the performance of any
services thereunder; (f) agrees that none of the Debt Financing Sources will have any liability or obligation to the Company or any of its Subsidiaries or any of their respective Affiliates or
representatives relating to or arising out of this Agreement, the Debt Financing, the Debt Commitment Letter, the Best Efforts Debt Financing or any of the transactions contemplated hereby or thereby
or the performance of any services thereunder, whether in law or in equity, whether in contract or in tort or otherwise, (g) agrees that (and each other party hereto agrees that) the Debt
Financing Sources are express third party beneficiaries of, and may enforce any of the provisions of Section 7.4(c) and this
Section 8.17, which shall be binding on all successors and assigns of the Parent, Merger Sub, and the Company and any of its Subsidiaries or any of their respective
Affiliates or representatives; and (h) agrees that the provisions of this Section 8.17 and the definitions of "Debt Financing Sources" (and any other
provisions of this Agreement to the extent a modification thereof would affect the substance of any of the foregoing) shall not be amended in any way adverse to the Debt Financing Sources without the
prior written consent of the Debt Financing Sources party to the Debt Commitment Letter. Notwithstanding the foregoing, nothing in this Section 8.17 shall in any
way limit or modify the rights and obligations of Parent (on behalf of itself, its Affiliates, and its Affiliates' respective officers, directors, equity holders, employees and agents) under this
Agreement or any Debt Financing Sources' obligations to Parent (on behalf of itself, its Affiliates, and its Affiliates' respective officers, directors, equity holders, employees and agents) under the
Debt Commitment Letter and/or the Best Efforts Debt Financing documentation.
[The remainder of this page is intentionally left blank; signature page follows]
A-60
Table of Contents
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly
authorized.
|
|
|
|
|
|
|
|
|
AQUAVENTURE HOLDINGS LIMITED
|
|
|
By:
|
|
/s/ ANTHONY IBARGUEN
|
|
|
|
|
Name:
|
|
Anthony Ibarguen
|
|
|
|
|
Title:
|
|
President, CEO and Director
|
|
|
CULLIGAN INTERNATIONAL COMPANY
|
|
|
By:
|
|
/s/ FRANK JOHN GRIFFITH
|
|
|
|
|
Name:
|
|
Frank John Griffith
|
|
|
|
|
Title:
|
|
Vice President and General Counsel
|
|
|
AMBERJACK MERGER SUB LIMITED
|
|
|
By:
|
|
/s/ SAMUEL ALLEN HAMOOD
|
|
|
|
|
Name:
|
|
Samuel Allen Hamood
|
|
|
|
|
Title:
|
|
Sole Director
|
[SIGNATURE PAGE TO MERGER AGREEMENT]
Table of Contents
Exhibit A
to
Merger Agreement
Articles of Merger
Table of Contents
Articles of Merger
These Articles of Merger are executed
on by Amberjack Merger Sub Limited,
a business company incorporated under the laws of the
British Virgin Islands with company number 2028398 ("Merger Sub"), and AquaVenture Holdings Limited, a business company incorporated under the
laws of the British Virgin Islands with company number 1916416 (the "Company"), and pursuant to the provisions of Section 171 of the BVI
Business Companies Act, 2004 (as amended, the "Act"), WITNESSETH as follows:
-
1.
-
Merger
Sub and the Company hereby adopt the Plan of Merger, a copy of which is annexed hereto, with the intent that Merger Sub shall merge with and into the Company,
with the Company being the surviving company (the "Surviving Company") of the merger (the "Merger"), and
that the Merger shall be effective on the date that these Articles of Merger are registered by the Registrar of Corporate Affairs.
-
1.
-
The
Company was incorporated under the Act on 17 June 2016 with company number 1916416.
-
2.
-
Merger
Sub was incorporated under the Act on 20 December 2019 with company number 2028398.
-
3.
-
The
Memorandum and Articles of Association of the Company were first registered by the Registrar of Corporate Affairs in the British Virgin Islands on 17 June
2016 (and were last amended and restated on 7 October 2016).
-
4.
-
The
Memorandum and Articles of Association of Merger Sub were first registered by the Registrar of Corporate Affairs in the British Virgin Islands on
20 December 2019.
-
5.
-
The
Merger and Plan of Merger were approved by the board of directors of the Company on [day] [month]
20[20] and authorized by the shareholders of the Company at a duly constituted meeting of the shareholders on
[day] [month] 20[20].
-
6.
-
The
Merger and Plan of Merger were approved by the sole director of Merger Sub on
[·] December 2019 and authorized by a written resolution of the sole member of Merger Sub on
[·] December 2019.
-
7.
-
The
memorandum of association and articles of association of the Company shall be the memorandum of association and articles of association of the Surviving Company.
-
8.
-
The
Company and Merger Sub have each complied with all the provisions of the laws of the British Virgin Islands to enable them to merge upon the date on which these
Articles of Merger are registered by the Registrar of Corporate Affairs.
-
9.
-
These
Articles of Merger may be executed in counterparts which, when taken together, shall constitute one instrument.
[Signature page follows.]
A-63
Table of Contents
IN WITNESS WHEREOF the parties hereto have caused these Articles of Merger to be executed on
this .
|
|
|
|
|
SIGNED for and on behalf of
|
|
)
|
|
|
Amberjack Merger Sub Limited
|
|
)
|
|
|
By:
|
|
)
|
|
|
Title:
|
|
)
|
|
|
|
|
)
|
|
|
|
|
)
|
|
|
SIGNED for and on behalf of
|
|
)
|
|
|
AquaVenture Holdings Limited
|
|
)
|
|
|
By:
|
|
)
|
|
|
Title:
|
|
)
|
|
|
|
|
)
|
|
|
|
|
)
|
|
|
Table of Contents
Exhibit B
to
Merger Agreement
Plan of Merger
Table of Contents
Plan of Merger
This Plan of Merger is for the merger between Amberjack Merger Sub Limited, a business company incorporated under the laws of the British Virgin
Islands with company number 2028398 ("Merger Sub"), and AquaVenture Holdings Limited, a business company incorporated under the laws of the
British Virgin Islands with company number 1916416 (the "Company"). Merger Sub and the Company are collectively referred to as the
"Constituent Companies".
WHEREAS each of Merger Sub and the Company is a business company existing under and by virtue of the BVI Business Companies Act, 2004 (as
amended, the "Act") and each is entering into this Plan of Merger pursuant to the provisions of Section 170 of the Act; and
WHEREAS the board of directors or sole director (as applicable) of each Constituent Company has determined that it is desirable and in the
best interests of its respective Constituent Company and its respective members that Merger Sub be merged with and into the Company, with the Company being the surviving company of the merger (the
"Merger").
In
accordance with Section 170(2) of the Act:
-
1.
-
The
constituent companies to the Merger are Merger Sub and the Company.
-
2.
-
The
surviving company of the Merger is the Company (the "Surviving Company").
-
3.
-
Merger
Sub has 100 ordinary shares of no par value of a single class in issue, all of which are entitled to vote on the Merger as one class.
-
4.
-
The
Company has [·] ordinary shares of no par value of a single class in
issue (the "Company Shares"). All of the Company Shares are entitled to vote on the Merger together as one class.
-
5.
-
Upon
the Merger, the separate corporate existence of Merger Sub shall cease and the Surviving Company shall become the owner, without further action, of all the
assets, property, rights, privileges, immunities, powers, objects and purposes of the Constituent Companies and the Surviving Company shall become subject to all claims, debts, liabilities and
obligations of the Constituent Companies.
-
6.
-
The
terms and conditions of the Merger, including the manner and basis of cancelling, reclassifying or converting the shares of the Constituent Companies into shares,
debt obligations or other securities in the Company, or money or other assets, or a combination thereof, shall be as set out below and as further set forth in the merger agreement between Culligan
International Company, Merger Sub and the Company entered into on [·] December 2019 (the
"Merger Agreement") and circulated to the shareholders on or about the date of this Plan of Merger. At the effective time of the Merger (the
"Effective Time"):
-
(a)
-
each
Company Share issued and outstanding immediately prior to the Effective Time (other than any Cancelled Shares and any Dissenting Shares (as each such term is
defined below)) shall be converted automatically into and shall thereafter represent only the right to receive
US$[·] in cash, without interest (the "Merger Consideration"),
and all Company Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and shall thereafter only represent the right to receive the Merger Consideration,
the aforementioned Merger Considering being subject to adjustment in accordance with the terms of the Merger Agreement;
-
(b)
-
each
Company Share that is a treasury share or is owned, directly or indirectly, by Culligan International Company, Merger Sub or any wholly-owned subsidiary of the
Company immediately prior to the Effective Time (collectively, the "Cancelled Shares") shall automatically be cancelled and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
A-66
Table of Contents
-
(c)
-
each
ordinary share of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid
and non-assessable ordinary share of the Surviving Company; and
-
(d)
-
each
Company Share in respect of which the holder thereof has duly and validly exercised a right of dissent in accordance with Section 179 of the Act
(collectively, the "Dissenting Shares") shall automatically be cancelled and shall cease to exist or be outstanding, and each holder of Dissenting
Shares shall cease to be a shareholder of the Company (and shall not be a shareholder of the Surviving Company) and shall cease to have any rights thereto (including any right to receive such holder's
portion of the aggregate Merger Consideration), subject to and except for such rights as are granted under Section 179 of the Act.
-
7.
-
The
memorandum and articles of association of the Company shall be amended and restated in the form attached hereto as Schedule 1.
-
8.
-
The
Merger shall be effective on the date on which the Articles of Merger relating to the Merger are registered by the Registrar of Corporate Affairs.
-
9.
-
This
Plan of Merger may be executed in counterparts which, when taken together, shall constitute one instrument.
[Signature page follows.]
A-67
Table of Contents
IN WITNESS WHEREOF the parties hereto have caused this Plan of Merger to be executed
on .
|
|
|
|
|
SIGNED for and on behalf of
|
|
)
|
|
|
Amberjack Merger Sub Limited
|
|
)
|
|
|
By:
|
|
)
|
|
|
Title:
|
|
)
|
|
|
|
|
)
|
|
|
|
|
)
|
|
|
SIGNED for and on behalf of
|
|
)
|
|
|
AquaVenture Holdings Limited
|
|
)
|
|
|
By:
|
|
)
|
|
|
Title:
|
|
)
|
|
|
|
|
)
|
|
|
|
|
)
|
|
|
Table of Contents
Exhibit C
to
Merger Agreement
Memorandum of Association and Articles of Association of the Surviving Company
Table of Contents
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE BVI BUSINESS COMPANIES ACT
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
AND ARTICLES OF ASSOCIATION
OF
AquaVenture Holdings Limited
Incorporated on the 17th June, 2016
Amended and Restated on 30 September, 2016
Amended and Restated on 7 October, 2016
Filed on [day]
[month] 2020
Conyers Trust Company (BVI) Limited
P.O. Box 3140
Road Town
Tortola
British Virgin Islands
Table of Contents
TERRITORY OF THE BRITISH VIRGIN ISLANDS
BVI BUSINESS COMPANIES ACT
MEMORANDUM OF ASSOCIATION
OF
AquaVenture Holdings Limited
1. NAME
The name of the Company is AquaVenture Holdings Limited (the "Company").
2. STATUS
3. REGISTERED OFFICE AND REGISTERED AGENT
-
(a)
-
The
first registered office of the Company is Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, British Virgin Islands VG1110. The
directors or Members may from time to time change the registered office of the Company by Resolution of Directors or Resolution of Members.
-
(b)
-
The
first registered agent of the Company is Codan Trust Company (B.V.I.) Ltd. of Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town,
Tortola, British Virgin Islands VG1110. The directors or Members may from time to time change the registered agent of the Company by Resolution of Directors or Resolution of Members.
4. CAPACITY AND POWERS
Subject
to the Act and any other British Virgin Islands legislation, the Company has, irrespective of corporate benefit:
-
(a)
-
full
capacity to carry on or undertake any business or activity, do any act or enter into any transaction; and
-
(b)
-
for
the purposes of subparagraph (a), full rights, powers and privileges.
5. NUMBER AND CLASSES OF SHARES
The
Company is authorised to issue up to a maximum of 50,000 ordinary shares of a single class without par value in one or more series.
6. RIGHTS ATTACHING TO SHARES
Subject
to the Articles, the terms of the issue of any share, or any Resolution of Members to the contrary (and, for greater clarity, without prejudice to any special rights conferred thereby on the
holders of any other shares), a share of the Company confers on the holder:
-
(a)
-
the
right to one vote at a meeting of the Members or on any Resolution of Members;
-
(b)
-
the
right to an equal share in any Distribution paid by the Company; and
-
(c)
-
the
right to an equal share in the distribution of the surplus assets of the Company on a winding up.
A-71
Table of Contents
7. VARIATION OF CLASS RIGHTS
The
rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that class or series), whether or not the Company is being wound-up, may be
varied with the consent in writing of all the holders of the issued shares of that class or series or with the sanction of a resolution passed by a majority of the votes cast at a separate meeting of
the holders of the shares of the class or series.
8. RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
Rights
conferred upon the holders of the shares of any class or series issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that
class or series, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
9. REGISTERED SHARES
The
Company shall issue registered shares only, and such shares may be in full or fractional form. The Company is not authorised to issue bearer shares, convert registered shares to bearer shares, or
exchange registered shares for bearer shares.
10. AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
Subject
to Clause 7, the Company may amend its Memorandum or Articles by a Resolution of Members or a Resolution of Directors, save that no amendment may be made by a Resolution of
Directors:
-
(a)
-
to
restrict the rights or powers of the Members to amend the Memorandum or Articles;
-
(b)
-
to
change the percentage of Members required to pass a Resolution of Members to amend the Memorandum or Articles;
-
(c)
-
in
circumstances where the Memorandum or Articles cannot be amended by the Members;
-
(d)
-
to
clauses 6, 7, 8 or this clause 10.
11. DEFINITIONS
A-72
Table of Contents
We,
CODAN TRUST COMPANY (B.V.I.) LTD., registered agent of the Company, of Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola, British Virgin Islands VG1110
for the purpose of incorporating a BVI Business Company under the laws of the British Virgin Islands hereby sign this Memorandum of Association on the 17th day of June, 2016:
|
|
|
|
|
Incorporator
|
|
|
CODAN TRUST COMPANY (B.V.I.) LTD.
|
|
|
SGD: Andrew Swapp
|
|
|
For and on behalf of
|
|
|
Codan Trust Company (B.V.I.) Ltd.
|
A-73
Table of Contents
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE BVI BUSINESS COMPANIES ACT
ARTICLES OF ASSOCIATION
OF
AquaVenture Holdings Limited
(a company limited by shares)
Table of Contents
TABLE OF CONTENTS
Table of Contents
Table of Contents
INTERPRETATION
-
1.
-
DEFINITIONS
-
1.1.
-
In
these Articles, the following words and expressions shall, where not inconsistent with the context, have the following meanings, respectively:
|
|
|
|
|
"Act"
|
|
BVI Business Companies Act, as from time to time amended or restated;
|
"Articles"
|
|
these Articles of Association as originally registered or as from time to time amended or restated;
|
"Board"
|
|
the board of directors appointed or elected pursuant to these Articles and acting by Resolution of Directors;
|
"Company"
|
|
AquaVenture Holdings Limited;
|
"Distribution"
|
|
(a)
|
|
the direct or indirect transfer of an asset, other than the Company's own shares, to or for the benefit of a Member;
or
|
|
|
(b)
|
|
the incurring of a debt to or for the benefit of a Member;
|
|
|
in relation to shares held by a Member and whether by means of the purchase of an asset, the purchase, redemption or other
acquisition of shares, a transfer of indebtedness or otherwise, and includes a dividend;
|
"Member"
|
|
a person whose name is entered in the register of members as the holder of one or more shares, or fractional shares, in the
Company;
|
"Memorandum"
|
|
the Memorandum of Association of the Company as originally registered or as from time to time amended or
restated;
|
"Resolution of Directors"
|
|
(a)
|
|
a resolution approved at a duly constituted meeting of directors or of a committee of directors of the Company by the
affirmative vote of a simple majority of the directors present who voted and did not abstain; or
|
|
|
(b)
|
|
a resolution consented to in writing by all of the directors or of all the members of the committee, as the case may
be;
|
"Resolution of Members"
|
|
(a)
|
|
a resolution approved at a duly constituted meeting of Members by the affirmative vote of a simple majority of the votes of
those Members entitled to vote and voting on the resolution; or
|
|
|
(b)
|
|
a resolution consented to in writing by all of the Members entitled to vote thereon;
|
"Seal"
|
|
the common seal of the Company;
|
"Secretary"
|
|
the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or assistant
secretary and any person appointed by the Board to perform any of the duties of the Secretary; and
|
"Treasury Share"
|
|
a share of the Company that was previously issued but was repurchased, redeemed or otherwise acquired by the Company and not
cancelled.
|
A-77
Table of Contents
-
1.2.
-
In
these Articles, where not inconsistent with the context:
-
(a)
-
words
denoting the plural number include the singular number and vice versa;
-
(b)
-
words
denoting the masculine gender include the feminine and neuter genders;
-
(c)
-
words
importing persons include companies, associations or bodies of persons whether corporate or not;
-
(d)
-
a
reference to voting in relation to shares shall be construed as a reference to voting by Members holding the shares, except that it is the votes allocated to the
shares that shall be counted and not the number of Members who actually voted and a reference to shares being present at a meeting shall be given a corresponding construction;
-
(e)
-
a
reference to money is, unless otherwise stated, a reference to the currency in which shares of the Company shall be issued;
-
(f)
-
the
words:-
-
(i)
-
"may"
shall be construed as permissive; and
-
(ii)
-
"shall"
shall be construed as imperative; and
-
(g)
-
unless
otherwise provided herein, words or expressions defined in the Act shall bear the same meaning in these Articles.
-
1.3.
-
In
these Articles expressions referring to writing or its cognates shall, unless the contrary intention appears, include facsimile, printing, lithography,
photography, electronic mail and other modes of representing words in visible form.
-
1.4.
-
Headings
used in these Articles are for convenience only and are not to be used or relied upon in the construction hereof.
SHARES
-
2.
-
POWER TO ISSUE SHARES
Subject
to the provisions of the Memorandum, the unissued shares of the Company shall be at the disposal of the Board which may, without prejudice to any rights previously conferred on the holders of
any existing shares or class or series of shares, offer, allot, grant options over or otherwise dispose of the shares to such persons, at such times and upon such terms and conditions as the Company
may by Resolution of Directors determine.
-
3.
-
POWER OF THE COMPANY TO PURCHASE ITS SHARES
Subject
to these Articles, the Company may by Resolution of Directors, purchase, redeem or otherwise acquire and hold its own shares. Sections 60, 61 and 62 of the Act shall not apply to the
Company.
-
4.
-
TREATMENT OF PURCHASED, REDEEMED OR ACQUIRED SHARES
-
4.1.
-
Subject
to article 4.2, a share that the Company purchases, redeems or otherwise acquires may be cancelled or held by the Company as a Treasury Share.
-
4.2.
-
The
Company may only hold a share that has been purchased, redeemed or otherwise acquired as a Treasury Share if the number of shares purchased, redeemed or
otherwise acquired, when aggregated with shares of the same class already held by the Company as Treasury Shares, does not exceed 50% of the shares of that class previously issued by the Company,
excluding shares that have been cancelled.
A-78
Table of Contents
-
5.
-
TREASURY SHARES
-
5.1.
-
Treasury
Shares may be transferred by the Company and the provisions of the Act, the Memorandum and these Articles that apply to the issue of shares apply to the
transfer of Treasury Shares.
-
5.2.
-
All
the rights and obligations attaching to a Treasury Share are suspended and shall not be exercised by or against the Company while it holds the share as a
Treasury Share.
-
6.
-
CONSIDERATION
-
6.1.
-
A
share may be issued for consideration, in any form or a combination of forms, including money, a promissory note or other written obligation to contribute money
or property, real property, personal property (including goodwill and know-how), services rendered or a contract for future services.
-
6.2.
-
No
share may be issued for a consideration, which is in whole or part, other than money unless the Board passes a resolution stating:
-
(a)
-
the
amount to be credited for the issue of the share; and
-
(b)
-
that,
in its opinion, the present cash value of the non-money consideration and money consideration, if any, is not less than the amount to be credited for the issue
of the share.
-
6.3.
-
No
share may be issued by the Company that:
-
(a)
-
increases
the liability of a person to the Company; or
-
(b)
-
imposes
a new liability on a person to the Company,
unless
that person, or an authorised agent of that person, agrees in writing to becoming the holder of the share.
-
6.4.
-
The
consideration for a share with par value shall not be less than the par value of the share.
-
6.5.
-
A
bonus share issued by the Company shall be deemed to have been fully paid for on issue.
-
7.
-
FORFEITURE OF SHARES
-
7.1.
-
Where
a share is not fully paid for on issue, the Board may, subject to the terms on which the share was issued, at any time serve upon the Member a written notice
of call specifying a date for payment to be made.
-
7.2.
-
The
written notice of call shall name a further date not earlier than the expiration of fourteen days from the date of service of the notice on or before which the
payment required by the notice is to be made and shall contain a statement that in the event of non-payment at or before the time named in the notice, the share will be liable to be forfeited.
-
7.3.
-
Where
a notice complying with the foregoing provisions has been issued and the requirements of the notice have not been complied with, the Board by Resolution of
Directors may, at any time before tender of payment, forfeit and cancel the share to which the notice relates and direct that the register of members be updated.
-
7.4.
-
Upon
forfeiture and cancellation pursuant to article 7.3, the Company shall be under no obligation to refund any moneys to that Member and that Member shall
be discharged from any further obligation to the Company as regards the forfeited share.
A-79
Table of Contents
-
8.
-
SHARE CERTIFICATES
-
8.1.
-
The
Company shall not be required to issue certificates in respect of its shares to a Member, but may elect to do so by the determination of any one director or the
Secretary in his sole discretion, upon the request and at the expense of the Member.
-
8.2.
-
If
the Company issues share certificates, the certificates shall be signed by at least one director or such other person who may be authorised by Resolution of
Directors to sign share certificates, or shall be under the common seal of the Company, with or without the signature of any director, and the signatures and common seal may be facsimiles.
-
8.3.
-
Any
Member receiving a share certificate for registered shares shall indemnify and hold the Company and its directors and officers harmless from any loss or
liability which it or they may incur by reason of wrongful or fraudulent use or representation made by any person by virtue of the possession thereof. If a share certificate for registered shares is
worn out or lost it may be renewed on production of the worn out certificate or on satisfactory proof of its loss together with such indemnity as may be required by a Resolution of Directors.
-
9.
-
FRACTIONAL SHARES
The
Company may issue fractional shares and a fractional share shall have the corresponding fractional rights, obligations and liabilities of a whole share of the same class or series of shares.
REGISTRATION OF SHARES
-
10.
-
REGISTER OF MEMBERS
-
10.1.
-
The
Board shall cause there to be kept a register of members in which there shall be recorded the name and address of each Member, the number of each class and
series of shares held by each Member, the date on which the name of each Member was entered in the register of members and the date upon which any person ceased to be a Member.
-
10.2.
-
The
register of members may be in such form as the Board may approve, but if it is in magnetic, electronic or other data storage form, the Company must be able to
produce legible evidence of its contents. Unless the Board otherwise determines, the magnetic, electronic or other data storage form shall be the original register of members.
-
11.
-
REGISTERED HOLDER ABSOLUTE OWNER
-
11.1.
-
The
entry of the name of a person in the register of members as a holder of a share in the Company is prima facie
evidence that legal title in the share vests in that person.
-
11.2.
-
The
Company may treat the holder of a registered share as the only person entitled to:
-
(a)
-
exercise
any voting rights attaching to the share;
-
(b)
-
receive
notices;
-
(c)
-
receive
a Distribution in respect of the share; and
-
(d)
-
exercise
other rights and powers attaching to the share.
-
12.
-
TRANSFER OF REGISTERED SHARES
-
12.1.
-
Registered
shares in the Company shall only be transferred by a written instrument of transfer signed by the transferor and containing the name and address of the
transferee.
A-80
Table of Contents
-
12.2.
-
The
instrument of transfer shall also be signed by the transferee if registration as a holder of the share imposes a liability to the Company on the transferee.
-
12.3.
-
The
instrument of transfer shall be sent to the Company for registration.
-
12.4.
-
The
Company shall, on receipt of an instrument of transfer, enter the name and address of the transferee of the share in the register of members unless the Board
resolves to refuse or delay the registration of the transfer for reasons that shall be specified in the resolution.
-
12.5.
-
The
Board is permitted to pass a Resolution of Directors refusing or delaying the registration of a transfer where it reasonably determines that it is in the best
interest of the Company to do so. Without limiting the generality of the foregoing, the Board may refuse or delay the registration of a transfer of shares if the transferor has failed to pay an amount
due in respect of those shares.
-
12.6.
-
Where
the Board passes a resolution to refuse or delay the registration of a transfer, the Company shall, as soon as practicable, send the transferor and the
transferee a notice of the refusal or delay.
-
12.7.
-
The
transfer of a share is effective when the name of the transferee is entered in the register of members and the Company shall not be required to treat a
transferee of a share in the Company as a Member until the transferee's name has been entered in the register of members.
-
12.8.
-
If
the Board is satisfied that an instrument of transfer has been signed but that the instrument has been lost or destroyed, it may resolve:
-
(a)
-
to
accept such evidence of the transfer of the shares as they consider appropriate; and
-
(b)
-
that
the transfer of shares be recorded, including by the entry of the transferee's name in the register of members.
-
13.
-
TRANSMISSION OF REGISTERED SHARES
-
13.1.
-
The
executor or administrator of the estate of a deceased Member, the guardian of an incompetent Member, the liquidator of an insolvent Member or the trustee of a
bankrupt Member shall be the only person recognised by the Company as having any title to the Member's share.
-
13.2.
-
Any
person becoming entitled by operation of law or otherwise to a share in consequence of the death, incompetence or bankruptcy of any Member may be registered as
a Member upon such evidence being produced as may reasonably be required by the Board. An application by any such person to be registered as a Member shall for all purposes be deemed to be a transfer
of the share of the deceased, incompetent or bankrupt Member and the Board shall treat it as such.
-
13.3.
-
Any
person who has become entitled to a share or shares in consequence of the death, incompetence or bankruptcy of any Member may, instead of being registered
himself, request in writing that some person to be named by him be registered as the transferee of such share and such request shall likewise be treated as if it were a transfer.
ALTERATION OF SHARES
-
14.
-
POWER TO ALTER SHARES
-
14.1.
-
The
Company may amend the Memorandum to increase or reduce the maximum number of shares that the Company is authorised to issue, or to authorise the Company to
issue an unlimited number of shares.
A-81
Table of Contents
-
14.2.
-
Subject
to the Memorandum and these Articles, the Company may:
-
(a)
-
divide
its shares, including issued shares, into a larger number of shares; or
-
(b)
-
combine
its shares, including issued shares, into a smaller number of shares;
-
(c)
-
provided
that, where shares are divided or combined, the aggregate par value (if any) of the new shares must be equal to the aggregate par value (if any) of the
original shares.
-
14.3.
-
A
division or combination of shares, including issued shares, of a class or series shall be for a larger or smaller number, as the case may be, of shares in the
same class or series.
-
15.
-
RESTRICTIONS ON THE DIVISION OF SHARES
The
Company shall not divide its shares if it would cause the maximum number of shares that the Company is authorised to issue to be exceeded.
DISTRIBUTIONS
-
16.
-
DISTRIBUTIONS
-
16.1.
-
The
Board may, by Resolution of Directors, authorise a Distribution by the Company to Members at such time and of such an amount as it thinks fit if it is
satisfied, on reasonable grounds, that immediately after the Distribution, the value of the Company's assets exceeds its liabilities and the Company is able to pay its debts as they fall due. The
resolution shall include a statement to that effect.
-
16.2.
-
Notice
of any Distribution that may have been authorised shall be given to each Member entitled to the Distribution in the manner provided in article 24 and
all Distributions unclaimed for three years after having been authorised may be forfeited by Resolution of Directors for the benefit of the Company.
-
17.
-
POWER TO SET ASIDE PROFITS
The
Board may, before authorising any Distribution, set aside out of the profits of the Company such sum as it thinks proper as a reserve fund, and may invest the sum so set apart as a reserve fund in
such securities as it may select.
-
18.
-
UNAUTHORISED DISTRIBUTIONS
-
18.1.
-
If,
after a Distribution is authorised and before it is made, the Board ceases to be satisfied on reasonable grounds that immediately after the Distribution the
value of the Company's assets exceeds its liabilities and the Company is able to pay its debts as they fall due, such Distribution is deemed not to have been authorised.
-
18.2.
-
A
Distribution made to a Member at a time when, immediately after the Distribution, the value of the Company's assets did not exceed its liabilities and the
Company was not able to pay its debts as they fell due, is subject to recovery in accordance with the provisions of the Act.
-
19.
-
DISTRIBUTIONS TO JOINT HOLDERS OF SHARES
If
two or more persons are registered as joint holders of any shares, any one of such persons may give an effectual receipt for any Distribution payable in respect of such shares.
A-82
Table of Contents
MEETINGS OF MEMBERS
-
20.
-
GENERAL MEETINGS
The
Board, by Resolution of Directors, may convene meetings of the Members of the Company at such times and in such manner as the Board considers necessary or desirable.
-
21.
-
LOCATION
Any
meeting of the Members may be held in such place within or outside the British Virgin Islands as the Board considers appropriate.
-
22.
-
REQUISITIONED GENERAL MEETINGS
The
Board shall call a meeting of the Members if requested in writing to do so by Members entitled to exercise at least thirty percent of the voting rights in respect of the matter for which the
meeting is being requested.
-
23.
-
NOTICE
-
23.1.
-
The
Board shall give not less than seven days notice of meetings of Members to those persons whose names, on the date the notice is given, appear as Members in the
register of members of the Company and are entitled to vote at the meeting.
-
23.2.
-
A
meeting of Members held in contravention of the requirement in article 23.1 is valid if Members holding a ninety percent majority of the total voting
rights on all the matters to be considered at the meeting have waived notice of the meeting and, for this purpose, the presence of a Member at the meeting shall be deemed to constitute waiver on his
part.
-
23.3.
-
The
inadvertent failure of the Board to give notice of a meeting to a Member, or the fact that a Member has not received notice, does not invalidate the meeting.
-
24.
-
GIVING NOTICE
-
24.1.
-
A
notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member's address in the register of
members or to such other address given for the purpose. Notice may be sent by mail, courier service, facsimile, electronic mail or other mode of representing words in a legible form as agreed by such
Member.
-
24.2.
-
Any
notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named
first in the register of members and notice so given shall be sufficient notice to all the holders of such shares.
-
25.
-
SERVICE OF NOTICE
Any
notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that
the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or transmitted by facsimile, electronic mail or other method as the case may be.
-
26.
-
PARTICIPATING IN MEETINGS BY TELEPHONE
A
Member shall be deemed to be present at a meeting of Members if he participates by telephone or other electronic means and all Members participating in the meeting are able to hear each other.
A-83
Table of Contents
-
27.
-
QUORUM AT GENERAL MEETINGS
-
27.1.
-
A
meeting of Members is properly constituted if, at the commencement of the meeting there are present in person or by proxy not less than fifty percent of the
votes of the shares or class or series of shares entitled to vote on Resolutions of Members to be considered at the meeting.
-
27.2.
-
If,
within two hours from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved;
in any other case it shall stand adjourned to the next business day at the same time and place or to such other time and place as the Board may determine, and if at the adjourned meeting there are
present within one hour from the time appointed for the meeting in person or by proxy not less than one third of the votes of the shares or each class or series of shares entitled to vote on the
resolutions to be considered by the meeting, those present shall constitute a quorum but otherwise the meeting shall be dissolved.
-
27.3.
-
If
a quorum is present, notwithstanding the fact that such quorum may be represented by only one person, then such person may resolve any matter and a certificate
signed by such person accompanied, where such person be a proxy, by a copy of the proxy form, shall constitute a valid Resolution of Members.
-
28.
-
CHAIRMAN TO PRESIDE
At
every meeting of Members, the chairman of the Board shall preside as chairman of the meeting. If there is no chairman of the Board or if the chairman of the Board is not present at the meeting, the
Members present shall choose one of their number to be the chairman. If the Members are unable to choose a chairman for any reason, then the person representing the greatest number of voting shares
present in person or by proxy at the meeting shall preside as chairman.
-
29.
-
VOTING ON RESOLUTIONS
At
any meeting of the Members the chairman shall be responsible for deciding in such manner as he shall consider appropriate whether any resolution has been carried or not and the result of his
decision shall be announced to the meeting and recorded in the minutes thereof.
-
30.
-
POWER TO DEMAND A VOTE ON A POLL
-
30.1.
-
At
any meeting of Members a resolution put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or
restrictions for the time being lawfully attached to any class or series of shares and subject to the provisions of these Articles, every Member present in person and every person holding a valid
proxy at such meeting shall be entitled to one vote and shall cast such vote by raising his hand.
-
30.2.
-
If
the chairman shall have any doubt as to the outcome of any resolution put to the vote, he shall cause a poll to be taken of all votes cast upon such resolution,
but if the chairman shall fail to take a poll then any Member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such
announcement demand that a poll be taken and the chairman shall thereupon cause a poll to be taken. If a poll is taken at any meeting, the result thereof shall be duly recorded in the minutes of that
meeting by the chairman.
-
31.
-
VOTING BY JOINT HOLDERS OF SHARES
The
following shall apply where shares are jointly owned: (a) if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of Members and may
A-84
Table of Contents
speak
as a Member; (b) if only one of the joint owners is present in person or by proxy he may vote on behalf of all of them; and (c) if two or more of the joint owners are present in
person or by proxy they must vote as one.
-
32.
-
INSTRUMENT OF PROXY
-
32.1.
-
A
Member may be represented at a meeting of Members by a proxy (who need not be a Member) who may speak and vote on behalf of the Member.
-
32.2.
-
An
instrument appointing a proxy shall be in such form as the Board may from time to time determine or such other form as the chairman of the meeting shall accept
as properly evidencing the wishes of the Member appointing the proxy.
-
32.3.
-
The
chairman of any meeting at which a vote is cast by proxy or on behalf of any person other than an individual may call for a notarially certified copy of such
proxy or authority which shall be produced within seven days of being so requested or the votes cast by such proxy or on behalf of such person shall be disregarded.
-
32.4.
-
The
instrument appointing a proxy shall be produced at the place appointed for the meeting before the time for holding the meeting at which the person named in
such instrument proposes to vote.
-
33.
-
REPRESENTATION OF MEMBERS
-
33.1.
-
Any
person other than an individual which is a Member may by resolution in writing (certified or signed by a duly authorised person) of its directors or other
governing body authorise such person as it thinks fit to act as its representative (in this article, "Representative") at any meeting of the Members or at the meeting of the Members of any class or
series of shares and the Representative shall be entitled to exercise the same powers on behalf of the Member which he represents as that Member could exercise if it were an individual.
-
33.2.
-
The
right of a Representative shall be determined by the law of the jurisdiction where, and by the documents by which, the Member is constituted or derives its
existence. In case of doubt, the Board may in good faith seek legal advice from any qualified person and unless and until a court of competent jurisdiction shall otherwise rule, the Board may rely and
act upon such advice without incurring any liability to any Member.
-
34.
-
ADJOURNMENT OF GENERAL MEETINGS
The
chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place.
-
35.
-
BUSINESS AT ADJOURNED MEETINGS
No
business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
-
36.
-
DIRECTORS ATTENDANCE AT GENERAL MEETINGS
Directors
of the Company may attend and speak at any meeting of Members of the Company and at any separate meeting of the holders of any class or series of shares in the Company.
A-85
Table of Contents
DIRECTORS AND OFFICERS
-
37.
-
ELECTION OF DIRECTORS
-
37.1.
-
The
first registered agent of the Company shall, within six months of the date of incorporation of the Company, appoint one or more persons as the first director
or directors of the Company. Thereafter, the directors shall be elected by a Resolution of Directors or a Resolution of Members.
-
37.2.
-
No
person shall be appointed as a director or nominated as a reserve director unless he has consented in writing to act as a director or to be nominated as a
reserve director.
-
37.3.
-
A
director shall not require a share qualification, and may be an individual or a company.
-
37.4.
-
Any
director which is a body corporate may appoint any person its duly authorised representative for the purpose of representing it at Board meetings or with
respect to unanimous written consents.
-
38.
-
NUMBER OF DIRECTORS
The
maximum number of directors may be fixed either by a Resolution of Directors or a Resolution of Members, provided that if the maximum number of directors is fixed by a Resolution of Members, then
any change to the maximum number of directors shall only be made by a Resolution of Members.
-
39.
-
TERM OF OFFICE OF DIRECTORS
Each
director shall hold office for the term, if any, as may be specified in the resolution appointing him or until his earlier death, resignation or removal.
-
40.
-
ALTERNATE AND RESERVE DIRECTORS
-
40.1.
-
A
director may at any time appoint any person (including another director) to be his alternate director and may at any time terminate such appointment. An
appointment and a termination of appointment shall be by notice in writing signed by the director and deposited at the Registered Office or delivered at a meeting of the Board.
-
40.2.
-
The
appointment of an alternate director shall terminate on the happening of any event which, if he were a director, would cause him to vacate such office or if
his appointor ceases for any reason to be a director.
-
40.3.
-
An
alternate director has the same rights as the appointing director in relation to any directors' meeting and any written resolution circulated for written
consent, save that he may not himself appoint an alternate director or a proxy. Any exercise by the alternate director of the appointing director's powers in relation to the taking of decisions by the
directors is as effective as if the powers were exercised by the appointing director.
-
40.4.
-
If
an alternate director is himself a director or attends a meeting of the Board as the alternate director of more than one director, his voting rights shall be
cumulative.
-
40.5.
-
Unless
the Board determines otherwise, an alternate director may also represent his appointor at meetings of any committee of the directors on which his appointor
serves; and this Article shall apply equally to such committee meetings as to meetings of the Board.
-
40.6.
-
Where
the Company has only one Member who is an individual and that Member is also the sole director, the sole member/director may, by instrument in writing,
nominate a person who is not disqualified from being a director under the Act as a reserve director in the event of his death.
A-86
Table of Contents
-
40.7.
-
The
nomination of a person as a reserve director ceases to have effect if: (a) before the death of the sole Member/director who nominated him he resigns as
reserve director, or the sole Member/director revokes the nomination in writing, or (b) the sole Member/director who nominated him ceases to be the sole Member/director for any reason other
than his death.
-
41.
-
REMOVAL OF DIRECTORS
-
41.1.
-
A
director may be removed from office, with or without cause:
-
(a)
-
by
a Resolution of Members at a meeting of the Members called for the purpose of removing the director or for purposes including the removal of the director; or
-
(b)
-
by
a Resolution of Members consented to in writing by all of the Members entitled to vote thereon.
-
41.2.
-
Notice
of a meeting called under article 41.1(a) shall state that the purpose of the meeting is, or the purposes of the meeting include, the removal of a
director.
-
42.
-
VACANCY IN THE OFFICE OF DIRECTOR
-
42.1.
-
Notwithstanding
article 37, the Board may appoint one or more directors to fill a vacancy on the Board.
-
42.2.
-
For
the purposes of this article, there is a vacancy on the Board if a director dies or otherwise ceases to hold office as a director prior to the expiration of
his term of office or there is otherwise a vacancy in the number of directors as fixed pursuant to article 38.
-
42.3.
-
The
term of any appointment under this article may not exceed the term that remained when the person who has ceased to be a director left or otherwise ceased to
hold office.
-
43.
-
REMUNERATION OF DIRECTORS
With
the prior or subsequent approval by a Resolution of Members, the Board may, by a Resolution of Directors, fix the emoluments of directors with respect to services to be rendered in any capacity
to the Company.
-
44.
-
RESIGNATION OF DIRECTORS
A
director may resign his office by giving written notice of his resignation to the Company and the resignation shall have effect from the date the notice is received by the Company or from such later
date as may be specified in the notice.
-
45.
-
DIRECTORS TO MANAGE BUSINESS
-
45.1.
-
The
business and affairs of the Company shall be managed by, or under the direction or supervision of, the Board.
-
45.2.
-
The
Board has all the powers necessary for managing, and for directing and supervising, the business and affairs of the Company.
-
45.3.
-
The
Board may authorise the payment of all expenses incurred preliminary to and in connection with the formation and registration of the Company and may exercise
all such powers of the Company as are not by the Act or by the Memorandum or these Articles required to be exercised by the Members of the Company, subject to any delegation of such powers as may be
authorised by these Articles and to such requirements as may be prescribed by a Resolution of Members; but no requirement made by a Resolution of Members shall prevail if it is inconsistent
A-87
Table of Contents
with
these Articles nor shall such requirement invalidate any prior act of the Board which would have been valid if such requirement had not been made.
-
45.4.
-
Subject
to the provisions of the Act, all cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for moneys paid to
the Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as shall from time to time be determined by Resolution of Directors.
-
46.
-
COMMITTEES OF DIRECTORS
-
46.1.
-
The
Board may, by a Resolution of Directors, designate one or more committees of directors, each consisting of one or more directors.
-
46.2.
-
Each
committee of directors has such powers and authorities of the Board, including the power and authority to affix the Seal, as are set forth in these Articles
or the Resolution of Directors establishing the committee, except that the Board has no power to delegate the following powers to a committee of directors:
-
(a)
-
to
amend the Memorandum or these Articles;
-
(b)
-
to
designate committees of directors;
-
(c)
-
to
delegate powers to a committee of directors;
-
(d)
-
to
appoint or remove directors;
-
(e)
-
to
appoint or remove an agent;
-
(f)
-
to
approve a plan of merger, consolidation or arrangement;
-
(g)
-
to
make a declaration of solvency or approve a liquidation plan; or
-
(h)
-
to
make a determination that the Company will, immediately after a proposed Distribution, meet the solvency test set out in the Act.
-
46.3.
-
A
committee of directors, where authorised by the Board, may appoint a sub-committee.
-
46.4.
-
The
meetings and proceedings of each committee of directors consisting of two or more directors shall be governed mutatis mutandis by the provisions of these
Articles regulating the proceedings of directors so far as the same are not superseded by any provisions in the resolution establishing the committee.
-
47.
-
OFFICERS AND AGENTS
-
47.1.
-
The
Board may, by a Resolution of Directors, appoint any person, including a person who is a director, to be an officer or agent of the Company. Such officers may
consist of a chairman of the Board, a vice chairman of the Board, a president and one or more vice presidents, secretaries and treasurers and such other officers as may from time to time be deemed
desirable. Any number of offices may be held by the same person.
-
47.2.
-
Each
officer or agent has such powers and authorities of the Board, including the power and authority to affix the Seal, as are set forth in these Articles or the
Resolution of Directors appointing the officer or agent, except that no officer or agent has any power or authority with respect to the following:
-
(a)
-
to
amend the Memorandum or these Articles;
-
(b)
-
to
change the registered office or agent;
-
(c)
-
to
designate committees of directors;
A-88
Table of Contents
-
(d)
-
to
delegate powers to a committee of directors;
-
(e)
-
to
appoint or remove directors;
-
(f)
-
to
appoint or remove an agent;
-
(g)
-
to
fix emoluments of directors;
-
(h)
-
to
approve a plan of merger, consolidation or arrangement;
-
(i)
-
to
make a declaration of solvency or approve a liquidation plan;
-
(j)
-
to
make a determination that the Company will, immediately after a proposed distribution, meet the solvency test set out in the Act; or
-
(k)
-
to
authorise the Company to continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands.
-
48.
-
REMOVAL OF OFFICERS AND AGENTS
The
officers and agents of the Company shall hold office until their successors are duly elected and qualified, but any officer or agent elected or appointed by the Board may be removed at any time,
with or without cause, by Resolution of Directors. Any vacancy occurring in any office of the Company may be filled by Resolution of Directors.
-
49.
-
DUTIES OF OFFICERS
In
the absence of any specific allocation of duties it shall be the responsibility of the chairman of the Board to preside at meetings of directors and Members, the vice chairman to act in the absence
of the chairman, the president to manage the day to day affairs of the Company, the vice presidents to act in order of seniority in the absence of the president but otherwise to perform such duties as
may be delegated to them by the president, the Secretary to maintain the register of members, register of directors, minute books, records (other than financial records) of the Company, and Seal and
to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the treasurer to be responsible for the financial affairs of the Company.
-
50.
-
REMUNERATION OF OFFICERS
The
emoluments of all officers shall be fixed by Resolution of Directors.
-
51.
-
STANDARD OF CARE
A
director, when exercising powers or performing duties as a director, shall exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into
account, but without limitation, (a) the nature of the Company, (b) the nature of the decision, and (c) the position of the director and the nature of the responsibilities
undertaken by him.
-
52.
-
CONFLICTS OF INTEREST
-
52.1.
-
A
director shall, forthwith after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the Company, disclose the
interest to the Board, unless the transaction or proposed transaction (a) is between the director and the Company and (b) is to be entered into in the ordinary course of the Company's
business and on usual terms and conditions.
A-89
Table of Contents
-
52.2.
-
A
transaction entered into by the Company in respect of which a director is interested is voidable by the Company unless the director complies with
article 52.1 or (a) the material facts of the interest of the director in the transaction are known by the Members entitled to vote at a meeting of Members and the transaction is
approved or ratified by a Resolution of Members or (b) the Company received fair value for the transaction.
-
52.3.
-
For
the purposes of this article, a disclosure is not made to the Board unless it is made or brought to the attention of every director on the Board.
-
52.4.
-
A
director who is interested in a transaction entered into or to be entered into by the Company may vote on a matter relating to the transaction, attend a meeting
of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum and sign a document on behalf of the Company,
or do any other thing in his capacity as director that relates to the transaction.
-
53.
-
INDEMNIFICATION AND EXCULPATION
-
53.1.
-
Subject
to article 53.2 the Company shall indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in
settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who:
-
(a)
-
is
or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative,
by reason of the fact that the person is or was a director, an officer or a liquidator of the Company; or
-
(b)
-
is
or was, at the request of the Company, serving as a director, officer or liquidator of, or in any other capacity is or was acting for, another body corporate or a
partnership, joint venture, trust or other enterprise.
-
53.2.
-
Article 53.1
does not apply to a person referred to in that Article unless the person acted honestly and in good faith and in what he believed to be the
best interests of the Company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful.
-
53.3.
-
The
decision of the Board as to whether the person acted honestly and in good faith and in what he believed to be the best interests of the Company and as to
whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of these Articles, unless a question of law is involved.
-
53.4.
-
The
termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle
prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the Company or that the
person had reasonable cause to believe that his conduct was unlawful.
-
53.5.
-
If
a person referred to in this article has been successful in defence of any proceedings referred to therein, the person is entitled to be indemnified against all
expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings.
-
53.6.
-
Expenses,
including legal fees, incurred by a director or officer (or former director or former officer) in defending any legal, administrative or investigative
proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the director or officer (or former director, or former
officer, as the case may be) to repay the amount if it shall ultimately be determined that the director or officer (or former director, or former officer as the case may be) is not entitled to be
indemnified by the Company.
A-90
Table of Contents
-
53.7.
-
The
indemnification and advancement of expenses provided by, or granted under, these Articles are not exclusive of any other rights to which the person seeking
indemnification or advancement of expenses may be entitled under any agreement, Resolution of Members, resolution of disinterested directors or otherwise, both as to acting in the person's official
capacity and as to acting in another capacity while serving as a director of the Company.
-
53.8.
-
The
Company may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the Company, or who at the
request of the Company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or
other enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person
against the liability under article 53.1.
MEETINGS OF THE BOARD OF DIRECTORS
-
54.
-
BOARD MEETINGS
The
Board or any committee thereof may meet at such times and in such manner and places within or outside the British Virgin Islands as it may determine to be necessary or desirable. Any director or
the Secretary of the Company may call a Board meeting.
-
55.
-
NOTICE OF BOARD MEETINGS
A
director shall be given reasonable notice of a Board meeting, but a Board meeting held without reasonable notice having been given to all directors shall be valid if all the directors entitled to
vote at the meeting waive notice of the meeting, and for this purpose, the presence of a director at the meeting shall be deemed to constitute waiver on his part (except where a director attends a
meeting for the express purpose of objecting to the transaction of business on the grounds that the meeting is not properly called). The inadvertent failure to give notice of a meeting to a director,
or the fact that a director has not received the notice, does not invalidate the meeting.
-
56.
-
PARTICIPATION IN MEETINGS BY TELEPHONE
A
director shall be deemed to be present at a meeting of directors if he participates by telephone or other electronic means and all directors participating in the meeting are able to hear each other.
-
57.
-
QUORUM AT BOARD MEETINGS
The
quorum necessary for the transaction of business at a meeting of directors shall be two directors.
-
58.
-
BOARD TO CONTINUE IN THE EVENT OF VACANCY
The
continuing directors may act notwithstanding any vacancy in their body, save that if their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum for a
Board meeting, the continuing directors or director may act only for the purpose of appointing directors to fill any vacancy that has arisen or summoning a meeting of Members.
-
59.
-
CHAIRMAN TO PRESIDE
At
every Board meeting, the chairman of the Board shall preside as chairman of the meeting. If there is not a chairman of the Board or if the chairman of the Board is not present at the meeting, the
vice chairman of the Board shall preside. If there is no vice chairman of the Board
A-91
Table of Contents
or
if the vice chairman of the Board is not present at the meeting, the directors present shall choose one of their number to be chairman of the meeting.
-
60.
-
POWERS OF SOLE DIRECTOR
If
the Company shall have only one director the provisions herein contained for Board meetings shall not apply but such sole director shall have full power to represent and act for the Company in all
matters as are not by the Act or the Memorandum or these Articles required to be exercised by the Members of the Company.
-
61.
-
PROCEEDINGS IF ONE DIRECTOR
If
the Company shall have only one director, in lieu of minutes of a meeting the director shall record in writing and sign a note or memorandum (or adopt a resolution in writing) concerning all
matters requiring a Resolution of Directors and such note, memorandum or resolution in writing shall be kept in the minute book. Such a note, memorandum or resolution in writing shall constitute
sufficient evidence of such resolution for all purposes.
CORPORATE RECORDS
-
62.
-
DOCUMENTS TO BE KEPT
-
62.1.
-
The
Company shall keep the following documents at the office of its registered agent:
-
(a)
-
the
Memorandum and these Articles;
-
(b)
-
the
register of members or a copy of the register of members;
-
(c)
-
the
register of directors or a copy of the register of directors;
-
(d)
-
the
register of charges or a copy of the register of charges;
-
(e)
-
copies
of all notices and other documents filed by the Company in the previous ten years.
-
62.2.
-
Where
the Company keeps a copy of its register of members or register of directors at the office of its registered agent, it shall within fifteen days of any
change in the register, notify the registered agent, in writing, of the change, and it shall provide the registered agent with a written record of the physical address of the place or places at which
the original register of members or the original register of directors is kept.
-
62.3.
-
Where
the place at which the original register of members or the original register of directors is changed, the Company shall provide the registered agent with the
physical address of the new location of the records within fourteen days of the change of location.
-
62.4.
-
The
Company shall keep the following records at the office of its registered agent or at such other place or places, within or outside the British Virgin Islands,
as the Board may determine:
-
(a)
-
the
minutes of meetings and Resolutions of Members and of classes of Members; and
-
(b)
-
the
minutes of meetings and Resolutions of Directors and committees of directors.
-
62.5.
-
Where
any of the minutes or resolutions described in the previous article are kept at a place other than at the office of the Company's registered agent, the
Company shall provide the registered agent with a written record of the physical address of the place or places at which the records are kept.
-
62.6.
-
Where
the place at which any of the records described in article 62.4 is changed, the Company shall provide the registered agent with the physical address
of the new location of the records within fourteen days of the change of location.
A-92
Table of Contents
-
62.7.
-
The
Company's records shall be kept in written form or either wholly or partly as electronic records.
-
63.
-
FORM AND USE OF SEAL
The
Board shall provide for the safe custody of the Seal. An imprint thereof shall be kept at the office of the registered agent of the Company. The Seal when affixed to any written instrument shall
be witnessed by any one director, the Secretary or Assistant Secretary, or by any person or persons so authorised from time to time by Resolution of Directors.
ACCOUNTS
-
64.
-
BOOKS OF ACCOUNT
The
Company shall keep records and underlying documentation that:
-
(a)
-
are
sufficient to show and explain the Company's transactions; and
-
(b)
-
will,
at any time, enable the financial position of the Company to be determined with reasonable accuracy.
-
65.
-
FORM OF RECORDS
-
65.1.
-
The
records required to be kept by the Company under the Act, the Mutual Legal Assistance (Tax Matters Act), 2003, the Memorandum or these Articles shall be kept
in written form or either wholly or partly as electronic records complying with the requirements of the Electronic Transactions Act (British Virgin Islands).
-
65.2.
-
The
records and underlying documentation shall be kept for a period of at least five years from the date of completion of the relevant transaction or the date the
Company terminates the business relationship to which the records and underlying documentation relate.
-
66.
-
FINANCIAL STATEMENTS
-
66.1.
-
If
required by a Resolution of Members, the Board shall cause to be made out and served on the Members or laid before a meeting of Members a profit and loss
account and balance sheet of the Company for such period and on such recurring basis as the Members think fit.
-
66.2.
-
The
Company's profit and loss account and balance sheet shall be drawn up so as to give respectively a true and fair view of the profit or loss of the Company for
that financial period, and a true and fair view of the state of affairs of the Company as at the end of that financial period.
-
67.
-
DISTRIBUTION OF ACCOUNTS
A
copy of such profit and loss account and balance sheet shall be served on every Member in the manner and with similar notice to that prescribed herein for calling a meeting of Members or upon such
shorter notice as the Members may agree to accept.
A-93
Table of Contents
AUDITS
-
68.
-
AUDIT
The
Company may by Resolution of Members call for the accounts to be examined by an auditor.
-
69.
-
APPOINTMENT OF AUDITOR
-
69.1.
-
The
first auditor shall be appointed by Resolution of Directors; subsequent auditors shall be appointed by a Resolution of Members.
-
69.2.
-
The
auditor may be a Member of the Company but no director or other officer shall be eligible to be an auditor of the Company during his continuance in office.
-
70.
-
REMUNERATION OF AUDITOR
The
remuneration of the auditor of the Company:
-
(a)
-
in
the case of an auditor appointed by the Board, may be fixed by Resolution of Directors; and
-
(b)
-
subject
to the foregoing, in the case of an auditor appointed by the Members, shall be fixed by Resolution of Members or in such manner as the Company may, by
Resolution of Members determine.
-
71.
-
DUTIES OF AUDITOR
The
auditor shall examine each profit and loss account and balance sheet required to be served on every Member of the Company or laid before a meeting of the Members of the Company and shall state in
a written report whether or not:
-
(a)
-
in
its opinion the profit and loss account and balance sheet give a true and fair view respectively of the profit and loss for the period covered by the accounts,
and of the state of affairs of the Company at the end of that period; and
-
(b)
-
all
the information and explanations required by the auditor have been obtained.
-
72.
-
ACCESS TO RECORDS
Every
auditor of the Company shall have right of access at all times to the books of account of the Company, and shall be entitled to require from the directors and officers of the Company such
information and explanations as he thinks necessary for the performance of the duties of the auditor.
-
73.
-
AUDITOR ENTITLED TO NOTICE
The
auditor of the Company shall be entitled to receive notice of, and to attend any meetings of Members of the Company at which the Company's profit and loss account and balance sheet are to be
presented.
VOLUNTARY LIQUIDATION
-
74.
-
LIQUIDATION
The
Company may be liquidated in accordance with the Act only if (a) it has no liabilities; or (b) it is able to pay its debts as they fall due and the value of its assets equals or
exceeds its liabilities. The Board shall be permitted to pass a Resolution of Directors for the appointment of an eligible individual as a voluntary liquidator (or two or more eligible individuals as
joint
A-94
Table of Contents
voluntary
liquidators) of the Company if the Members have, by a Resolution of Members, approved the liquidation plan in accordance with the Act.
FUNDAMENTAL CHANGES
-
75.
-
CHANGES
Section 175
of the Act shall not apply to the Company.
-
76.
-
CONTINUATION UNDER FOREIGN LAW
The
Company may by Resolution of Members or by Resolution of Directors continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands in the manner provided
under those laws.
A-95
Table of Contents
We,
CODAN TRUST COMPANY (B.V.I.) LTD., registered agent of the Company, of Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola, British Virgin Islands VG1110
for the purpose of incorporating a BVI Business Company under the laws of the British Virgin Islands hereby sign these Articles of Association on the 17th day of June, 2016:
|
|
|
|
|
Incorporator
|
|
|
CODAN TRUST COMPANY (B.V.I.) LTD.
|
|
|
SGD: Andrew Swapp
|
|
|
For and on behalf of
|
|
|
Codan Trust Company (B.V.I.) Ltd.
|
A-96
Table of Contents
ANNEX B
|
|
|
388 Greenwich Street
New York, NY 10013
|
|
|
December 23,
2019
The
Special Committee of the Board of Directors
AquaVenture Holdings Limited
Commerce House, Wickhams Cay 1
P.O. Box 3140 Road Town
British Virgin Islands VG 1110
Members
of the Special Committee of the Board of Directors:
You
have requested our opinion as to the fairness, from a financial point of view, to the holders of the ordinary shares, no par value, of AquaVenture Holdings Limited ("AquaVenture") of
the Merger Consideration (defined below) to be received by such holders (other than Culligan International Company ("Culligan") and its affiliates) pursuant to the terms and subject to the conditions
set forth in the Agreement and Plan of Merger, dated as of December 23, 2019 (the "Merger Agreement"), among Culligan, Amberjack Merger Sub Limited, a wholly owned subsidiary of Culligan
("Merger Sub"), and AquaVenture. As more fully described in the Merger Agreement, (i) Merger Sub will be merged with and into AquaVenture (the "Merger") and (ii) each outstanding
ordinary share, no par value, of AquaVenture ("AquaVenture Ordinary Shares"), other than (a) AquaVenture Ordinary Shares held in the treasury of AquaVenture, (b) AquaVenture Ordinary
Shares owned by Culligan or Merger Sub or any wholly owned subsidiary of AquaVenture, and (c) Dissenting Shares (as defined in the Merger Agreement), will be converted into the right to receive
$27.10 in cash (the "Merger Consideration").
In
arriving at our opinion, we reviewed a draft dated December 22, 2019 of the Merger Agreement and held discussions with certain senior officers, directors and other
representatives and advisors of AquaVenture concerning the business, operations and prospects of AquaVenture. We examined certain publicly available business and financial information relating to
AquaVenture as well as certain financial forecasts and other information and data relating to AquaVenture which were provided to or discussed
with us by the management of AquaVenture. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: current and historical market prices
and trading volumes of AquaVenture Ordinary Shares; the historical and projected earnings and other operating data of AquaVenture; and the capitalization and financial condition of AquaVenture. We
considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Merger and analyzed certain financial, stock market and
other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of AquaVenture. In connection with our engagement and at
the direction of the Special Committee of the Board of Directors (the "Special Committee"), we held discussions with selected third parties to solicit indications of interest in the possible
acquisition of all or a part of AquaVenture. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market
criteria as we deemed appropriate in arriving at our opinion. The issuance of our opinion has been authorized by our fairness opinion committee.
In
rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly
available or provided to or otherwise reviewed by or discussed with us and upon the assurances of the management of AquaVenture that they are not aware of any relevant information that has been
omitted or that remains undisclosed to us. With respect to financial forecasts and other information and data relating to AquaVenture provided to or otherwise reviewed by or discussed with us, we have
been advised by
Table of Contents
The
Special Committee of the Board of Directors
AquaVenture Holdings Limited
December 23, 2019
Page 2
the
management of AquaVenture that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of
AquaVenture as to the future financial performance of AquaVenture.
We
have assumed, with your consent, that the Merger will be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or
agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay, limitation, restriction or condition will be imposed
that would have an adverse effect on AquaVenture or the Merger. Representatives of AquaVenture have advised us, and we further have assumed, that the final terms of the Merger Agreement will not vary
materially from those set forth in the draft reviewed by us. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of
AquaVenture nor have we made any physical inspection of the properties or assets of AquaVenture. Our opinion does not address the underlying business decision of AquaVenture to effect the Merger, the
relative merits of the Merger as compared to any alternative business strategies that might exist for AquaVenture or the effect of any other transaction in which AquaVenture might engage. We also
express no view as to, and our opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees
of any parties to the Merger, or any class of such persons, relative to the Merger Consideration or otherwise. Our opinion is necessarily based upon information available to us, and financial, stock
market and other conditions and circumstances existing, as of the date hereof.
Citigroup
Global Markets Inc. has acted as financial advisor to the Special Committee in connection with the proposed Merger and will receive a fee for such services, a
significant portion of which is contingent upon the consummation of the Merger. We will also receive a fee in connection with the delivery of this opinion. In addition, AquaVenture has agreed to
reimburse our expenses and indemnify us against certain liabilities arising out of our engagement. As you are aware, we and our affiliates in the past have provided, currently are providing and in the
future may provide, investment banking, commercial banking and other similar financial services to AquaVenture unrelated to the proposed Merger, for which services we and such affiliates have received
and expect to receive compensation, including, without limitation, during the two year period prior to the date hereof, having acted as joint bookrunner in connection with an offering of equity
securities of AquaVenture and as a lender in connection with certain loans of AquaVenture. As you are also aware, we and our affiliates in the past have provided, currently are providing and in the
future may provide, investment banking, commercial banking and other similar financial services to Advent International Corporation ("Advent"), an affiliate of Culligan, and its affiliates and
portfolio companies unrelated to the proposed Merger, for which services we and our affiliates have received and expect to receive compensation, including, without limitation, during the two year
period prior to the date hereof, having acted as financial advisor to Advent and certain of its affiliates and portfolio companies in connection with certain M&A activity, as joint bookrunner in
connection with certain initial public offerings and other equity offerings of affiliates and portfolio companies of Advent, and as joint bookrunner and/or joint arranger in connection with certain
bond issuances, loan and credit facility underwritings for Culligan and other affiliates and portfolio companies of Advent and as a lender in connection with certain loans of affiliates and portfolio
companies of Advent. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of AquaVenture, Advent and Culligan and their respective affiliates and, as
applicable, portfolio companies for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities.
B-2
Table of Contents
The
Special Committee of the Board of Directors
AquaVenture Holdings Limited
December 23, 2019
Page 3
In
addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with AquaVenture, Advent, Culligan and their respective affiliates and, as
applicable, portfolio companies.
Our
advisory services and the opinion expressed herein are provided for the information of the Special Committee in its evaluation of the proposed Merger, and our opinion is not intended
to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the proposed Merger.
Based
upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view, to the holders of AquaVenture Ordinary Shares (other than Culligan and its affiliates).
Very
truly yours,
/s/
Citigroup Global Markets Inc.
CITIGROUP
GLOBAL MARKETS INC.
B-3
Table of Contents
|
|
|
|
|
ANNEX C
|
As
of December 23, 2019
The
Special Committee of the Board of Directors
AquaVenture Holdings Limited
c/o Conyers Corporate Services (BVI) Limited
Commerce House, Wickhams Cay 1
P.O. Box 3140 Road Town
British Virgin Islands
Dear
Members of the Special Committee of the Board of Directors of AquaVenture Holdings Limited:
We
understand that AquaVenture Holdings Limited, a business company incorporated under the laws of the British Virgin Islands (the "Company"), is considering a transaction whereby
Culligan International Company, a Delaware corporation ("Acquiror"), will effect a merger involving the Company. Pursuant to the terms of an Agreement and Plan of Merger, draft dated
December 22, 2019 (the "Agreement"), among Acquiror, Amberjack Merger Sub Limited, a business company incorporated under the laws of the British Virgin Islands ("Sub"), and the Company, Sub
will merge with and into the Company, whereby the Company will become a wholly owned subsidiary of Acquiror (the "Transaction"). Pursuant to the terms of the Agreement all of the issued and
outstanding ordinary shares, no par value, of the Company ("Company Shares"), will be converted (subject to certain exceptions as set forth in the Agreement) into the right to receive $27.10 in cash
(the "Consideration").
The
terms and conditions of the Transaction are more fully set forth in the Agreement.
You
have requested our opinion as to the fairness, from a financial point of view, to the holders of the Company Shares of the Consideration to be received by such holders in the
Transaction.
UBS
Securities LLC ("UBS") has acted as financial advisor to the Special Committee of the Board of Directors of the Company in connection with the Transaction and will receive a
fee for its services, a portion of which is payable in connection with this opinion and a significant portion of which is contingent upon consummation of the Transaction. In addition, the Company has
agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. UBS Group AG (the indirect parent of UBS) and its subsidiaries,
branches and affiliates provide a wide range of investment banking, commercial banking and other financial services (including wealth, asset and investment management, corporate finance, municipal
lending solutions, and securities issuing, trading and research). In connection therewith, UBS and/or its affiliates have provided services unrelated to the Transaction to the Company and its
affiliates and/or the Acquiror and its affiliates (including affiliates of each of Advent International Corporation (collectively, "Advent") and Centerbridge Partners, L.P. (collectively,
"Centerbridge")) and received compensation for such services. In particular, since December 1, 2017, UBS has acted with respect to (i) the Company as bookrunner in connection with a
follow on offering of Company Shares, (ii) Advent as (a) financial advisor in connection with the acquisitions of two portfolio companies, and the sale of one portfolio company,
(b) joint bookrunner in connection with the initial public offering of equity securities of a portfolio company, and (c) underwriter in connection with five offerings of debt securities
by four separate portfolio companies, and (iii) Centerbridge as (a) financial advisor in connection with the acquisition of one portfolio company and the sales of two portfolio
companies, and (b) joint bookrunner in connection with an offering of debt securities by a portfolio company. In addition, in the ordinary course of business, UBS, its affiliates and its and
their respective employees may currently own or trade loans, debt and/or equity securities of the Company and/or affiliates of the
Table of Contents
The
Special Committee of the Board of Directors AquaVenture Holdings Limited
As of December 23, 2019
Page 2
Acquiror
(including Advent and Centerbridge) for its own account or for the accounts of customers, and may at any time hold a long or short position in such securities.
Our
opinion does not address the relative merits of the Transaction as compared to other business strategies or transactions that might be available with respect to the Company or the
Company's underlying business decision to effect the Transaction. Our opinion does not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the
Transaction. At your direction, we have not been asked to, nor do we, offer any opinion as to the terms, other than the Consideration to the extent expressly specified herein, of the Agreement or the
form of the Transaction. In addition, we express no opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the
Transaction, or any class of such persons, relative to the Consideration. In rendering this opinion, we have assumed, with your consent, that (i) the final executed form of the Agreement will
not differ in any material respect from the draft that we have reviewed, (ii) the parties to the Agreement will comply with all material terms of the Agreement, and (iii) the Transaction
will be consummated in accordance with the terms of the Agreement without any adverse waiver or amendment of any material term or condition thereof. We also have assumed that all governmental,
regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any material adverse effect on the Company or the Transaction.
In
arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and financial information relating to the Company; (ii) reviewed
certain internal financial information and other data relating to the businesses and financial prospects of the Company that were not publicly available, including financial forecasts and estimates
prepared by the management of the Company that we have been directed to utilize for purposes of our analysis (and which you have approved for such use); (iii) conducted discussions with members
of the senior management of the Company concerning the businesses and financial prospects of the Company; (iv) reviewed publicly available financial and stock market data with respect to
certain other companies we believe to be generally relevant; (v) compared the financial terms of the Transaction with the publicly available financial terms of certain other transactions we
believe to be generally relevant; (vi) reviewed current and historical market prices of Company Shares; (vii) reviewed the Agreement; and (viii) conducted such other financial
studies, analyses and investigations, and considered such other information, as we deemed necessary or appropriate. At your request, we have contacted third parties to solicit indications of interest
in a possible transaction with the Company and held discussions with certain of these parties prior to the date hereof.
In
connection with our review, with your consent, we have assumed and relied upon, without independent verification, the accuracy and completeness in all material respects of the
information provided to or reviewed by us for the purpose of this opinion. In addition, with your consent, we have not made any independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of the Company, nor have we been furnished with any such evaluation or appraisal. With respect to the financial forecasts, estimates, referred to above, we have assumed, at
your direction, that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial
performance of the Company. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information available to us as of, the date hereof. The
issuance of this opinion was approved by an authorized committee of UBS.
Based
upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Consideration to be received by holders of Company Shares in the Transaction is fair, from a
financial point of view, to such holders.
C-2
Table of Contents
The
Special Committee of the Board of Directors AquaVenture Holdings Limited
As of December 23, 2019
Page 3
This
opinion is provided for the benefit of the Special Committee of the Board of Directors of the Company (in its capacity as such) in connection with, and for the purpose of, its
evaluation of the Consideration in the Transaction.
|
|
|
|
|
Very truly yours,
|
|
|
/s/ UBS Securities LLC
|
|
|
UBS SECURITIES LLC
|
C-3
Table of Contents
ANNEX D
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT ("Agreement"), dated as of
December 23, 2019, is made by and between Culligan International Company, a Delaware corporation ("Parent"), and the undersigned holder (the
"Shareholder") of ordinary shares, of no par value, of AquaVenture Holdings Limited, a business company incorporated under the laws of the British Virgin Islands (the
"Company").
WHEREAS, Parent, Amberjack Merger Sub Limited, a business company incorporated under the laws of the British Virgin Islands and a
wholly-owned subsidiary of Parent ("Merger Sub"), and the
Company, concurrently with the signing of this Agreement, are entering into an Agreement and Plan of Merger, dated as of even date herewith (as such agreement may be subsequently amended or modified,
the "Merger Agreement"), providing for the merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent
(the "Merger");
WHEREAS, the Shareholder beneficially owns and has sole or shared voting power with respect to the number of the Company's ordinary
shares, and holds stock options or other rights to acquire beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of the number of the Company's ordinary shares indicated opposite the Shareholder's name on Schedule 1 attached hereto (together with any New
Shares (defined in Section 2 below), the "Shares");
WHEREAS, as an inducement and a condition to the willingness of Parent and Merger Sub to enter into the Merger Agreement, and in
consideration of the substantial expenses incurred and to be incurred by them in connection therewith, the Shareholder has agreed to enter into and perform this Agreement; and
WHEREAS, all capitalized terms used in this Agreement without definition herein shall have the meanings ascribed to them in the Merger
Agreement.
NOW, THEREFORE, in consideration of, and as a condition to, Parent entering into the Merger Agreement and proceeding with the transactions
contemplated thereby, and in consideration of the expenses incurred and to be incurred by Parent in connection therewith, the Shareholder and Parent agree as follows:
1. Agreement to Vote Shares. The Shareholder agrees that, prior to the Expiration
Date (as defined in Section 2 below), at any meeting of the Shareholders of the Company and at any adjournment or postponement thereof, and in connection with any written consent of the
Shareholders of the Company, with respect to the Merger, the Merger Agreement or any Acquisition Proposal, the Shareholder shall:
(a) appear
at such meeting or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum; and
(b) from
and after the date hereof until the Expiration Date, vote (or cause to be voted), or deliver a written consent (or cause a written consent to be delivered) covering
all of the Shares that such Shareholder shall be entitled to so vote: (i) in favor of adoption and approval of the Merger Agreement and all other transactions contemplated by the Merger
Agreement as to which Shareholders of the Company are called upon to vote or consent in favor of any matter necessary for consummation of the Merger and the other transactions contemplated by the
Merger Agreement; (ii) against any action or
agreement that would reasonably be expected to result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of the Company or any of its
Subsidiaries or Affiliates under the Merger Agreement or that would reasonably be expected to result in any of the conditions to the Company's or any of its Subsidiaries or Affiliates' obligations
under the Merger Agreement not being fulfilled; and (iii) against (A) any Acquisition Proposal, (B) any agreement, transaction or other matter that is intended to, or would
reasonably be expected to, impede, interfere with, delay, postpone, discourage or materially and adversely affect the consummation of the Merger and all other
Table of Contents
transactions
contemplated by the Merger Agreement, (C) any reorganization, recapitalization, dissolution or liquidation of the Company or any of its Subsidiaries, (D) any change in the
majority of the board of directors of the Company and (E) any material change in the capitalization of the Company or the Company's corporate structure. The Shareholder shall not take or commit
or agree to take any action inconsistent with the foregoing.
2. Expiration Date. As used in this Agreement, the term "Expiration
Date" shall mean the earlier to occur of (a) the Effective Time, (b) such date and time as the Merger Agreement shall be terminated pursuant to Article VII thereof,
(c) such date and time as (A) any amendment or change to the Merger Agreement is effected without the Shareholder's consent that decreases the Merger Consideration or changes the form of
consideration payable under the Merger Agreement to the Shareholder, or (B) any amendment or change to the Merger Agreement that is not approved by the Board of Directors of the Company is
effected without the Shareholder's consent that materially and adversely affects the Shareholder, or (d) upon mutual written agreement of the parties to terminate this Agreement. Upon
termination or expiration of this Agreement, no party shall have any further obligations or liabilities under this Agreement; provided,
however, such termination or expiration shall not relieve any party from liability for any fraud, willful breach of this Agreement or acts of bad faith prior to
termination hereof.
3. Additional Purchases. The Shareholder agrees that any ordinary shares of the
Company that the Shareholder purchases or with respect to which the Shareholder otherwise acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) after the execution of
this Agreement and prior to the Expiration Date, whether by the exercise of any stock options or otherwise ("New Shares"), shall be subject to the terms and conditions of
this Agreement to the same extent as if they
constituted Shares as of the date hereof and the representation and warranties in Section 5 below shall be true and correct as of the date that beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of such New Shares is acquired. The Shareholder agrees to promptly notify Parent in writing of the nature and amount of any New Shares.
4. Agreement to Retain Shares. From and after the date hereof until the Expiration
Date, the Shareholder shall not, directly or indirectly, (a) sell, assign, transfer, tender, or otherwise dispose of (including, without limitation, the voting rights thereunder or by the
creation of a Lien) or otherwise permit the sale, assignment, transfer, tender or disposition of any Shares (including the voting rights thereunder or by the creation of a Lien), (b) deposit
any Shares into a voting trust or enter into a voting agreement or similar arrangement with respect to such Shares or grant any proxy or power of attorney with respect thereto, (c) enter into
any contract, option, commitment or other arrangement or understanding with respect to the direct or indirect sale, transfer, assignment or other disposition of (including, without limitation, by the
creation of a Lien) any Shares, or (d) take any action that would make any representation or warranty of the Shareholder contained herein untrue or incorrect or have the effect of preventing or
disabling the Shareholder from performing the Shareholder's obligations under this Agreement. Notwithstanding the foregoing, the Shareholder may make (i) transfers by will or by operation of
law or other transfers for estate planning purposes; provided,that, as a precondition to such
transfers, the transferee agrees in a written instrument, reasonably satisfactory in form and substance to Parent, to be bound by all of the terms of this Agreement, and (ii) as Parent may
otherwise agree in writing in its sole and absolute discretion.
5. Representations and Warranties of the Shareholder. The Shareholder hereby
represents and warrants to Parent as follows:
(a) the
Shareholder has the full power and authority to execute and deliver this Agreement and to perform the Shareholder's obligations hereunder;
(b) this
Agreement (assuming this Agreement constitutes a valid and binding agreement of Parent) has been duly executed and delivered by or on behalf of the Shareholder and
constitutes a
D-2
Table of Contents
valid
and binding agreement with respect to the Shareholder, enforceable against the Shareholder in accordance with its terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally;
(c) the
Shareholder beneficially owns the number of Shares indicated opposite such Shareholder's name on Schedule 1 free and clear of any
Liens, and has sole or shared, and otherwise unrestricted, voting power with respect to such Shares and none of the Shares are subject to any voting trust or other agreement, arrangement, or
restriction with respect to the voting of the Shares, except as contemplated by this Agreement;
(d) the
execution and delivery of this Agreement by the Shareholder does not, and the performance by the Shareholder of his or her obligations hereunder and the compliance
by the Shareholder with any provisions hereof will not, violate or conflict with, result in a material breach of or constitute a default (or an event that with notice or lapse of time or both would
become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any Shares pursuant to, any agreement,
instrument, note, bond, mortgage, contract, lease, license, permit or other obligation or any order, arbitration award, judgment or decree to which the Shareholder is a party or by which the
Shareholder is bound, or any law, statute, rule or regulation to which the Shareholder is subject or, in the event that the Shareholder is a corporation, partnership, trust or other entity, any bylaw
or other organizational document of the Shareholder; and
(e) the
execution and delivery of this Agreement by the Shareholder does not, and the performance of this Agreement by the Shareholder does not and will not, require any
consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority by the Shareholder except for applicable requirements, if any, of the
Exchange Act, and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the
Shareholder of his obligations under this Agreement in any material respect.
6. Irrevocable Proxy. Subject to the last sentence of this Section 6, by
execution of this Agreement, the Shareholder does hereby irrevocably and the fullest extent permitted by law appoint Parent with full power of substitution and resubstitution, as the Shareholder's
true and lawful attorney and irrevocable proxy, to the fullest extent of the Shareholder's rights with respect to the Shares, to vote each of such Shares, or to execute a written consent, solely with
respect to the matters set forth in Section 1 hereof. The Shareholder intends this proxy to be irrevocable and coupled with an interest hereunder until the Expiration Date and hereby revokes
any proxy previously granted by the Shareholder with respect to the Shares. Notwithstanding anything contained herein to the contrary, this irrevocable proxy shall automatically terminate upon the
Expiration Date of this Agreement. The Shareholder hereby revokes any proxies previously granted, and represents that none of such previously-granted proxies are irrevocable.
7. No Solicitation. From and after the date hereof until the Expiration Date,
Shareholder shall not: (a) solicit, initiate or knowingly encourage (including by way of furnishing non-public information or other assistance), or take other action to facilitate, any
inquiries or the making of any proposal that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal, (b) participate in any
discussions or negotiations regarding, or that would reasonably be expected to lead to, an Acquisition Proposal, (c) endorse, approve or enter into any agreement with respect to an Acquisition
Proposal (other than the Merger Agreement), (d) solicit proxies, become a "participant" in a "solicitation" or take any action to facilitate a "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act) with respect to an Acquisition Proposal (other than the Merger Agreement), (e) initiate a Shareholders' vote or action by consent of the Company's
Shareholders with respect to an Acquisition
D-3
Table of Contents
Proposal,
(f) except by reason of this Agreement, become a member of a "group" (as such term is used in Rule 13d-5(b)(1) of the Exchange Act) with respect to any voting securities of the
Company that takes any action in support of an Acquisition Proposal or (g) knowingly take any action that would result in the revocation or invalidation of the proxy contemplated by this
Agreement.
8. Waiver of Appraisal Rights. The Shareholder hereby waives, and agrees not to
exercise or assert, any appraisal rights under the BVI Act in connection with the Merger.
9. No Limitation on Discretion as Director or Fiduciary. Notwithstanding anything
herein to the contrary, the covenants and agreements set forth herein shall not prevent the Shareholder, if the Shareholder is serving on the Board of Directors of the Company, from exercising his
duties and obligations as a director of the Company or otherwise taking any action, subject to compliance with the applicable provisions of the Merger Agreement, while acting in such capacity as a
director of the Company. The Shareholder is executing this Agreement solely in his capacity as a Shareholder.
10. Specific Performance. The parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement was not performed in accordance with the terms hereof or was otherwise breached. It is accordingly agreed that the parties shall be entitled to
specific performance hereunder, including, without limitation, an injunction or injunctions to prevent and enjoin breaches of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, in any state or federal court in any competent jurisdiction, in addition to any other remedy to which they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to any such remedy are hereby waived.
11. Further Assurances. The Shareholder shall, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
12. Notice. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent in accordance with Section 8.4 of the Merger Agreement and to each Shareholder
at its address set forth on Schedule 1 attached hereto (or at such other address for a party as shall be specified by like notice).
13. Severability. If any term or other provision of this Agreement is determined 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 materially adverse to any party. 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 as closely as possible to
the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
14. Binding Effect and Assignment. All of the covenants and agreements contained in
this Agreement shall be binding upon, and inure to the benefit of, the respective parties and their permitted successors, assigns, heirs, executors, administrators and other legal representatives, as
the case may be. This Agreement may not be assigned by any party hereto without the prior written consent of the other party hereto; provided,however, that, notwithstanding the
foregoing, Parent may assign its rights and obligations under this Agreement to any Subsidiary.
15. No Waivers. No waivers of any breach of this Agreement extended by Parent to
the Shareholder shall be construed as a waiver of any rights or remedies of Parent with respect to any other Shareholder of the Company who has executed an agreement substantially in the form of this
D-4
Table of Contents
Agreement
with respect to Shares held or subsequently held by such Shareholder or with respect to any subsequent breach of the Shareholder or any other such Shareholder of the Company. No waiver of
any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such
party.
16. Governing Law; Jurisdiction and Venue. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard to its rules of conflict of laws. The parties hereto hereby irrevocably and unconditionally consent to and submit to the
exclusive jurisdiction of the courts located in the Borough of Manhattan, City of New York and of the United States of America located in such state (the "New York
Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agree not to commence any litigation
relating thereto except in such courts), waive any objection to the laying of venue of any such litigation in the New York Courts and agree not to plead or claim in any New York Court that such
litigation brought therein has been brought in any inconvenient forum.
17. Waiver of Jury Trial. The parties hereto hereby waive any right to trial by
jury with respect to any action or proceeding related to or arising out of this Agreement, any document executed in connection herewith and the matters contemplated hereby and thereby.
18. No Agreement Until Executed. Irrespective of negotiations among the parties or
the exchanging of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until
(a) the Board of Directors of the Company has approved, for purposes of any applicable anti-takeover laws and regulations, and any applicable provision of the Company's memorandum of
association and articles of association, each as amended, the transactions contemplated by the Merger Agreement and (b) this Agreement is executed by all parties hereto.
19. Attorney's Fees. If any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party may be entitled).
20. Certain Adjustments. In the event of a stock split, stock dividend or
distribution, or any change in the ordinary shares of the Company by reason of any split-up, reverse stock split, recapitalization, combination, reclassification, exchange of shares or the like, the
term Shares shall be deemed to refer to and include such shares as well as all such stock dividends and distributions and any securities into which any or all of such shares are changed or exchanged
or which have been received in such transaction.
21. Entire Agreement; Amendment. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may
not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto.
22. Effect of Headings. The section headings herein are for convenience only and
shall not affect the construction of interpretation of this Agreement.
23. Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute one and the same instrument.
[Signature
Page Follows Next]
D-5
Table of Contents
EXECUTED as of the date first above written.
|
|
|
|
|
|
|
|
|
CULLIGAN INTERNATIONAL COMPANY
|
|
|
By:
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
Title:
|
|
|
[Signature
Page to Voting Agreement]
Table of Contents
SCHEDULE 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder & Address
|
|
|
|
Ordinary Shares
|
|
|
|
Options
|
|
|
|
Restricted Share Units
|
|
|
|
Phantom Share Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[NAME]
|
|
|
|
[·]
|
|
|
|
[·]
|
|
|
|
[·]
|
|
|
|
[·]
|
|
|
|
|
[ADDRESS]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters heres how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 by 11:59 P.M., (Eastern Time), on March 15, 2020. Online GIof ntoo welwewct.rinovneicstvoortviontge,.com/WAAS or scan delete QR code and control # the QR code login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/WAAS Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + For Against Abstain For Against Abstain 1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger (including a form of the plan of merger which is included as an exhibit thereto), dated as of December 23, 2019, among Culligan International Company, a Delaware corporation (Parent), Amberjack Merger Sub Limited, a business company incorporated under the laws of the British Virgin Islands and a wholly-owned subsidiary of Parent, and AquaVenture Holdings Limited, a business company incorporated under the laws of the British Virgin Islands (as it may be amended from time to time, the merger agreement). 2. To approve one or more adjournments of the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature within the box. MMMMMMM C 1234567890 J N T 4 6 1 3 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 0 2 D M 4 036CYE MMMMMMMMM B Authorized Signatures This section must be completed for your vote to count. Please date and sign below. A Proposals The Board of Directors recommend a vote FOR Proposals 1 and 2. Special Meeting Proxy Card1234 5678 9012 345
q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Notice of Special Meeting of Shareholders Monday, March 16, 2020, 8:00 a.m. Eastern Time Marriott Downtown at CF Toronto Eaton Centre 525 Bay Street Toronto, Ontario M5G 2L2 Proxy Solicited by Board of Directors for Special Meeting Anthony Ibarguen and Lee Muller, or either of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Special Meeting of Shareholders of AquaVenture Holdings Limited to be held on Monday, March 16, 2020 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted and, if a shareholder specifies a choice for any matter to be acted upon at the meeting, will be voted in accordance with the specifications made. If no such directions are indicated, Messrs. Ibarguen and Muller will have authority to vote FOR Proposals 1 and 2. In their discretion, Messrs. Ibarguen and Muller are authorized to vote upon such other business as may properly come before the meeting. Change of Address Please print new address below. Comments Please print your comments below. Meeting Attendance Mark box to the right if you plan to attend the Special Meeting. + C Non-Voting Items Proxy - AquaVenture Holdings Limited Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/WAAS