PRIVILEGED AND CONFIDENTIAL FOR DISCUSSION PURPOSES ONLY
AGREEMENT AND PLAN OF MERGER
by and among
CLOUDIUM TECHNOLOGIES PLC,
STRATOS MERGER SUB INC.,
and
SOLARA DIGITAL INFRASTRUCTURE FUND VI LP
Dated as of [●], 2024
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of [●], 2024, by and among:
(1) Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales (Company No. 09734521), with its registered office at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its United States headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103 (the "Company");
(2) Stratos Merger Sub Inc., a corporation organized under the laws of the State of Delaware, with its registered office at 1209 Orange Street, Wilmington, Delaware 19801 ("Merger Sub"); and
(3) Solara Digital Infrastructure Fund VI LP, a limited partnership organized under the laws of the State of Delaware, with its principal offices at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801 ("Parent").
Each of the Company, Merger Sub, and Parent is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Parent is a Delaware limited partnership, the general partner of which is Solara Fund VI GP LLC, a Delaware limited liability company ("Parent GP");
WHEREAS, Merger Sub is a corporation organized under the laws of the State of Delaware and a direct, wholly owned subsidiary of Parent, formed solely for the purpose of effecting the Merger (as defined below), and has not conducted any activities other than those incidental to its formation and the transactions contemplated by this Agreement;
WHEREAS, the Company is a public limited company incorporated under the laws of England and Wales, with its shares of common stock (the "Company Common Stock") listed on the Nasdaq Global Select Market under the ticker symbol "CLDM," and, as of the date hereof, there are 184,200,000 shares of Company Common Stock issued and outstanding;
WHEREAS, the respective boards of directors or other governing bodies of each of Parent (acting through Parent GP), Merger Sub, and the Company have (i) determined that the merger of Merger Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law (the "DGCL"), is advisable, fair to, and in the best interests of their respective stockholders, members, or partners, as applicable, and (ii) approved the execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions set forth herein;
WHEREAS, in the Merger, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares, Dissenting Shares, and Rollover Shares, each as defined herein) will be converted into the right to receive $36.92 per share in cash, without interest (the "Per Share Merger Consideration"), subject to the adjustments set forth in Section 2.7 hereof, representing an aggregate equity value of approximately $6,800,000,000 (the "Deal Value");
WHEREAS, concurrently with the execution and delivery of this Agreement, Parent is entering into rollover agreements (each, a "Rollover Agreement" and, collectively, the "Rollover Agreements") with Jonathan Hargrove and Pinnacle Growth Ventures LLC (each, a "Rollover Participant" and, collectively, the "Rollover Participants"), pursuant to which certain shares of Company Common Stock will be contributed to Parent (or its designee) in exchange for equity interests in the Surviving Corporation (as defined below), as more fully described in the Rollover Agreements; provided that the Rollover Participants shall receive the same class of equity interests in the Surviving Corporation;
WHEREAS, Parent has obtained committed debt financing from Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC, as more fully described in the Debt Commitment Letter (as defined herein), and will fund the equity contribution as more fully described in the Equity Commitment Letter (as defined herein), in each case on the terms and subject to the conditions set forth therein; Parent acknowledges that the sufficiency of the Financing shall not be a condition to the consummation of the Merger;
WHEREAS, as a condition to, and an inducement for, Parent's willingness to enter into this Agreement, concurrently with the execution and delivery hereof, certain stockholders of the Company are entering into Voting and Support Agreements (the "Voting Agreements") with Parent, pursuant to which such stockholders have agreed, among other things, to vote their shares of Company Common Stock in favor of the adoption of this Agreement;
WHEREAS, Parent intends to obtain, prior to the Closing, a buyer-side representation and warranty insurance policy (the "R&W Insurance Policy") in connection with the transactions contemplated hereby, on the terms and subject to the conditions described in Section 6.15; the R&W Insurance Policy shall contain a full waiver of subrogation against the Company, its Subsidiaries, and their respective current and former directors, officers, and employees, except in the case of by such Person; and
WHEREAS, the Parties intend that the Merger shall be treated for United States federal income tax purposes as described in Article IX and Article X hereof.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants, representations, warranties, and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acceptable Confidentiality Agreement" means a confidentiality agreement between the Company and any Third Party that contains terms and conditions that are no less favorable to the Company than those contained in the NDA between Parent and the Company dated September 5, 2023, including (it being understood that such confidentiality agreement need not contain any provision that would prohibit the making or amendment of any Acquisition Proposal).
"Acquisition Proposal" means any inquiry, proposal, or offer from any Person or group of Persons (other than Parent, Merger Sub, or any of their respective Affiliates) relating to, in a single transaction or a series of related transactions: (i) any merger, consolidation, business combination, reorganization, recapitalization, or other similar transaction involving the Company or any of its Subsidiaries; (ii) any direct or indirect acquisition of assets (including equity securities of any Subsidiary) constituting twenty percent (20%) or more of the consolidated assets of the Company and its Subsidiaries, taken as a whole, or to which twenty percent (20%) or more of the revenues or earnings of the Company and its Subsidiaries, taken as a whole, are attributable; (iii) any direct or indirect acquisition of twenty percent (20%) or more of the outstanding shares of Company Common Stock or other equity securities of the Company; (iv) any tender offer or exchange offer that, if consummated, would result in any Person or group of Persons beneficially owning twenty percent (20%) or more of the outstanding shares of Company Common Stock; or (v) any combination of the foregoing, in each case, other than the transactions contemplated by this Agreement.
"Adverse Recommendation Change" has the meaning set forth in Section 6.4(d).
"Affiliate" means, with respect to any specified Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Aggregate Merger Consideration" means an amount in cash equal to the product of (i) the Per Share Merger Consideration multiplied by (ii) the total number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, excluding Excluded Shares, Dissenting Shares, and Rollover Shares.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) any other day on which commercial banks in New York, New York, London, England, or Wilmington, Delaware are authorized or required by Law to close.
"Burdensome Condition" has the meaning set forth in Section 6.5(e).
"Certificate of Merger" has the meaning set forth in Section 2.3.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
"Company Board" means the board of directors of the Company.
"Company Board Recommendation" has the meaning set forth in Section 6.3(b).
"Company Common Stock" means the common stock, par value $0.001 per share, of the Company.
"Company Disclosure Schedules" means the disclosure schedules delivered by the Company to Parent and Merger Sub concurrently with the execution and delivery of this Agreement, which disclosure schedules are arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in Article IV of this Agreement.
"Company Material Adverse Effect" has the meaning set forth in Section 1.1(a).
"Company Stockholder Meeting" has the meaning set forth in Section 6.3(a).
"Company Subsidiary" or "Subsidiaries" means, with respect to the Company, any corporation, partnership, limited liability company, joint venture, or other entity of which the Company directly or indirectly owns or controls a majority of the outstanding voting securities or equity interests, including, without limitation, (i) Cloudium Technologies UK Ltd. (Company No. 11287456, England and Wales), (ii) Cloudium Technologies India Pvt. Ltd. (Karnataka, India), and (iii) Cloudium Solutions GmbH (Berlin, Germany), and each other entity set forth on Schedule 4.3.
"Deal Value" means $6,800,000,000.
"Debt Commitment Letter" has the meaning set forth in Section 5.7(a).
"Debt Financing" means the debt financing contemplated by the Debt Commitment Letter.
"DGCL" means the General Corporation Law of the State of Delaware.
"Dissenting Shares" means shares of Company Common Stock held by stockholders who have properly demanded and perfected appraisal rights in accordance with Section 262 of the DGCL and have not effectively withdrawn or lost such rights prior to the Effective Time.
"Effective Time" has the meaning set forth in Section 2.3.
"Environmental Law" means any Law relating to pollution, the protection of the environment or natural resources, human health and safety (as it relates to exposure to Hazardous Materials), or the generation, use, storage, treatment, transport, release, or disposal of Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), and all analogous state, local, and foreign Laws.
"Equity Commitment Letter" has the meaning set forth in Section 5.7(b).
"Equity Financing" means the equity financing contemplated by the Equity Commitment Letter.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
"Escrow Agent" means Cobalt Trust Company, in its capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" has the meaning set forth in Section 2.10.
"Escrow Amount" means $544,000,000 (representing eight percent (8%) of the Deal Value).
"Escrow Fund" means the Escrow Amount deposited with the Escrow Agent at the Closing pursuant to the Escrow Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Exchange Fund" has the meaning set forth in Section 3.2(b).
"Excluded Shares" means shares of Company Common Stock held (i) by the Company (as treasury stock), (ii) by Parent, Merger Sub, or any of their respective wholly owned Subsidiaries, or (iii) by any wholly owned Subsidiary of the Company, in each case immediately prior to the Effective Time.
"Final Closing Statement" has the meaning set forth in Section 2.7.
"Financing" means, collectively, the Debt Financing and the Equity Financing.
"Financing Sources" means the entities that have committed to provide, or that otherwise have entered into agreements in connection with, the Financing or any alternative financing arrangements in connection with the transactions contemplated by this Agreement, including Meridian Atlantic Bank, N.A., Ironclad Capital Markets LLC, and their respective Affiliates, successors, and assigns, and their respective officers, directors, employees, agents, and representatives.
"FIRPTA" means Sections 897 and 1445 of the Code.
"Fundamental Representations" means the representations and warranties set forth in Section 4.1 (Organization, Good Standing, and Qualification), Section 4.2 (Capitalization), Section 4.4 (Authority; Due Authorization), Section 4.23 (Brokers and Finders), Section 5.1 (Organization, Good Standing, and Qualification), Section 5.2 (Authority; Due Authorization), and Section 5.8 (Brokers and Finders).
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time, applied on a consistent basis throughout the periods involved.
"General Cap" has the meaning set forth in Section 9.5(a).
"Governmental Authority" means any federal, state, local, foreign, or supranational government or governmental authority, regulatory or administrative agency, commission, court, tribunal, or arbitral body, or self-regulatory organization, including, without limitation, the U.S. Securities and Exchange Commission (the "SEC"), the U.S. Federal Trade Commission (the "FTC"), the U.S. Department of Justice (the "DOJ"), the UK Competition and Markets Authority (the "CMA"), the U.S. Internal Revenue Service (the "IRS"), the Nasdaq Stock Market LLC, the UK Financial Conduct Authority, and any similar body in any applicable jurisdiction.
"Hazardous Materials" means any substance, material, waste, pollutant, or contaminant that is listed, defined, designated, or classified as hazardous, toxic, radioactive, or otherwise regulated pursuant to any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" means a Person entitled to indemnification under Article IX.
"Indemnifying Party" means a Person required to provide indemnification under Article IX.
"intellectual Property" means all intellectual property and proprietary rights, including all: (i) patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, divisions, revisions, extensions, and re-examinations thereof; (ii) trademarks, service marks, trade names, brand names, trade dress, logos, slogans, domain names, and social media handles, together with all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith; (iii) copyrights, including copyrights in computer software, and all applications, registrations, and renewals in connection therewith; (iv) trade secrets, know-how, inventions, processes, techniques, methodologies, algorithms, data, databases, and other confidential or proprietary information; and (v) all other intellectual property rights recognized under any applicable Law.
"Intervening Event" has the meaning set forth in Section 6.4(f).
"Knowledge" means, with respect to the Company, the actual knowledge of Jonathan Hargrove (Chief Executive Officer), Sienna Whitfield (Chief Financial Officer), and Nadia Chowdhury (General Counsel). With respect to Parent or Merger Sub, "Knowledge" means the actual knowledge (after reasonable inquiry of their respective direct reports) of Marcus Elliston (Managing Partner) and Priya Narasimhan (Co-Managing Partner).
"Law" means any statute, law, ordinance, rule, regulation, code, order, judgment, writ, decree, injunction, directive, guideline, policy, or other legally binding requirement of any Governmental Authority, whether federal, state, local, foreign, or supranational.
"Letter of Transmittal" has the meaning set forth in Section 3.2(b).
"Lien" means any mortgage, lien, pledge, charge, security interest, encumbrance, claim, easement, restriction on transfer, option, right of first refusal, preemptive right, or other similar restriction or limitation of any kind or nature.
"Limited Guarantee" has the meaning set forth in Section 5.7(c).
"Losses" means any and all damages, losses, liabilities, obligations, penalties, fines, judgments, claims, demands, deficiencies, costs, and expenses (including reasonable attorneys' fees and disbursements and costs of investigation and litigation), whether or not arising from any third-party claim; provided that "Losses" shall include direct, consequential, and incidental damages but shall not include punitive or speculative damages.
"Material Adverse Effect" or "Company Material Adverse Effect" has the meaning set forth in Section 1.1(a).
"Material Contracts" has the meaning set forth in Section 4.17.
"Merger" has the meaning set forth in the Recitals.
"Merger Consideration" means the Per Share Merger Consideration.
"Merger Sub" has the meaning set forth in the Preamble.
"NDA" means the Confidentiality Agreement, dated September 5, 2023, between Parent and the Company, as the same may have been amended, modified, or supplemented from time to time.
"Outside Date" means (as such date may be extended pursuant to Section 8.1(b)).
"Parent" has the meaning set forth in the Preamble.
"Parent GP" means Solara Fund VI GP LLC, a Delaware limited liability company, in its capacity as the general partner of Parent.
"Parent Indemnified Parties" has the meaning set forth in Section 9.2.
"Parent Material Adverse Effect" means any event, change, circumstance, occurrence, effect, development, condition, or state of facts that, individually or in the aggregate, would prevent or materially delay or materially impair the ability of Parent or Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement.
"Paying Agent" means Cobalt Trust Company, or such other agent as may be reasonably agreed by Parent and the Company.
"Per Share Merger Consideration" means $36.92 per share in cash, without interest.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (ii) mechanics', carriers', workmen's, repairmen's, warehousemen's, or other like Liens arising in the ordinary course of business; (iii) pledges or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance, and other social security legislation; (iv) easements, covenants, conditions, restrictions, and other similar matters of record that do not materially impair the use or occupancy of the affected property; (v) zoning, building codes, and other land use Laws regulating the use or occupancy of real property; and (vi) Liens arising under this Agreement.
"Person" means an individual, corporation, partnership, limited partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority, or other entity.
"Proxy Statement" has the meaning set forth in Section 6.3(a).
"R&W Insurance Policy" has the meaning set forth in Section 6.15.
"Representatives" means, with respect to any Person, such Person's directors, officers, employees, agents, advisors (including financial advisors, legal counsel, and accountants), and other representatives.
"Reverse Termination Fee" has the meaning set forth in Section 8.3(b).
"Rollover Agreement" means each of the rollover agreements, substantially in the forms attached hereto as Exhibit F and Exhibit G, respectively, entered into by Jonathan Hargrove and Pinnacle Growth Ventures LLC, respectively, with Parent (or its designee) concurrently with the execution and delivery of this Agreement.
"Rollover Equity" means, collectively, the equity contributed (or to be contributed) to Parent (or its designee) pursuant to the Rollover Agreements, having an aggregate value of approximately $616,055,952.
"Rollover Participant" means each of Jonathan Hargrove and Pinnacle Growth Ventures LLC.
"Rollover Shares" means the shares of Company Common Stock that are subject to, and will be contributed pursuant to, the Rollover Agreements.
"SEC" means the U.S. Securities and Exchange Commission.
"Special Indemnity" means indemnification obligations arising from (i) fraud or willful breach, (ii) Tax indemnities, and (iii) the matters set forth on Schedule 9.5(d).
"Stockholder Approval" means the approval and adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon at the Company Stockholder Meeting (or any adjournment or postponement thereof).
"Stockholder Representative" means Douglas Pemberton, in his capacity as the representative of the former stockholders of the Company for the purposes set forth in the Escrow Agreement and this Article IX.
"Superior Proposal" has the meaning set forth in Section 6.4(g).
"Survival Period" has the meaning set forth in Section 9.1.
"Surviving Corporation" means the Company, as the surviving corporation in the Merger.
"Tax" or "Taxes" means any and all federal, state, local, foreign, or supranational income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, report, declaration, claim for refund, information return, or statement relating to Taxes, including any schedule or attachment thereto, and any amendment thereof.
"Termination Fee" has the meaning set forth in Section 8.3(a).
"Transaction Expenses" means all out-of-pocket costs, fees, and expenses incurred or payable by any of the Parties or their respective Affiliates in connection with the transactions contemplated by this Agreement, including (i) all filing fees under the HSR Act, the CMA, and other regulatory filings, (ii) all fees and expenses of investment bankers, financial advisors, legal counsel, accountants, consultants, and other advisors, (iii) all fees and expenses relating to the Financing, and (iv) all other transaction-related costs and expenses.
"Transfer Agent" means Cascade Corporate Services Inc., in its capacity as the transfer agent and registrar for the Company Common Stock.
"Voting Agreements" means the Voting and Support Agreements, entered into concurrently with the execution and delivery of this Agreement, by and between Parent and each of Jonathan Hargrove and Pinnacle Growth Ventures LLC, substantially in the form attached hereto as Exhibit H.
Section 1.1(a) — Definition of "Material Adverse Effect"
"Company Material Adverse Effect" means any event, change, circumstance, occurrence, effect, development, condition, or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the business, assets, liabilities, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the Company to consummate the Merger and the other transactions contemplated by this Agreement; provided, however, that, for purposes of clause (i), none of the following, either alone or in combination, shall be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect:
(A) changes in general economic, financial, credit, or securities market conditions (including changes in prevailing interest rates, exchange rates, credit markets, commodity prices, or any failure of any financial institution);
(B) changes or conditions generally affecting the industries or markets in which the Company and its Subsidiaries operate, including the cloud computing, software-as-a-service, and digital infrastructure industries;
(C) changes in applicable Law or in GAAP (or other applicable accounting principles) or any interpretation thereof by any Governmental Authority, including the SEC;
(D) changes resulting from any pandemic, epidemic, disease outbreak, or public health emergency (including COVID-19 or any variant, mutation, or evolution thereof), or any actions taken by any Governmental Authority in response thereto, including quarantine, social distancing, shelter-in-place, shut-down, closure, sequester, safety, or similar Law, directive, guideline, or recommendation;
(E) changes resulting from any act of war (whether or not declared), armed hostility, sabotage, terrorism, military action, insurrection, or cyber-attack, or any escalation or worsening of any of the foregoing, including any response thereto by any Governmental Authority;
(F) changes in any Law, regulation, directive, or policy of any Governmental Authority (including changes in Tax Law or the interpretation thereof);
(G) changes resulting from the announcement, execution, delivery, or pendency of this Agreement or the transactions contemplated hereby, including the impact on relationships with customers, suppliers, vendors, partners, employees, labor unions, financing sources, landlords, licensors, licensees, or Governmental Authorities, and including any changes resulting from the identity of, or any facts or circumstances relating to, Parent, Merger Sub, or any of their respective Affiliates (it being understood that this clause (G) shall not apply for purposes of Section 4.5);
(H) changes resulting from any action required to be taken by the Company or any of its Subsidiaries pursuant to the express terms of this Agreement, or any action taken at the prior written request or with the prior written consent of Parent;
(I) any failure by the Company or any of its Subsidiaries to meet any internal or published industry analyst projections, forecasts, budgets, milestones, or estimates of revenue, earnings, cash flow, or other financial or operating metrics for any period (it being understood that the underlying facts, circumstances, or events giving rise to or contributing to such failure may, to the extent not otherwise excluded by clauses (A) through (H) or (J), be considered in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur); and
(J) changes in the market price or trading volume of the Company Common Stock on the Nasdaq Global Select Market (it being understood that the underlying facts, circumstances, or events giving rise to or contributing to such changes may, to the extent not otherwise excluded by clauses (A) through (I), be considered in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur);
(K) changes resulting from any natural disaster, weather event, force majeure event, or act of God; provided that, for purposes of this clause (K), the effects thereof shall not be excluded to the extent they have a disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole, relative to other participants in the industries and geographies in which the Company and its Subsidiaries operate;
provided, further, that, with respect to clauses (A) through (F) , such events, changes, circumstances, occurrences, effects, developments, conditions, or states of facts shall be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that they disproportionately affect the Company and its Subsidiaries, taken as a whole, relative to other participants operating in the industries and geographies in which the Company and its Subsidiaries operate.
Section 1.2 — Rules of Construction
Unless the context of this Agreement otherwise requires:
(a) Words of any gender include each other gender.
(b) Words using the singular or plural number also include the plural or singular number, respectively.
(c) The terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement.
(d) The terms "Article," "Section," "Schedule," and "Exhibit" refer to the specified Article, Section, Schedule, or Exhibit of or to this Agreement, unless otherwise specified.
(e) The word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified.
(f) The word "or" shall not be exclusive.
(g) The word "extent" in the phrase "to the extent" means the degree to which a subject or other thing extends, and such phrase shall not mean simply "if."
(h) References to "$" or "dollars" mean United States dollars.
(i) References to any Person include such Person's successors and permitted assigns.
(j) References to any Law shall be deemed to refer to such Law as amended from time to time and to any rules, regulations, or guidance promulgated thereunder, unless the context requires otherwise.
(k) References to "days" shall mean calendar days unless otherwise specified as "Business Days."
(l) The table of contents and headings set forth in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
(m) The Parties have participated jointly in the negotiation and drafting of this Agreement; in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision.
ARTICLE II — THE MERGER
Section 2.1 — The Merger
Upon the terms and subject to the conditions of this Agreement, and in accordance with the applicable provisions of the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company in a reverse triangular merger (the "Merger"). As a result of the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware as a wholly owned subsidiary of Parent.
Section 2.2 — Closing
The closing of the Merger (the "Closing") shall take place on the second (2nd) Business Day after the satisfaction or waiver (to the extent permitted by applicable Law) of the last of the conditions set forth in Article VII to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), or on such other date as Parent and the Company shall mutually agree in writing. The Closing shall occur at 10:00 a.m., Eastern Time, at the offices of Calderwood & Harkness LLP, 599 Lexington Avenue, New York, New York 10022, or remotely by electronic exchange of documents and signatures, as may be mutually agreed by the Parties. The date on which the Closing actually occurs is referred to herein as the "Closing Date."
Section 2.3 — Effective Time
On the Closing Date, the Parties shall cause a certificate of merger (the "Certificate of Merger"), in substantially the form attached hereto as Exhibit A, to be duly executed, acknowledged, and filed with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such later date and time as may be agreed upon by the Parties in writing and specified in the Certificate of Merger (the date and time at which the Merger becomes effective, the "Effective Time").
Section 2.4 — Effects of the Merger
The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL, including Sections 259, 260, and 261 thereof. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, immunities, powers, and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, and duties of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, and duties of the Surviving Corporation.
Section 2.5 — Certificate of Incorporation of the Surviving Corporation
At the Effective Time, the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as set forth in Exhibit B hereto, and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms, the DGCL, and this Agreement.
Section 2.6 — Bylaws of the Surviving Corporation
At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation, in substantially the form set forth in Exhibit C hereto, until thereafter amended in accordance with their terms, the certificate of incorporation of the Surviving Corporation, and applicable Law; provided that references to the name of Merger Sub shall be replaced with the name of the Surviving Corporation.
Section 2.7 — Post-Closing Purchase Price Adjustment
(a) Final Closing Statement. Within forty-five (45) days following the Closing Date, the Company (as directed by Parent) shall prepare and deliver to the Stockholder Representative a statement (the "Final Closing Statement") setting forth the Company's good-faith calculation of: (i) the Closing Date net working capital (calculated in accordance with the methodology and definitions set forth on Schedule 2.7); (ii) the Closing Date cash; (iii) the Closing Date indebtedness; and (iv) the Closing Date transaction expenses. The Final Closing Statement shall include reasonable supporting detail for each line item and shall be prepared in accordance with GAAP applied on a basis consistent with the preparation of the audited financial statements of the Company for the fiscal year ended September 30, 2023.
(b) Review Period. The Stockholder Representative shall have days after receipt of the Final Closing Statement (the "Review Period") to review the Final Closing Statement. During the Review Period, Parent shall provide the Stockholder Representative and its Representatives with reasonable access to the books, records, work papers, and personnel of the Company and its Subsidiaries to the extent reasonably necessary for the Stockholder Representative's review of the Final Closing Statement. If the Stockholder Representative disagrees with any item set forth in the Final Closing Statement, the Stockholder Representative shall, on or before the last day of the Review Period, deliver to Parent a written notice of dispute (a "Dispute Notice") setting forth in reasonable detail the items in dispute and the Stockholder Representative's proposed amounts for each such disputed item. If the Stockholder Representative does not deliver a Dispute Notice within the Review Period, the Final Closing Statement as delivered by Parent shall be deemed final and binding upon the Parties.
(c) Resolution of Disputes. If a Dispute Notice is timely delivered, the Parties shall attempt in good faith to resolve any disputed items within fifteen (15) days after delivery of the Dispute Notice. If the Parties are unable to resolve any disputed items within such fifteen (15)-day period, such unresolved disputed items shall be submitted for resolution to an independent nationally recognized accounting firm mutually agreed upon by Parent and the Stockholder Representative (or, failing such agreement within ten (10) days after the expiration of such fifteen (15)-day period, selected by the American Arbitration Association) (the "Independent Accounting Firm"), which shall be instructed to determine only the items in dispute and to render a written determination within thirty (30) days after such submission. The determination of the Independent Accounting Firm shall be final and binding upon the Parties, absent manifest error or fraud. The costs and expenses of the Independent Accounting Firm shall be borne by the non-prevailing party, as determined by reference to which party's position on the aggregate disputed amount is closer to the final determination of the Independent Accounting Firm.
(d) Payment of Adjustments. Any adjustments determined pursuant to this Section 2.7 shall be paid to or from the Escrow Fund as appropriate. In the event the Escrow Fund is insufficient to satisfy any adjustment payable to the Parent Indemnified Parties, such additional amounts shall be paid by wire transfer of immediately available funds within five (5) Business Days of the final determination of the Final Closing Statement.
Section 2.8 — Directors and Officers of the Surviving Corporation
(a) Directors. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal.
(b) Officers. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal.
ARTICLE III — MERGER CONSIDERATION; CONVERSION OF SHARES; EXCHANGE PROCEDURES
Section 3.1 — Conversion of Shares
At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, Parent, or any holder of shares of Company Common Stock or shares of common stock of Merger Sub:
(a) Company Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares, Dissenting Shares, and Rollover Shares) shall be automatically converted into the right to receive $36.92 in cash, without interest (the "Per Share Merger Consideration"). As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (or book-entry share) representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Per Share Merger Consideration upon surrender of such certificate (or book-entry share) in accordance with Section 3.2, without interest.
(b) Excluded Shares. Each Excluded Share shall, by virtue of the Merger and without any action on the part of any Person, be automatically canceled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.
(c) Rollover Shares. Each Rollover Share shall be treated in accordance with the terms and conditions of the applicable Rollover Agreement (consistent with the terms of the Rollover Agreements) and shall not be converted into the right to receive the Per Share Merger Consideration. As contemplated by the Rollover Agreements, the following Rollover Shares shall be contributed to Parent (or its designee) in exchange for equity interests in the Surviving Corporation:
(i) Jonathan Hargrove shall contribute fifty percent (50%) of his 7,736,400 shares of Company Common Stock (i.e., 3,868,200 Rollover Shares), representing Rollover Equity of approximately $142,814,544 based on the Per Share Merger Consideration; and
(ii) Pinnacle Growth Ventures LLC shall contribute sixty percent (60%) of its 21,367,200 shares of Company Common Stock (i.e., 12,820,320 Rollover Shares), representing Rollover Equity of approximately $473,241,408 based on the Per Share Merger Consideration.
The aggregate Rollover Equity is approximately $616,055,952. The Rollover Shares not contributed (the "Cashed-Out Rollover Participant Shares") shall be converted into the right to receive the Per Share Merger Consideration in accordance with Section 3.1(a).
(d) Merger Sub Shares. Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid, and non-assessable share of common stock of the Surviving Corporation. After the Effective Time, each certificate evidencing ownership of shares of Merger Sub common stock shall evidence ownership of shares of common stock of the Surviving Corporation.
Section 3.2 — Exchange Procedures
(a) Paying Agent. Prior to the Effective Time, Parent shall appoint Cobalt Trust Company to act as the paying agent (the "Paying Agent") for the payment of the Merger Consideration in connection with the Merger. The Paying Agent shall act as agent for the holders of Company Common Stock in connection with the Merger for the purpose of receiving the aggregate Merger Consideration and transmitting it to such holders.
(b) Exchange Fund; Letter of Transmittal. No later than the opening of business on the first Business Day following the Effective Time, Parent shall deposit, or cause to be deposited, with the Paying Agent an amount of cash in immediately available funds sufficient to pay the aggregate Merger Consideration payable to holders of Company Common Stock pursuant to Section 3.1(a) (such aggregate cash amount, the "Exchange Fund"). The Paying Agent shall invest the Exchange Fund in direct obligations of the United States of America or money market funds invested exclusively therein, and any and all investment income on the Exchange Fund shall be for the benefit of the Surviving Corporation. As promptly as practicable after the Effective Time (and in any event within five (5) Business Days thereafter), the Paying Agent shall mail to each record holder of Company Common Stock as of immediately prior to the Effective Time (i) a letter of transmittal (the "Letter of Transmittal"), which shall be substantially in the form attached hereto as Exhibit D, and which shall specify that delivery shall be effected, and risk of loss and title to certificates shall pass, only upon proper delivery of certificates (or effective affidavits of loss in lieu thereof) or book-entry transfer to the Paying Agent, and (ii) instructions for use in effecting the surrender of certificates (or book-entry shares) in exchange for the Per Share Merger Consideration.
(c) Payment. Upon (i) surrender to the Paying Agent of a certificate representing shares of Company Common Stock for cancellation, together with a duly completed and validly executed Letter of Transmittal and such other documents as may be reasonably required by the Paying Agent, or (ii) receipt of an "agent's message" by the Paying Agent (or such other evidence of transfer as the Paying Agent may reasonably request) in the case of book-entry shares, the holder of such certificate or book-entry shares shall be entitled to receive in exchange therefor the aggregate Per Share Merger Consideration for each share of Company Common Stock formerly represented by such certificate or book-entry shares, and such certificate or book-entry shares shall forthwith be canceled.
(d) No Interest. No interest shall be paid or accrue on any cash payable upon surrender of certificates or book-entry shares.
(e) Lost Certificates. If any certificate shall have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen, or destroyed and, if reasonably required by the Paying Agent, the posting by such Person of a bond in such customary amount as the Paying Agent may direct, as indemnity against any claim that may be made against it with respect to such certificate, the Paying Agent will issue in exchange for such lost, stolen, or destroyed certificate the applicable Per Share Merger Consideration.
(f) Withholding. Parent, Merger Sub, the Surviving Corporation, and the Paying Agent shall each be entitled to deduct and withhold from the amounts otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, FIRPTA, or any other provision of applicable federal, state, local, or foreign Tax Law. To the extent that amounts are so deducted and withheld and remitted to the applicable Governmental Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the holders of Company Common Stock for eighteen (18) months after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Company Common Stock who have not theretofore complied with this Section 3.2 shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat, or other similar Laws) for payment of their respective Per Share Merger Consideration. Any amounts remaining unclaimed by holders of Company Common Stock immediately prior to the time at which such amounts would otherwise escheat to or become the property of any Governmental Authority shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.
Section 3.3 — Dissenting Shares / Appraisal Rights
(a) Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by a holder who has properly demanded and perfected appraisal rights for such shares in accordance with Section 262 of the DGCL and who has not effectively withdrawn or lost such appraisal rights prior to the Effective Time ("Dissenting Shares") shall not be converted into or represent a right to receive the Per Share Merger Consideration, but the holder thereof shall be entitled only to such rights as are granted by Section 262 of the DGCL.
(b) Notwithstanding the foregoing, if any such holder shall have failed to perfect, or shall have effectively withdrawn or lost, the right to appraisal under Section 262 of the DGCL, then, as of the later of the Effective Time or the occurrence of such event, such holder's shares of Company Common Stock shall automatically be converted into and represent only the right to receive the Per Share Merger Consideration, as provided in Section 3.1(a), upon surrender of the certificate or book-entry shares representing such shares of Company Common Stock in the manner provided in Section 3.2.
(c) The Company shall give Parent (i) prompt notice of any written demands for appraisal of any shares of Company Common Stock, any attempted withdrawals of such demands, and any other instruments relating to such demands served pursuant to the DGCL and received by the Company, and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned, or delayed), voluntarily make any payment with respect to, settle, or offer to settle any such demands for appraisal, or agree to do any of the foregoing. Parent shall not, and shall cause the Surviving Corporation not to, settle or compromise any appraisal demands without the prior written consent of the Stockholder Representative (such consent not to be unreasonably withheld, conditioned, or delayed).
Section 3.4 — Treatment of Company Equity Awards
(a) Stock Options. At the Effective Time, each outstanding and unexercised option to purchase shares of Company Common Stock (each, a "Company Option"), whether or not vested or exercisable, shall be canceled and converted into the right to receive an amount in cash (without interest, and subject to applicable withholding Taxes) equal to the product of (i) the total number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time, multiplied by (ii) the excess, if any, of the Per Share Merger Consideration over the exercise price per share of Company Common Stock subject to such Company Option. All unvested Company Options shall fully vest and become exercisable immediately prior to the Effective Time. Any Company Option with an exercise price per share equal to or greater than the Per Share Merger Consideration shall be canceled for no consideration.
(b) Restricted Stock Units. At the Effective Time, each outstanding restricted stock unit award (each, a "Company RSU"), whether or not vested, shall be canceled and converted into the right to receive an amount in cash (without interest, and subject to applicable withholding Taxes) equal to the product of (i) the total number of shares of Company Common Stock underlying such Company RSU immediately prior to the Effective Time, multiplied by (ii) the Per Share Merger Consideration.
(c) Performance Share Units. At the Effective Time, each outstanding performance share unit award (each, a "Company PSU") shall be canceled and converted into the right to receive an amount in cash (without interest, and subject to applicable withholding Taxes) equal to the product of (i) the total number of shares of Company Common Stock underlying such Company PSU immediately prior to the Effective Time, determined based on the greater of (A) applicable target level of performance and (B) actual level of performance through the Effective Time, multiplied by (ii) the Per Share Merger Consideration.
(d) Payment of Equity Award Consideration. All amounts payable pursuant to this Section 3.4 shall be paid by the Surviving Corporation (or its designee) through the Company's (or the Surviving Corporation's) payroll system as promptly as practicable following the Effective Time (and in any event within five (5) Business Days thereof), net of any applicable withholding Taxes.
(e) Actions Prior to the Effective Time. At or prior to the Effective Time, the Company and the Company Board (or, if appropriate, any committee thereof administering the Company's equity plans) shall adopt any resolutions and take any actions that are necessary to effectuate the provisions of this Section 3.4, including, without limitation, terminating the Company's equity plans as of the Effective Time.