UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
(Rule 13d-101)
Under the Securities Exchange Act of 1934
(Amendment No. 5)*
SWK HOLDINGS CORPORATION
(Name of Issuer)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
483600300
(CUSIP Number)
Chris Haga
Carlson Capital, L.P.
2100 McKinney Avenue
Dallas, TX 75201
(214) 932-9600
with a copy to:
Robert B. Little
Gibson, Dunn & Crutcher LLP
2100 McKinney Avenue
Dallas, TX 75201
(214) 698-3260
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
June 20, 2014
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
* | The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be filed for the purpose of section 18 of the Securities Exchange Act of 1934 (Act) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 483600300 | Page 2 of 13 |
1. | Names of Reporting Persons
Double Black Diamond Offshore Ltd. | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
WC | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
Cayman Islands | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
11,427,421 Shares | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
11,427,421 Shares | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
11,427,421 Shares | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
26.5% | |||||
14. | Type of Reporting Person (See Instructions)
CO |
CUSIP No. 483600300 | Page 3 of 13 |
1. | Names of Reporting Persons
Black Diamond Offshore Ltd. | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
WC | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
Cayman Islands | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
721,679 Shares | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
721,679 Shares | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
721,679 Shares | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
1.7% | |||||
14. | Type of Reporting Person (See Instructions)
CO |
CUSIP No. 483600300 | Page 4 of 13 |
1. | Names of Reporting Persons
Double Black Diamond, L.P. | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
WC | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
Delaware | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
1,000,000 Shares (issuable upon exercise of a warrant) | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
1,000,000 Shares (issuable upon exercise of a warrant) | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
1,000,000 Shares (issuable upon exercise of a warrant) | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
2.3% | |||||
14. | Type of Reporting Person (See Instructions)
PN |
CUSIP No. 483600300 | Page 5 of 13 |
1. | Names of Reporting Persons
Carlson Capital, L.P. | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
AF | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
Delaware | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
30.5% | |||||
14. | Type of Reporting Person (See Instructions)
PN; IA |
CUSIP No. 483600300 | Page 6 of 13 |
1. | Names of Reporting Persons
Asgard Investment Corp. II | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
AF | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
Delaware | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
30.5% | |||||
14. | Type of Reporting Person (See Instructions)
CO |
CUSIP No. 483600300 | Page 7 of 13 |
1. | Names of Reporting Persons
Asgard Investment Corp. | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
AF | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
Delaware | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
30.5% | |||||
14. | Type of Reporting Person (See Instructions)
CO |
CUSIP No. 483600300 | Page 8 of 13 |
1. | Names of Reporting Persons
Clint D. Carlson | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
AF | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
United States | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
0 | ||||
8. | Shared Voting Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
9. | Sole Dispositive Power
0 | |||||
10. | Shared Dispositive Power
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
13,149,100 Shares (includes warrant to purchase 1,000,000 Shares) | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
30.5% | |||||
14. | Type of Reporting Person (See Instructions)
IN |
CUSIP No. 483600300 | Page 9 of 13 |
1. | Names of Reporting Persons
Michael D. Weinberg | |||||
2. | Check the Appropriate Box if a Member of a Group (See Instructions)
(a) ¨ (b) ¨ | |||||
3. | SEC Use Only
| |||||
4. | Source of Funds (See Instructions)
OO | |||||
5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)
¨ | |||||
6. | Citizenship or Place of Organization
United States | |||||
Number of Shares Beneficially Owned by Each Reporting Person With
|
7. | Sole Voting Power
305,000 Shares | ||||
8. | Shared Voting Power
0 | |||||
9. | Sole Dispositive Power
305,000 Shares | |||||
10. | Shared Dispositive Power
0 | |||||
11. |
Aggregate Amount Beneficially Owned by Each Reporting Person
305,000 Shares | |||||
12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
¨ | |||||
13. | Percent of Class Represented by Amount in Row (11)
0.7% | |||||
14. | Type of Reporting Person (See Instructions)
IN |
Page 10 of 13
Introduction
This Amendment No. 5 (Amendment No. 5) amends and supplements the statement on Schedule 13D filed with the Securities and Exchange Commission (the SEC) on November 4, 2009 (the Original Schedule 13D), as amended by Amendment No. 1 to the Original Schedule 13D filed with the SEC on November 25, 2009 (Amendment No. 1), and as further amended by Amendment No. 2 to the Original Schedule 13D filed with the SEC on March 1, 2012 (Amendment No. 2), and as further amended by Amendment No. 3 to the Original Schedule 13D filed with the SEC on September 9, 2013 (Amendment No. 3), and as further amended by Amendment No. 4 to the Original Schedule 13D filed with the SEC on May 16, 2014 (Amendment No. 4, and together with the Original Schedule 13D, Amendment No. 1, Amendment No. 2, Amendment No. 3 and this Amendment No. 5, the Schedule 13D) with respect to the shares (Shares) of common stock, par value $0.001 per share, of SWK Holdings Corporation (the Issuer). Capitalized terms used herein and not otherwise defined in this Amendment No. 5 have the meanings set forth in the Schedule 13D. This Amendment No. 5 amends Items 4, 5 and 7 as set forth below.
Item 4. | Purpose of Transaction |
The information previously provided in response to Item 4 is hereby amended and supplemented by adding the following immediately prior to the final paragraph thereof:
In connection with the discussions and negotiations previously referenced in this Item 4, Carlson Capital submitted a letter dated June 20, 2014 (the Special Committee Letter) to the special committee of the board of directors of the Issuer (the Special Committee). In the Special Committee Letter, Carlson Capital informed the Special Committee that Carlson Capital was disappointed in the Special Committees failure to pursue Carlson Capitals proposed transaction. Carlson Capital further identified its willingness to engage in a transaction that contained certain identified terms. The Special Committee Letter is a non-binding expression of Carlson Capitals continuing interest in pursuing a transaction that it believes will benefit all stockholders of the Issuer, and Carlson Capital reserves the right to modify the terms proposed in the Special Committee Letter in its sole discretion.
The foregoing description of the Special Committee Letter does not purport to be complete and is qualified in its entirety by reference to the Special Committee Letter, a copy of which is attached as Exhibit 13 hereto, which exhibit is incorporated by reference in its entirety in this Item 4.
Item 5. | Interest in Securities of the Issuer |
Paragraphs (a)(c) of Item 5 of the Schedule 13D are hereby amended and restated in their entirety as follows:
(a) As of the close of business on June 20, 2014, Carlson beneficially owned an aggregate of 13,149,100 Shares (including a warrant to purchase 1,000,000 Shares), constituting approximately 30.5% of the Shares outstanding. Mr. Weinberg may be deemed to beneficially own an aggregate of 305,000 Shares, constituting approximately 0.7% of the shares outstanding based upon his ownership of (i) 200,000 shares of restricted stock that vest based upon the 60 day average closing price of the Shares, (ii) 35,000 shares of restricted stock, granted by the Issuer to Mr. Weinberg on January 31, 2012 as compensation for his service as a director of the Issuer, that fully vested on January 31, 2013, (iii) 35,000 shares of restricted stock, granted by the Issuer to Mr. Weinberg on March 14, 2013 as compensation for his service as a director of the Issuer, that fully vested on January 31, 2014, and (iv) 35,000 shares of restricted stock, granted by the Issuer to Mr. Weinberg on January 31, 2014 as compensation for his service as a director of the Issuer, that fully vest on January 31, 2015, provided that Mr. Weinberg remains a director of the Issuer at such time.
Page 11 of 13
The aggregate percentages of Shares reported herein are based upon 43,174,894 Shares outstanding, which is the total number of Shares issued and outstanding as of May 9, 2014 as reported in the Issuers quarterly report on Form 10-Q for the period ended March 31, 2013, filed on May 14, 2014.
(b) Carlson Capital, Asgard II, Asgard and Mr. Carlson have the power to vote and direct the disposition of (i) the 721,679 Shares reported herein as beneficially owned by Offshore, (ii) the 11,427,421 Shares reported herein as beneficially owned by Double Offshore and (iii) the 1,000,000 Shares issuable upon exercise of a warrant reported herein as beneficially owned by DBD LP. Subject to the vesting requirements described herein, Mr. Weinberg has the power to vote and direct the disposition of the 305,000 shares of restricted stock beneficially owned by him.
(c) Other than as described herein, no transactions were effected by the Reporting Persons in the Shares during the past 60 days.
Item 7. | Materials to be Filed as Exhibits |
The information previously provided in response to Item 7 is hereby amended and supplemented by adding the following at the end thereof:
Exhibit 13 | Special Committee Letter dated June 20, 2014 |
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
Dated: June 20, 2014
DOUBLE BLACK DIAMOND OFFSHORE LTD. | ||
By: Carlson Capital, L.P., its investment manager | ||
By: Asgard Investment Corp. II, its general partner | ||
By: | /s/ Clint D. Carlson | |
| ||
Name: Clint D. Carlson | ||
Title: President | ||
BLACK DIAMOND OFFSHORE LTD. | ||
By: Carlson Capital, L.P., its investment manager | ||
By: Asgard Investment Corp. II, its general partner | ||
By: | /s/ Clint D. Carlson | |
| ||
Name: Clint D. Carlson | ||
Title: President | ||
DOUBLE BLACK DIAMOND L.P. | ||
By: Carlson Capital, L.P., its investment manager | ||
By: Asgard Investment Corp. II, its general partner | ||
By: | /s/ Clint D. Carlson | |
| ||
Name: Clint D. Carlson | ||
Title: President | ||
CARLSON CAPITAL, L.P. | ||
By: Asgard Investment Corp. II, its general partner | ||
By: | /s/ Clint D. Carlson | |
| ||
Name: Clint D. Carlson | ||
Title: President | ||
ASGARD INVESTMENT CORP. II | ||
By: | /s/ Clint D. Carlson | |
| ||
Name: Clint D. Carlson | ||
Title: President |
ASGARD INVESTMENT CORP. | ||
By: | /s/ Clint D. Carlson | |
Name: Clint D. Carlson | ||
Title: President | ||
/s/ Clint D. Carlson | ||
Clint D. Carlson | ||
/s/ Michael D. Weinberg | ||
Michael D. Weinberg |
Exhibit 13
[LETTERHEAD OF CARLSON CAPITAL, L.P.]
June 20, 2014
SWK Holdings Corporation
15770 North Dallas Parkway, Suite 1290
Dallas, Texas 75248
Attention: Special Committee of the Board of Directors
Gentlemen:
As you know, on May 16, 2014, Carlson Capital, L.P. made a non-binding offer to acquire 80 million shares of newly issued common stock of SWK Holdings Corporation at a price of $1.20 per share. SWK formed a special committee of independent directors unaffiliated with Carlson, and the special committee and Carlson have exchanged drafts of certain discussion points related to the potential transaction. In the course of negotiations, Carlson has agreed to additional terms, including formalizing our continued support for the companys planned rights offering, which we believe provide added benefits to all stockholders. The appendix to this letter contains the most recent draft of these discussion points.
Notwithstanding Carlsons good faith attempts to reach an agreement on these discussion points with the special committee, we now understand that the special committee is unwilling to move forward with our proposed transaction under any circumstances unless Carlson agrees to subject the transaction to approval by a majority of the outstanding shares held by stockholders that are not affiliated with Carlson. Based on low levels of participation in prior SWK stockholder meetings, and because shares of stockholders who do not vote will be counted as votes against the deal, we believe the special committees position creates unreasonable risk to the completion of the transaction. Instead, Carlson is willing to condition its proposal on approval by holders of a majority of the shares not affiliated with Carlson that vote on the matter a vote that adequately ensures the transaction is supported by unaffiliated SWK stockholders.
We are very disappointed in this outcome and believe the special committees decision not to pursue this value-generating transaction with Carlson is contrary to the best interests of SWKs stockholders.
As reflected in the discussion points, Carlson is prepared to move forward with a transaction that contains the following terms:
A. | SWK will conduct a discounted rights offering for all SWK stockholders as currently contemplated by the registration statement on Form S-1, with Carlson serving as the backstop for no fee. |
B. | Concurrently with the rights offering, SWK will issue to Carlson, at a purchase price of $1.20 per share, a number of shares of common stock in a private placement such that Carlson will own, as a result of the rights offering and the private placement, 71% of SWKs post-transaction equity interests. The actual number of shares to be issued to Carlson in the private placement will depend on the rights offering subscriptions of other stockholders. |
C. | SWK will have a 40-day go-shop period after execution of the definitive agreement with Carlson, during which time SWK would be entitled to solicit alternative transactions that are more favorable for SWKs stockholders. |
D. | Carlson will agree not to acquire shares of SWK common stock for a specified period after the closing that would cause its ownership percentage to increase by more than 5% unless it first offers to purchase all remaining shares held by SWK stockholders. |
E. | For a specified period after the closing, if Carlson proposes to sell its shares of SWK common stock to a third party that would result in such third party owning in excess of 40% of SWK (and Carlson owning less than such third party), Carlson will ensure that stockholders not affiliated with Carlson will have the opportunity to sell the same proportion of their shares on the same terms as the Carlson sale (i.e., a tag-along right). |
The transaction contemplated by the terms proposed by Carlson represents a premium to the current trading price of SWK common stock and provides immediate value for existing SWK stockholders. The concurrent rights offering will enable existing stockholders to invest additional equity capital, at a discount to the price Carlson has offered to pay through the private placement. Finally, stockholders will retain the post-closing upside in a substantially stronger company, with the benefit of stockholder protections designed to align the interests of all stockholders.
The special committee has a fiduciary duty to act in the best interest of SWKs stockholders. We urge the special committee to listen to SWKs stockholders, whom we believe will support this valuable proposal, and comply with its fiduciary obligations by pursuing the transaction with Carlson on the terms outlined in the appendix to this letter.
Very truly yours,
Carlson Capital, L.P. | ||
By: | /s/ Clint Carlson |
Contact:
Chris Haga
Carlson Capital, L.P.
Portfolio Manager
(214) 932-9653
2
Appendix
DISCUSSION POINTS
Parties |
SWK Holdings Corporation (the Company); and
Funds controlled by Carlson Capital, L.P., which may include such funds as already have positions in the Company, other existing funds managed by Carlson, or entities newly formed to undertake the Transaction (collectively, the Investor). | |
Transaction |
The Company will raise additional funds through a Rights Offering and Share Issuance (each as described below), such that the Investor will own 71% of the Companys post Transaction equity interests (the Target Equity Interest). The Rights Offering and Share Issuance will be conducted in parallel, will be conditioned on one another and will close simultaneously.
The purpose of the Transaction is to enable the Company to substantially expand its operations in order to:
Capture more of the economics of its pharmaceutical and biotechnology royalty securitization business;
Diversify its portfolio to lower asset level risk and access more attractive debt financing in the future;
More effectively compete for business that requires a demonstration of substantial capital resources;
Retain and motivate management;
Better spread fixed costs; and
Maximize the potential benefits of its net operating loss carryforwards (NOLs). | |
Rights Offering |
The Company will conduct the rights offering as currently contemplated by the registration statement on Form S-1, including with respect to the Investor backstop (the Rights Offering). | |
Share Issuance |
Concurrent with the Rights Offering, the Company, through a private placement, will issue shares of common stock, par value $0.001 per share, to the Investor at a purchase price of $1.20 per share (the Per Share Price) (the Share Issuance). The Rights Offering and Share Issuance, together, are referred to herein as the Transaction. |
A-1
The number of shares issued in the Share Issuance shall be adjusted based on the results of the Rights Offering such that the Target Equity Interest is achieved, and that the NOL attributes of the Company are preserved. | ||
Stockholder Vote |
The Transaction as a whole shall be submitted for approval to the stockholders of the Company, with a non-waivable condition requiring the affirmative vote of a majority of the outstanding shares having voting power held by stockholders unaffiliated with the Investor that are present or represented by proxy at a duly called meeting of stockholders at which a quorum of unaffiliated stockholders is present or represented by proxy.
The Special Committee will recommend that the stockholders vote in favor of the Transaction, subject to the withdrawal and termination rights described below.
If the requisite stockholder approval is not obtained the Company shall reimburse the Investors reasonable expenses in an amount not to exceed $150,000. | |
Agreement and Proxy Statement |
[TBD] will prepare a first draft of the definitive agreement incorporating the terms generally contained in this Term Sheet (the Agreement). The parties will use reasonable best efforts to cause the proxy statement to be filed with the SEC no later than one week following the execution and delivery of the Agreement by the parties. | |
Existing Investor Credit Facility |
Under the existing credit facility, upon execution of the Agreement the Investor will release an additional $25 million of availability, with all balances under the existing credit facility to be repaid in full out of the proceeds of the Transaction or the proceeds of any Acquisition Proposal (as defined below). | |
Deal Protection |
The Agreement will include customary deal protection provisions that include an initial solicitation period (go-shop) for Acquisition Proposals:
Acquisition Proposal is defined as a transaction involving at least 15% of the Companys equity or assets. |
A-2
Between the execution date of the Agreement and the stockholder vote, the Company (through the Special Committee) may exchange confidential information and engage in discussions and negotiations with a third party that makes an unsolicited Acquisition Proposal (or submits an Acquisition Proposal during the go-shop period) that the Special Committee determines in good faith and based on the advice of its financial advisor could reasonably be likely to lead to a transaction that is more favorable to the Companys stockholders than the Transaction.
The Company (through the Special Committee) may solicit Acquisition Proposals from third parties for a period of 40 days following announcement of the Transaction (i.e., the go-shop period) and shall inform the Investor upon receipt of any Acquisition Proposal, including the identity and terms of such proposal. It is understood and agreed that the pendency of the go-shop period shall not delay the process for the proxy filing, proxy distribution and stockholder meeting (it being understood that the stockholder meeting shall not be held prior to expiration of the go-shop period).
The Investor will have the right to match any Acquisition Proposals.
The Company will not agree to pay fees or expenses of a party proposing an Acquisition Proposal in an amount greater than that offered to the Investor.
Prior to the stockholder vote, if (a) the Company, in compliance with its obligations in these provisions, receives a third party proposal that the Special Committee in good faith deems to be superior to the Transaction based on the advice of its financial advisor and that the Investor declines to match or (b) there is a material event (other than third party proposals) occurring or arising after the execution date of the Agreement that was not known or reasonably foreseeable to the Special Committee as of such date, the Special Committee may change its recommendation of the Transaction and/or terminate the Agreement (i) if, after consultation with its outside legal counsel, failure to change its recommendation and/or terminate the Agreement would reasonably be likely to constitute a breach of the Special Committees fiduciary duties and (ii) upon payment of a termination fee to the Investor equal to 3.0% of the aggregate purchase price offered by the Investor in the Transaction (the Termination Fee), except that in the case of a change in |
A-3
recommendation and/or termination under clause (a) above involving a proposal received from a party that was solicited through the go-shop, the Termination Fee shall be 1.0% of such aggregate purchase price offered by the Investor in the Transaction. | ||
The 3% Termination Fee will also be payable under the following circumstances if the Investor does not exercise matching rights with respect to the applicable transactions: (a) the Agreement is terminated following the failure to obtain the requisite stockholder approval after an Acquisition Proposal had been made, or (b) the Agreement is terminated as a result of the lapsing of the drop-dead date after an Acquisition Proposal had been made, and, in the case of both clause (a) or (b), the Company enters into a definitive agreement for an Acquisition Proposal with a third party within one year of the termination date and such transaction is consummated. | ||
Representations and Warranties |
The Agreement will contain representations and warranties of the Company (and disclosure schedules containing applicable exceptions to such representations and warranties) relating to corporate organization, authority, binding effect of the Agreement, approvals and consents, valid issuance of the shares issued to the Investor, capitalization, SEC reports, financial statements, no conflicts, absence of undisclosed liabilities, absence of changes, compliance with laws, material contracts, taxes, litigation, employee matters, information to be supplied in the proxy, takeover statutes and financial advisors, and representations and warranties of the Investor (and disclosure schedules containing applicable exceptions to such representations and warranties) relating to organization, authority, binding effect of the Agreement, approvals and consents, available funds and accredited investor status and investment intent.
The representations and warranties will survive until the earlier of two years from the closing date or the applicable statute of limitations. | |
Diligence |
The Investor requires no diligence. | |
Financing Contingency |
None. |
A-4
Management Employment Agreements |
Concurrently with execution and delivery of the Agreement, the Company will enter into amended and extended employment agreements with Brett Pope and Winston Black on terms acceptable to the Investor (the Management Employment Agreements). | |
Closing Conditions |
The Transaction shall be subject to the following conditions precedent:
receipt of the stockholder approval described above;
expiration of any applicable anti-trust waiting periods;
accuracy of representations and warranties in all material respects, except for representations regarding corporate organization, authority, binding effect, valid issuance of shares and capitalization, which must be accurate in all respects other than, in the case of the capitalization representation, de minimis inaccuracies;
compliance with covenants in all material respects;
no material adverse change to the Companys business;
no injunctions or orders prohibiting consummation;
delivery of tax opinion by legal counsel to the Company that is reasonably satisfactory to the Investor to the effect that the Transaction will not create an ownership change under Section 382(g) and the Company will not become a Personal Holding Company;
Board of directors de-staggered through an amendment to the Companys charter approved at the stockholder meeting called for voting on the Transaction;
Composition of the board of directors consisting of the CEO and [six] individuals designated by Carlson (two of whom will meet the independence requirements specified below);
receipt of material third party consents; and
Management Employment Agreements, voting agreement amendment (as described below) and registration rights agreement (as described below) in full force and effect. |
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Costs and Expenses |
The parties will bear their respective legal and other transaction costs, including without limitation legal, financial or other advisors (including consultants). For the avoidance of doubt, the Investor will be responsible for payment of the filing fees in connection with any applicable anti-trust filings. | |
Use of Proceeds |
General corporate purposes. | |
Minority Protections |
The Agreement shall contain additional provisions applicable for the period following consummation of the Transaction and until the earlier of (a) such time as the Investor beneficially owns less than 40% of the then total outstanding shares of voting securities of the Company or (b) five years after the closing date:
The Investor shall not (i) acquire shares of common stock of the Company that cause the Investors percentage ownership of the Company to increase by 5% or more (and subject in any event to limitations relating to retaining the benefits of the Companys NOLs), (ii) cause the Company to engage in stock buybacks or (iii) otherwise engage in a Rule 13e-3 transaction (under the Securities Exchange Act of 1934), unless in each case the Investor first offers to purchase all remaining shares held by stockholders who are not affiliated with the Investor (an Additional Purchase Transaction).
If the Investor proposes or causes the Company to propose an Additional Purchase Transaction, such transaction (i) shall be subject to review, evaluation and negotiation by a special committee of directors who are unaffiliated with either the Company or the Investor, and no such Additional Purchase Transaction shall be approved or consummated by the Company or the Investor without the prior approval of such special committee, and (ii) shall be submitted for approval to the stockholders of the Company, with a non-waivable condition that a majority of the shares held by stockholders that are not affiliated with the Investor approve the transaction.
If the Investor proposes to sell shares of common stock of the Company to a third party investor that would result in the third party investor owning in excess of 40% (and with neither the Investor and its affiliates nor any other holder or its affiliates owning a greater percentage) of the outstanding shares of the Company, then the Investor shall ensure that stockholders that are not affiliated with the Investor are permitted to sell a proportionate number of their shares on the same terms as the Investor sells its shares. |
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The Company shall maintain at least two (2) directors who are unaffiliated with either the Company or the Investor. | ||
Investor Approval Rights |
The Investor will have approval rights (separate and apart from the voting rights of its designees on the board of directors of the Company) with respect to debt incurrences above specified ratios, new equity issuances, material acquisitions and dispositions, dividends and redemptions, investments in or loans to third parties, changing the size of the board of directors and hiring and terminating the Companys chief executive officer. The Investor will retain the approval rights as long as it owns at least 40% of the outstanding shares of the Companys common stock. | |
Other |
The Company will grant a waiver under the Companys existing NOL rights plan to permit entry into the Agreement and consummation of the Share Issuance.
The Company will take such steps as are necessary to cause the provisions of Section 203(a) of the Delaware General Corporation Statute to be inapplicable to entry into the Agreement and consummation of the Share Issuance.
The voting agreement will be amended effective as of the closing of the Transaction to eliminate the section therein entitled Section 2. Agreement to Vote and to make other relevant conforming changes.
The Investor will receive customary demand and piggyback resale registration rights. |
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