DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                              Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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December 14, 2020

Dear Stockholder:

We cordially invite you to attend a special meeting of the stockholders of Endurance International Group Holdings, Inc., a Delaware corporation, which we refer to as “we,” “us,” “Endurance” or the “Company,” to be held on January 14, 2021 at 10:00 a.m., Eastern time. Due to public health and travel concerns related to coronavirus (COVID-19), the special meeting will be a virtual stockholder meeting, conducted via live audio webcast. You may attend the special meeting online, vote your shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join and participate in the special meeting. Instructions on how to attend and participate online will be posted at www.virtualshareholdermeeting.com/EIGI2021SM before the special meeting. Online check-in will begin at 9:45 a.m. We encourage you to access the meeting prior to the start time to allow ample time to complete the online check-in process. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be provided on the log-in page.

On November 1, 2020, the Company entered into an agreement and plan of merger, which we refer to as the “merger agreement,” with Endure Digital Intermediate Holdings, Inc., a Delaware corporation (formerly known as Razorback Technology Intermediate Holdings, Inc.), which we refer to as “Parent,” and Endure Digital, Inc., a Delaware corporation (formerly known as Razorback Technology, Inc.) and a wholly-owned subsidiary of Parent, which we refer to as “Merger Sub,” 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. Parent and Merger Sub are beneficially owned by affiliates of Clearlake Capital Group, L.P. (“Clearlake”), which is a private equity firm based in California specializing in investments in the technology, industrials and consumer sectors.

At the special meeting, you will be asked to consider and vote on the following matters:

 

   

a proposal to adopt the merger agreement, as it may be amended from time to time in accordance with its terms;

 

   

a proposal to approve, on a nonbinding advisory basis, the “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger as reported on the Golden Parachute Compensation table on page 76 of the accompanying proxy statement; and

 

   

a proposal to approve one or more adjournments of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

We do not expect that any matters other than the proposals set forth above will be brought before the special meeting, and only matters specified in the notice of the meeting may be acted upon at the special meeting.

If the merger is consummated, each share of Company common stock issued and outstanding immediately prior to the effective time of the merger will, other than as provided below, be converted into the right to receive $9.50 in cash, without interest and subject to deduction for any required withholding tax. We refer to this consideration per share of Company common stock to be paid in the merger as the “merger consideration.” The following shares of Company common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of our stockholders who do not vote in favor of the proposal to adopt the merger agreement and who are entitled to and otherwise properly demand and exercise, and do not effectively withdraw, fail to perfect or otherwise lose, appraisal rights under Section 262 of the General Corporation Law of the State of Delaware, (b) shares held in the treasury of the Company and (c) shares owned by any subsidiary of the Company, Parent, Merger Sub or any other subsidiary of Parent. The merger consideration of $9.50 per share of Company common stock represents a 79% premium over Endurance’s closing share price of $5.30 on September 25, 2020, the last full trading day prior to media speculation about a


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potential acquisition of the Company, and a 64% premium over its closing share price of $5.81 on October 30, 2020, the last full trading day prior to the public announcement of the merger.

The board of directors of the Company, which we refer to as the “board of directors,” has unanimously (1) determined and declared that the merger agreement, the merger and the other transactions contemplated thereby, on the terms and subject to the conditions set forth therein, are advisable and in the best interests of the Company and its stockholders, (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (3) declared that the terms of the merger are fair to the Company and the Company’s stockholders, (4) determined that it is advisable and in the best interests of the Company for the board of directors to submit the merger agreement to the Company’s stockholders for adoption and directed that the merger agreement be submitted to the Company’s stockholders at a special meeting of the Company’s stockholders for their adoption and (5) recommended that the Company’s stockholders adopt the merger agreement. The board of directors made its determination after consultation with its legal and financial advisors and consideration of a number of factors. After careful consideration, the board of directors unanimously recommends that you vote FOR approval of the proposal to adopt the merger agreement, FOR approval of the nonbinding advisory proposal regarding golden parachute compensation that will or may become payable to our named executive officers in connection with the merger and FOR approval of the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Approval of the proposal to adopt the merger agreement requires the affirmative vote of holders of a majority of the shares of Company common stock that are issued and outstanding as of the record date.

Your vote is very important. Whether or not you plan to attend the special meeting online, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or the Internet. If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted FOR approval of the proposal to adopt the merger agreement, FOR approval of the nonbinding advisory proposal regarding golden parachute compensation that will or may become payable to our named executive officers in connection with the merger and FOR approval of the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes to adopt the merger agreement at the time of the special meeting. You may revoke your proxy at any time before it is exercised at the special meeting by delivering a properly executed proxy card bearing a later date or a written revocation of your proxy to our tabulator, Broadridge Financial Solutions, Inc., not later than January 13, 2021, the day before the special meeting, submitting a later-dated proxy electronically via the Internet or telephonically, or by voting online while virtually attending the special meeting. Attending the special meeting will not, in itself, revoke a previously submitted proxy. To revoke a proxy at the special meeting, you must vote online while virtually attending the special meeting. The failure to vote your shares of Company common stock will have the same effect as a vote AGAINST approval of the proposal to adopt the merger agreement.

If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will be unable to vote your shares of Company common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee how to vote your shares of Company common stock in accordance with the procedures provided by your bank, brokerage firm or other nominee. Your bank, brokerage firm or other nominee cannot vote on any of the proposals to be considered at the special meeting without your instructions. The failure to instruct your bank, brokerage firm or other nominee to vote your shares of Company common stock “FOR” approval of the proposal to adopt the merger agreement will have the same effect as voting “AGAINST” the proposal to adopt the merger agreement. Without your instructions, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting.

Under Delaware law, if the merger is completed, holders of Company common stock who do not vote in favor of adoption of the merger agreement and who satisfy other conditions set forth in Section 262 of the General


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Corporation Law of the State of Delaware will have the right to seek an appraisal by the Delaware Court of Chancery of the “fair value” of their shares of Company common stock (exclusive of any elements of value arising from the accomplishment or expectation of the merger and together with interest (as described in the accompanying proxy statement) to be paid on the amount determined to be “fair value”) in lieu of receiving the merger consideration if the merger is completed. In order to exercise your appraisal rights, you must submit a written demand for an appraisal of your shares prior to the stockholder vote to adopt the merger agreement at the special meeting, you must not vote in favor of adoption of the merger agreement and you must comply with all other Delaware law procedures set forth in Section 262 of the General Corporation Law of the State of Delaware and explained in the accompanying proxy statement. See “Appraisal Rights” beginning on page 119 of the accompanying proxy statement, Section 262 of the General Corporation Law of the State of Delaware is reproduced in its entirety in Annex E to the accompanying proxy statement.

The accompanying proxy statement provides you with detailed information about the Company, the special meeting, the merger agreement and the merger, and the other proposals to be considered at the special meeting. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement.

The proxy statement also describes the actions and determinations of the Company’s board of directors in connection with its evaluation of the merger agreement and the merger. We urge you to carefully read the entire proxy statement and its annexes, including the merger agreement, as they contain important information. You also may obtain additional information about the Company from documents we have filed with the Securities and Exchange Commission by following the instructions listed in the section of the accompanying proxy statement entitled “Where You Can Find More Information.

If you have any questions or need assistance voting your shares of Company common stock, please call Morrow Sodali, the Company’s proxy solicitor, at +1 (212) 300-2470.

Thank you in advance for your cooperation and continued support.

Sincerely,

 

LOGO

Jeffrey H. Fox

Chief Executive Officer

The accompanying proxy statement is dated December 14, 2020 and is first being mailed to our stockholders, together with the enclosed form of proxy card, on or about December 14, 2020.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

YOUR VOTE IS IMPORTANT. PLEASE SUBMIT YOUR PROXY ELECTRONICALLY VIA THE INTERNET OR TELEPHONICALLY OR BY COMPLETING, SIGNING, DATING AND PROMPTLY RETURNING THE ENCLOSED PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES OF COMPANY COMMON STOCK AT THIS TIME. IF THE MERGER AGREEMENT IS ADOPTED AND THE MERGER IS COMPLETED, YOU WILL RECEIVE A LETTER OF TRANSMITTAL AND RELATED INSTRUCTIONS TO SURRENDER YOUR STOCK CERTIFICATES.


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ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.

10 Corporate Drive

Burlington, Massachusetts 01803

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

 

Notice is given that a special meeting of stockholders of Endurance International Group Holdings, Inc., a Delaware corporation will be held at the following time and place, for the following purposes:

 

Time and Date

10:00 a.m., local time, on Thursday, January 14, 2021

 

Place

Due to public health and travel concerns related to coronavirus (COVID-19), the special meeting will be held virtually, conducted via live audio webcast. You may attend the special meeting online, vote your shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join and participate in the special meeting. Instructions on how to attend and participate online will be posted at www.virtualshareholdermeeting.com/EIGI2021SM before the special meeting. Online check-in will begin at 9:45 a.m. We encourage you to access the meeting prior to the start time to allow ample time to complete the online check-in process. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be provided on the log-in page.

 

Items of Business

To consider and vote on:

 

   

a proposal to adopt the Agreement and Plan of Merger, dated as of November 1, 2020, as it may be amended from time to time in accordance with its terms, which we refer to as the “merger agreement,” by and among Endurance International Group Holdings, Inc., which we refer to as the “Company,” Endure Digital Technology Intermediate Holdings, Inc., a Delaware corporation (formerly known as Razorback Technology Intermediate Holdings, Inc.), which we refer to as “Parent,” and Endure Digital, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (formerly known as Razorback Technology, Inc.), which we refer to as “Merger Sub.” A copy of the merger agreement is attached as Annex A to the accompanying proxy statement;

 

   

a proposal to approve, on a nonbinding advisory basis, the “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger as reported on the Golden Parachute Compensation table on page 76 of the accompanying proxy statement; and

 

   

any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if


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there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

  These items of business are more fully described in the proxy statement accompanying this notice.

 

  We do not expect that any matters other than the proposals set forth above will be brought before the special meeting, and only matters specified in the notice of the meeting may be acted upon at the special meeting.

 

Record Date

You are entitled to receive notice of, and to vote at, the special meeting if you were a stockholder of record of the Company at the close of business on December 11, 2020.

 

Proxy Voting

Your vote is very important, regardless of the number of shares of Company common stock you own. The merger and other transactions contemplated by the merger agreement cannot be consummated unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the shares of Company common stock that are issued and outstanding as of the record date. Even if you plan to virtually attend the special meeting, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy by telephone or the Internet, using the instructions on the enclosed proxy card, prior to the special meeting to ensure that your shares of Company common stock will be represented at the special meeting if you are unable to attend. If you do not attend the special meeting and fail to return your proxy card or fail to submit your proxy by phone or the Internet, your shares of Company common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

  If you are a stockholder of record, voting online while virtually attending the special meeting will revoke any proxy previously submitted. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee in order to vote. As a beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee on how to vote the shares in your account. You are also invited to virtually attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares online while virtually attending the special meeting unless you request and obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee.

 

Recommendation

After careful consideration, the board of directors of the Company, which we refer to as the “board of directors,” has unanimously approved the merger agreement and recommends that all Company stockholders vote in favor of the proposal to adopt the merger agreement. The board of directors made its determination after


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consultation with its legal and financial advisors and consideration of a number of factors. After careful consideration, the board of directors unanimously recommends that you vote “FOR” approval of the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger and “FOR” approval of the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

 

Attendance

Only stockholders of record or their duly authorized proxies have the right to attend the special meeting. If your shares of Company common stock are held through a bank, brokerage firm or other nominee, please obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee to attend the special meeting.

 

Appraisal Rights

Under Delaware law, if the merger is completed, holders of Company common stock who do not vote in favor of adoption of the merger agreement and who satisfy other conditions set forth in Section 262 of the General Corporation Law of the State of Delaware will have the right to seek an appraisal by the Delaware Court of Chancery of the fair value of their shares of Company common stock (exclusive of any elements of value arising from the accomplishment or expectation of the merger and together with interest (as described in the accompanying proxy statement) to be paid on the amount determined to be “fair value”) in lieu of receiving the merger consideration if the merger is completed. In order to exercise your appraisal rights, you must submit a written demand for an appraisal of your shares prior to the stockholder vote to adopt the merger agreement at the special meeting, you must not vote in favor of adoption of the merger agreement and you must comply with all other Delaware law procedures set forth in Section 262 of the General Corporation Law of the State of Delaware and explained in the accompanying proxy statement. See “Appraisal Rights” beginning on page 119. Section 262 of the General Corporation Law of the State of Delaware is reproduced in its entirety in Annex E of the accompanying proxy statement and is incorporated in this notice by reference.

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU VOTE ONLINE WHILE VIRTUALLY ATTENDING THE SPECIAL MEETING, YOUR VOTE WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED.

By order of the Board of Directors,

 

LOGO

DAVID C. BRYSON

Secretary

December 14, 2020

Burlington, Massachusetts


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IMPORTANT INFORMATION

Even if you plan to virtually attend the special meeting, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy by telephone or the Internet, using the instructions on the enclosed proxy card, prior to the special meeting to ensure that your shares of Company common stock will be represented at the special meeting if you are unable to attend.

If you do not attend the special meeting and fail to return your proxy card or fail to submit your proxy by phone or the Internet, your shares of Company common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote against the proposal to adopt the merger agreement.

If you are a stockholder of record, voting online while virtually attending the special meeting will revoke any proxy previously submitted. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee in order to vote. As a beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee on how to vote the shares in your account. You are also invited to virtually attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares at the special meeting unless you request and obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee.

We urge you to read the accompanying proxy statement and its annexes, including all documents incorporated by reference into the accompanying proxy statement, carefully and in their entirety. If you have any questions concerning the merger, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement, or need help voting your shares of Company common stock, please contact our proxy solicitor: Morrow Sodali, at +1 (212) 300-2470.


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PROXY STATEMENT

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SUMMARY

     1  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     17  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

     27  

THE SPECIAL MEETING

     28  

Time, Place and Purpose of the Special Meeting

     28  

Record Date and Quorum

     28  

Attendance

     29  

Vote Required

     29  

Shares Owned by Our Directors and Executive Officers

     31  

Proxies and Revocation

     31  

Adjournments and Recesses

     31  

Anticipated Date of Completion of the Merger

     32  

Appraisal Rights

     32  

Solicitation of Proxies; Payment of Solicitation Expenses

     32  

Questions and Additional Information

     33  

PARTIES TO THE MERGER

     34  

THE MERGER

     35  

Overview of the Merger

     35  

Directors and Officers of the Surviving Corporation

     36  

Background of the Merger

     36  

Reasons for the Merger; Recommendation of the Board of Directors

     45  

Opinion of Centerview Partners LLC

     50  

Opinion of Goldman Sachs & Co. LLC

     57  

Financial Forecasts

     64  

Financing of the Merger

     67  

Limited Guarantee

     68  

Closing and Effective Time of the Merger

     68  

Payment of Merger Consideration and Surrender of Stock Certificates

     69  

Interests of Certain Persons in the Merger

     69  

Golden Parachute Compensation

     75  

Accounting Treatment

     77  

U.S. Federal Income Tax Consequences of the Merger

     77  

Regulatory Approvals

     80  

Litigation Relating to the Merger

     80  

THE MERGER AGREEMENT (PROPOSAL ONE)

     81  

Explanatory Note Regarding the Merger Agreement

     81  

The Merger

     81  

Effective Time of the Merger

     82  

Marketing Period

     82  

Merger Consideration

     83  

Payment Procedures

     83  

Appraisal Rights

     85  

Treatment of Company Stock Awards

     85  

Representations and Warranties

     86  

Definition of Company Material Adverse Effect

     88  

Definition of Parent Material Adverse Effect

     90  

Covenants Relating to the Conduct of the Company’s Business

     90  


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Covenants Relating to the Conduct of Parent’s and Merger Sub’s Business

     93  

Restrictions on Solicitation of Other Offers

     93  

Restrictions on Changes of Recommendation to Company Stockholders

     95  

Additional Agreements of the Parties to the Merger Agreement

     96  

Legal Conditions to the Merger

     97  

Conditions to the Merger

     105  

Termination

     106  

Termination Fees

     108  

Amendment; Extension; Waiver; Procedures

     109  

Governing Law; Submission to Jurisdiction

     110  

VOTING AGREEMENT

     111  

NONBINDING ADVISORY PROPOSAL REGARDING “GOLDEN PARACHUTE” COMPENSATION (PROPOSAL TWO)

     113  

AUTHORITY TO ADJOURN THE SPECIAL MEETING (PROPOSAL THREE)

     114  

MARKET PRICE OF COMPANY COMMON STOCK

     115  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     116  

APPRAISAL RIGHTS

     119  

DELISTING AND DEREGISTRATION OF COMPANY COMMON STOCK

     124  

CONDUCT OF OUR BUSINESS IF THE MERGER IS NOT COMPLETED

     124  

OTHER MATTERS

     125  

Other Matters for Action at the Special Meeting

     125  

Future Stockholder Proposals

     125  

WHERE YOU CAN FIND MORE INFORMATION

     126  

ANNEX A — Agreement and Plan of Merger

     A-1  

ANNEX B — Opinion of Centerview Partners LLC

     B-1  

ANNEX C — Opinion of Goldman Sachs & Co. LLC

     C-1  

ANNEX D — Voting Agreement

     D-1  

ANNEX E — Section  262 of the General Corporation Law of the State of Delaware

     E-1  


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We are furnishing this proxy statement to our stockholders as part of the solicitation of proxies by the Company’s board of directors for use at the special meeting of stockholders described herein. This proxy statement and the enclosed proxy card or voting instruction form are first being mailed on or about December 14, 2020 to our stockholders who owned shares of Company common stock as of the close of business on December 11, 2020.

SUMMARY

The following summary highlights selected information contained elsewhere in this proxy statement and may not contain all the information that is important to you with respect to the merger and the other matters being considered at the special meeting of stockholders described herein. Accordingly, we urge you to read carefully this entire proxy statement, its annexes and the documents we refer to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 126.

Parties to the Merger (Page 34)

In this proxy statement, we refer to the agreement and plan of merger, dated as of November 1, 2020, as it may be amended from time to time in accordance with its terms, among Parent, Merger Sub and the Company, as the “merger agreement,” and the merger of Merger Sub with and into the Company as the “merger.” The parties to the merger agreement and the merger are:

 

   

Endurance International Group Holdings, Inc., which we refer to as “we,” “us,” “Endurance” or the “Company,” is a leading provider of cloud-based platform solutions that helps millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, business solutions, and more. Our family of brands includes: Constant Contact, Bluehost, HostGator, and Domain.com, among others. Headquartered in Burlington, Massachusetts, Endurance employs over 3,800 people across the United States, Brazil, India and the Netherlands. Shares of Endurance common stock are traded on The Nasdaq Global Select Market under the symbol “EIGI.” The principal executive offices of Endurance are located at 10 Corporate Drive, Burlington, Massachusetts 01803, and its telephone number is (781) 852-3450.

 

   

Endure Digital Intermediate Holdings, Inc., which we refer to as “Parent,” (formerly known as Razorback Technology Intermediate Holdings, Inc.) is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and the other transactions contemplated thereby. Parent is owned by funds managed by affiliates of Clearlake Capital Group, L.P. (“Clearlake”) and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement and the related financing transactions. Upon completion of the merger, the Company will be a direct wholly-owned subsidiary of Parent. The principal executive offices of Parent are located at 233 Wilshire Boulevard, Suite 800, Santa Monica, CA 90401, and its telephone number is (310) 400-8800.

 

   

Endure Digital, Inc., which we refer to as “Merger Sub,” (formerly known as Razorback Technology, Inc.) is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and the other transactions contemplated thereby. Merger Sub is a wholly-owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement and the related financing transactions. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the merger, which we refer to as the “surviving corporation.” The principal executive offices of Merger Sub are located at 233 Wilshire Boulevard, Suite 800, Santa Monica, CA 90401, and its telephone number is (310) 400-8800.



 

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The Special Meeting (Page 28)

Time, Place and Purpose of the Special Meeting (Page 28)

The special meeting of the stockholders of the Company, which we refer to as the “special meeting,” will be held on January 14, 2021, starting at 10:00 a.m., Eastern time. Due to public health and travel concerns related to coronavirus (COVID-19), the special meeting will be held virtually, conducted via live audio webcast. Holders of record of the Company’s common stock at the close of business on December 11, 2020, the record date for the special meeting, may attend the special meeting online, vote their shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join and participate in the special meeting.

At the special meeting, holders, which we refer to as “stockholders,” of common stock of the Company, $0.0001 par value per share, which we refer to as “Company common stock,” will be asked to consider and vote on:

 

   

a proposal to adopt the merger agreement;

 

   

a proposal to approve, on a nonbinding advisory basis, the “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger as reported on the Golden Parachute Compensation table on page 76; and

 

   

a proposal to approve one or more adjournments of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

We do not expect that any matters other than the proposals set forth above will be brought before the special meeting, and only matters specified in the notice of the meeting may be acted upon at the special meeting.

Record Date and Quorum (Page 28)

You are entitled to receive notice of, attend and to vote at, the special meeting if you owned shares of Company common stock as of the close of business on December 11, 2020, which is the date we have set as the record date for the special meeting, and which we refer to as the “record date.” You will be entitled to cast one vote on each matter presented at the special meeting for each share of Company common stock that you owned at the close of business on the record date. As of the close of business on the record date, there were 141,713,327 shares of Company common stock outstanding and entitled to vote at the special meeting. A quorum is necessary to adopt the merger agreement and approve the nonbinding advisory proposal regarding “golden parachute” compensation at the special meeting. A majority of the shares of Company common stock that are issued and outstanding at the close of business on the record date, present virtually or represented by proxy, at the special meeting constitutes a quorum for the purposes of the special meeting. Your shares of Company common stock will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee), if you vote online at the meeting or you attend the special meeting but abstain from voting. The special meeting may be adjourned whether or not a quorum is present.

Vote Required (Page 29)

Approval of the proposal to adopt the merger agreement and completion of the merger requires the affirmative vote of the holders of a majority of the shares of Company common stock that are issued and outstanding as of the close of business on the record date. Because the required vote for this proposal is based on the number of votes our stockholders are entitled to cast rather than on the number of votes actually cast, if you fail to authorize a proxy or vote online at the meeting (including by abstaining), or fail to instruct your broker on how to vote, such failure will have the same effect as votes cast “AGAINST” the merger proposal.



 

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Under our amended and restated by-laws, which we refer to as our “by-laws,” approval of the nonbinding advisory proposal regarding “golden parachute” compensation and approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies, require the affirmative vote of a majority of the votes cast by the holders of all of the shares present or represented at the special meeting and voting on such matters.

Shares Owned by Our Directors and Executive Officers (Page 31)

As of the close of business on the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, 73,505,584 shares of Company common stock, representing 52% of the outstanding shares of Company common stock on the record date. The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock “FOR the proposal to adopt the merger agreement, “FOR approval of the advisory proposal regarding “golden parachute” compensation and “FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. The shares described above include shares beneficially owned by investment funds and entities affiliated with Warburg Pincus LLC, which we refer to as “Warburg Pincus,” and Goldman Sachs & Co. LLC, which we refer to as “Goldman Sachs.” James C. Neary, Chandler J. Reedy and Justin L. Sadrian are partners of Warburg Pincus & Co, an affiliate of Warburg Pincus. All shares indicated as owned by Messrs. Neary, Reedy and Sadrian are included because of their affiliation with the Warburg Pincus entities. Joseph P. DiSabato is a managing director of Goldman Sachs. All shares indicated as owned by Mr. DiSabato are included because of his affiliation with the Goldman Sachs entities. Warburg Pincus and Goldman Sachs are obligated, pursuant to voting and support agreement entered into on November 1, 2020 between Parent and each of such stockholders, to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock in favor of the adoption of the merger agreement and any matter that would reasonably be expected to facilitate the merger.

Proxies and Revocation (Page 31)

Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, or by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote online while virtually attending the special meeting. If you are a stockholder of record, your proxy must be received by telephone or the Internet by 11:59 p.m., on January 13, 2021 in order for your shares to be voted at the special meeting. If your shares of Company common stock are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you hold your shares of Company common stock in “street name,” please contact your bank, brokerage firm or other nominee for their instructions on how to vote your shares. Please note that if you are a beneficial owner of shares of Company common stock held in “street name” and wish to vote online while virtually attending the special meeting, you must request and obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee (your attendance at the special meeting virtually will not, by itself, revoke your proxy; you must vote virtually at the special meeting to revoke your proxy).

If you fail to submit a proxy or to vote online while virtually attending the special meeting, or if you do not provide your bank, brokerage firm or other nominee with voting instructions, your shares of Company common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote “AGAINST the proposal to adopt the merger agreement, and your shares of Company common stock will not have an effect on approval of the advisory proposal regarding “golden parachute” compensation or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised at the special meeting, by submitting a later-dated proxy through any of the methods



 

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available to you, by giving written notice of revocation to our tabulator, Broadridge Financial Solutions, Inc., not later than January 13, 2021, the day before the special meeting. Your attendance at the special meeting virtually will not, by itself, revoke your proxy; you must vote virtually at the special meeting to revoke your proxy.

The Merger (Page 35)

Pursuant to the terms of the merger agreement, subject to the satisfaction or waiver of certain conditions set forth in the merger agreement and the applicable provisions of the Delaware General Corporation Law, which we refer to as the “DGCL,” at the effective time of the merger, (i) Merger Sub will merge with and into the Company (ii) the separate existence of Merger Sub will cease and (iii) the Company will continue as the surviving corporation in the merger and as a wholly owned subsidiary of Parent and will continue to do business following the merger. As a result of the merger, the Company will cease to be a publicly traded company. If the merger is consummated, you will not own any shares of the capital stock of the surviving corporation.

Merger Consideration (Page 83)

In the merger, each share of Company common stock, other than as provided below, will be converted into the right to receive $9.50 in cash, without interest and subject to deduction for any required withholding tax. We refer to this consideration per share of Company common stock to be paid in the merger as the “merger consideration.” The following shares of Company common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of our stockholders who do not vote in favor of the proposal to adopt the merger agreement and who are entitled to and otherwise properly demand and exercise, and do not effectively withdraw, fail to perfect or otherwise lose, appraisal rights under Section 262 of the DGCL, (b) shares held in the treasury of the Company and (c) shares owned by any subsidiary of the Company, Parent, Merger Sub or any other subsidiary of Parent. We sometimes refer to the shares described in the foregoing sentence, collectively, as the “excluded shares.”

Reasons for the Merger; Recommendation of the Board of Directors (Page 45)

After consideration of various factors described in the section entitled “The Merger — Reasons for the Merger; Recommendation of the Board of Directors,” the board of directors of the Company, which we refer to as the “board of directors,” by a unanimous vote of all directors, (a) determined and declared that the merger agreement, the merger and the other transactions contemplated thereby, on the terms and subject to the conditions set forth therein, are advisable and in the best interests of the Company and the Company’s stockholders, (b) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (c) declared that the terms of the merger are fair to the Company and its stockholders, (d) determined that it is advisable and in the best interests of the Company for the board of directors to submit the merger agreement to the Company’s stockholders for adoption and directed that the merger agreement be submitted to the Company’s stockholders at a special meeting of the Company’s stockholders for their adoption and (e) recommended that the Company’s stockholders adopt the merger agreement.

In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, yours. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in their recommendations with respect to the merger agreement. See the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page 69.

The board of directors recommends that you vote “FOR” approval of the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute”



 

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compensation and “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement.

Opinion of Centerview Partners LLC (Page 50)

The Company retained Centerview Partners LLC, which we refer to as “Centerview,” as financial advisor to the board of directors in connection with the proposed merger and the other transactions contemplated by the merger agreement, which we refer to collectively as the “Transaction.” In connection with this engagement, the board of directors requested that Centerview evaluate the fairness, from a financial point of view, to the holders of shares of Company common stock (other than (i) Dissenting Shares (as defined in the merger agreement), (ii) shares held by the Company as treasury stock or owned by Parent, the Company or any of their subsidiaries, and (iii) shares held by any affiliate of the Company or Parent, which we refer to collectively as “Excluded Shares,” of the merger consideration proposed to be paid to such holders pursuant to the merger agreement.

On November 1, 2020, Centerview rendered to the board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion dated November 1, 2020 that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the merger consideration proposed to be paid to the holders of shares of Company common stock (other than Excluded Shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated November 1, 2020, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated herein by reference. Centerview’s financial advisory services and opinion were provided for the information and assistance of the board of directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the holders of shares of Company common stock (other than Excluded Shares) of the merger consideration to be paid to such holders pursuant to the merger agreement. Centerview’s opinion did not address any other term or aspect of the merger agreement or the Transaction and does not constitute a recommendation to any stockholder of the Company or any other person to as to how such stockholder or other person should vote with respect to the merger or otherwise act with respect to the Transaction or any other matter. The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

Opinion of Goldman Sachs & Co. LLC (Page 57)

Goldman Sachs & Co. LLC, which we refer to as “Goldman Sachs,” delivered its opinion to the Company’s board of directors that, as of November 1, 2020 and based upon and subject to the factors and assumptions set forth therein, the $9.50 in cash per share of the Company’s common stock to be paid to the holders (other than Parent and its affiliates) of shares of the Company’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 1, 2020, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C. Goldman Sachs provided advisory services and its opinion for the information and assistance of the board of directors of the Company in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of the Company’s common stock should vote with respect to the merger or any other matter.



 

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Pursuant to an engagement letter between the Company and Goldman Sachs, the Company has agreed to pay Goldman Sachs a transaction fee that is estimated, based on the information available as of the date of the announcement of the merger, to be approximately $21,000,000, $1,000,000 of which became payable at announcement of the merger, and the remainder of which is contingent upon consummation of the merger.

Financing of the Merger (Page 67)

On November 1, 2020, in connection with the merger agreement, Merger Sub entered into a debt commitment letter, which we refer to as the “debt commitment letter” (as further amended and restated) with JPMorgan Chase Bank, N.A., which we refer to as “JPMCB,” Bank of America, N.A., which we refer to as “Bank of America,” BofA Securities, Inc. or any of its designated affiliates, which we refer to as “BofA Securities,” Deutsche Bank Securities Inc., which we refer to as “DBSI,” Deutsche Bank AG New York Branch, which we refer to as “DBNY,” Deutsche Bank AG Cayman Islands Branch, which we refer to as “DBCI” and together with DBSI and DBNY, “Deutsche Bank,” UBS AG, Stamford Branch together with any of its designated affiliates, which we refer to as “UBS AG,” and UBS Securities LLC together with any of its designated affiliates, which we refer to as “UBSS” and together with UBS AG, “UBS” for commitments with respect to the financing required by Merger Sub to consummate the merger, to retire or redeem the Company’s 10.875% Senior Notes due 2024, which we refer to as the “Company notes,” and to refinance the Company’s credit facility.

The financing under the debt commitment letter, the availability of which is contingent on the satisfaction of certain conditions, including the closing of the merger, provides for credit facilities in an aggregate principal amount of up to $2,500 million, consisting of: (i) a senior secured first lien term loan facility in an aggregate principal amount of $1,830 million, (ii) a senior secured revolving credit facility in an aggregate principal amount of $200 million and (iii) a senior unsecured bridge facility in an aggregate principal amount of up to $470 million, which would be incurred by Merger Sub to the extent Merger Sub has not, or cannot, on or prior to the consummation of the merger, issue “Rule 144A-for-life” senior unsecured notes generating up to $470 million in gross proceeds in a private placement.

The facilities to be provided under the debt commitment letter will bear interest at LIBOR or the base rate plus an applicable margin. The senior secured credit facilities to be provided under the debt commitment letter will be secured by liens on substantially all of the Company’s assets, and will be guaranteed by, and secured by the assets of, its direct parent entity and certain of its subsidiaries. The one-year senior unsecured bridge facility of up to $470 million, which we refer to as the “bridge facility,” will be unsecured but guaranteed by the same guarantors as those under the senior secured credit facilities. Various economic and other terms of the financing under the debt commitment letter are subject to change in the process of syndication as set forth in the debt commitment letter.

In connection with the transaction, the indebtedness outstanding under the Company’s existing credit facility will be repaid and the commitments thereunder terminated at or prior to the closing of the transaction. In addition, the Company notes will be retired or redeemed at or prior to the closing of the transaction.

The provision of debt financing under the debt commitment letter is not a condition to the closing of the transaction.

In addition, Parent has obtained an equity commitment letter dated as of November 1, 2020, which we refer to as the “equity commitment letter,” from Clearlake Capital Partners VI, L.P., Clearlake Capital Partners VI (Offshore), L.P., Clearlake Capital Partners VI (USTE), L.P., and Clearlake Flagship Plus Partners (Master), L.P., which we refer to collectively as the “Guarantors.” The equity commitment letter provides for up to $980 million in the aggregate of equity financing on the terms and subject to the conditions set forth therein, which was delivered to the Company concurrently with the execution of the merger agreement.



 

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Limited Guarantee(Page 68)

In connection with entering into the merger agreement, the Guarantors provided the Company with a limited guarantee pursuant to which each Guarantor guarantees, severally, and not jointly, the payment and performance of such Guarantor’s respective percentage of Parent’s obligations to the Company with respect to the payment of the Parent termination fee (as discussed below), enforcement expenses related to the Parent termination fee and certain indemnification obligations related to financing cooperation and any debt tender offer (as described below), subject to a maximum aggregate obligation of $119,656,000.00.

Interests of Certain Persons in the Merger (Page 69)

In considering the recommendation of the board of directors with respect to the merger agreement, you should be aware that the Company’s directors and executive officers may have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally, as more fully described below. The board of directors was aware of these interests and considered them, among other matters, in reaching the determination that the terms and conditions of the merger and the merger agreement were fair to, advisable and in the best interests of the Company and its stockholders in reaching its decision to approve and adopt the merger agreement, and in making their recommendation that our stockholders vote in favor of adoption of the merger agreement as described in “The Merger — Reasons for the Merger; Recommendation of the Board of Directors” beginning on page 45. These interests include:

 

   

accelerated vesting of outstanding and unexercised options to purchase shares of Company common stock held by the Company’s directors and executive officers and cancellation and conversion of each such Company stock option into the right to receive a cash payment equal to the total number of shares of Company common stock then underlying such stock option multiplied by the excess, if any, of the merger consideration of $9.50 over the exercise price per share of such Company stock option;

 

   

accelerated vesting of Company restricted stock unit awards held by the Company’s directors and executive officers, and cancellation and conversion of each such restricted stock unit award into the right to receive a cash payment equal to the merger consideration of $9.50 multiplied by the total number of shares of Company common stock underlying such restricted stock unit award on the terms set forth in the merger agreement;

 

   

in the event of certain terminations of employment, cash payments payable, and payment of or reimbursement for premiums with respect to continued health, dental and vision coverage benefits provided, to executive officers of the Company pursuant to certain employment and severance agreements between the Company and our executive officers; and

 

   

continued indemnification and liability insurance for directors and officers following completion of the merger.

See “The Merger — Interests of Certain Persons in the Merger” beginning on page 69 for additional information.

Approval of “Golden Parachute” Compensation (page 75)

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act,” and Rule 14a-21(c) under the Exchange Act, we are providing stockholders with the opportunity to cast a nonbinding advisory vote with respect to certain payments that will or may become payable to our named executive officers in connection with the merger, or “golden parachute” compensation, as reported on the Golden Parachute Compensation table on page 76. The board of directors recommends that you vote “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation.



 

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Approval of the proposal regarding “golden parachute” compensation requires the approval of a majority of the votes cast on this proposal. Approval of this proposal is not a condition to completion of the merger. The vote with respect to “golden parachute” compensation is an advisory vote and will not be binding on us. Therefore, regardless of whether stockholders approve the “golden parachute” compensation, if the merger agreement is adopted by the stockholders and the merger is completed, the “golden parachute” compensation will still be paid to our named executive officers to the extent payable in accordance with the terms of such compensation.

U.S. Federal Income Tax Consequences of the Merger (Page 77)

The exchange of shares of Company common stock for cash pursuant to the merger will generally be a taxable transaction to U.S. holders and certain non-U.S. holders for U.S. federal income tax purposes. A U.S. holder (or a non-U.S. holder that is subject to U.S. federal income tax on its gain from the merger) who exchanges shares of Company common stock for cash pursuant to the merger agreement generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the stockholder’s adjusted tax basis in such shares. You should read “The Merger U.S. Federal Income Tax Consequences of the Merger” beginning on page 77 for the definition of “U.S. holder” and “non-U.S. holder” and a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your U.S. federal, state and local and/or foreign taxes.

Regulatory Approvals (Page 80)

The merger is subject to the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the “HSR Act.” On November 23, 2020, the U.S. Federal Trade Commission granted early termination of the waiting period under the HSR Act with respect to the merger. Under the terms of the merger agreement, the merger cannot be consummated if any governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (preliminary or permanent) or statute, rule or regulation which has the effect of making the merger illegal or otherwise prohibiting consummation of the merger.

Litigation Relating to the Merger (Page 80)

On December 8, 2020, a complaint was filed against the Company and each of its directors in the United States District Court for the Southern District of New York. The lawsuit, captioned Stamps v. Endurance International Group Holdings Inc., Civil Action No. 1:20-cv-10321, alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder against the defendants for allegedly disseminating a materially incomplete and misleading preliminary proxy statement in connection with the proposed merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. The plaintiff seeks to enjoin the defendants from proceeding with the stockholder vote to approve the proposed merger, or from consummating the proposed merger, unless and until the Company discloses to the Company’s public common stockholders the allegedly material information discussed in the complaint; or, in the event the proposed merger is consummated, the plaintiff seeks to recover damages. The plaintiff also seeks an award of costs, expert fees, and attorneys’ fees.

On December 11, 2020, a complaint was filed against the Company and each of its directors in the United States District Court for the District of Delaware. The lawsuit, captioned Baker v. Endurance International Group Holdings Inc., Civil Action No. 1:20-cv-01691, alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder against the defendants for allegedly disseminating a materially incomplete and misleading preliminary proxy statement in connection with the proposed merger of



 

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Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. The plaintiff seeks to enjoin the defendants from proceeding with or consummating the proposed merger, or, in the event the proposed merger is consummated, the plaintiff seeks to rescind it or recover damages and seeks a declaration that the defendants violated Sections 14(a) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9. The plaintiff also seeks an award of costs, expert fees, and attorneys’ fees.

The Merger Agreement (Page 81)

Merger Consideration (Page 83)

If the merger is completed, each share of Company common stock, other than the excluded shares, will be automatically converted into the right to receive $9.50 in cash, without interest and subject to deduction for any required withholding tax, will no longer be outstanding, will automatically be cancelled and will cease to exist.

Treatment of Company Stock Awards (Page 85)

Effective as of immediately prior to the effective time of the merger, each then-outstanding and unexercised option to purchase shares of Company common stock will vest in full. If any such Company stock option is not exercised prior to the effective time of the merger, then at the effective time of the merger such Company stock option will automatically be canceled and converted into the right to receive an amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying such Company stock option multiplied by (ii) the excess, if any, of the merger consideration over the exercise price per share of such Company stock option, without any interest thereon and subject to all applicable withholding. In the event that the exercise price of any Company stock option is equal to or greater than the merger consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit, other than a specified restricted stock unit as described in the next paragraph, that is then outstanding and unvested will vest in full. Each Company restricted stock unit, other than a specified restricted stock unit, that is outstanding as of the effective time of the merger will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (B) the merger consideration without any interest thereon and subject to all applicable withholding taxes.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that was granted (i) on or after October 27, 2020 to new hires or (ii) in connection with any acquisition that closed in 2020, which we refer to collectively as the “specified restricted stock units,” will automatically be cancelled and converted into the right to receive an amount in cash equal to the merger consideration the holder of the specified restricted stock unit would have received pursuant to the preceding paragraph, with payment of the merger consideration made at the vesting dates, subject to the holder of the specified restricted stock units remaining in continuous service with Parent, the surviving corporation or any of its subsidiaries through each such vesting date. The specified restricted stock units granted on or after October 27, 2020 to new hires will vest as to one-third on the first anniversary of their date of grant and the remainder on the first anniversary of the effective time of the merger, subject to acceleration in full upon a termination without cause, and the specified restricted stock units granted in connection with any acquisition that closed in 2020 will vest based on their pre-effective time vesting schedules with certain accelerations to be determined and with further acceleration upon a termination without cause within 12 months following the effective time of the merger. The merger consideration payable with respect to the specified restricted stock units will be net of any applicable withholding taxes and will be paid on the first administratively practicable payroll date following the vesting date.



 

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Effective as of immediately prior to the effective time of the merger, each Company restricted stock award that is then outstanding and unvested will vest in full and will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock award multiplied by (B) the merger consideration, without any interest thereon and subject to all applicable withholding taxes.

Restrictions on Solicitation of Other Offers (Page 93).

Under the merger agreement, during the period beginning on the date of the merger agreement until the earlier of the termination of the merger agreement and the receipt of the Company stockholder approval, the Company and its subsidiaries will not, and the Company will instruct its directors, managers, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives, which we refer to collectively as “representatives,” not to, and will not authorize or knowingly permit any of its representatives to, directly or indirectly:

 

   

solicit, initiate or propose the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that constitutes, or would reasonably be expected to lead to, any acquisition proposal;

 

   

terminate, waive, amend or modify any provision of any existing confidentiality or standstill agreement with respect to a potential acquisition proposal, except under the circumstances permitted under the merger agreement; or

 

   

other than informing persons of the existence of the applicable provisions of the merger agreement, enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any non-public information for the purpose of encouraging or facilitating, any acquisition proposal or any proposal or inquiry that is reasonably expected to lead to an acquisition proposal.

Notwithstanding the foregoing restrictions or anything to the contrary set forth in the merger agreement, subject to compliance with the terms of the merger agreement, at any time prior to receipt of the Company stockholder approval the Company may:

 

   

furnish non-public information with respect to the Company and its subsidiaries to any person who has made an acquisition proposal that did not result from a material breach of the merger agreement that the board of directors determines in good faith (after consultation with outside counsel and its financial advisor) is, or could reasonably be expected to lead to, a superior proposal, which we refer to as a qualified person (and the representatives of such qualified person), pursuant to a confidentiality agreement not materially less restrictive with respect to the confidentiality obligations of the qualified person than the confidentiality agreement between the Company and Clearlake, provided that such confidentiality agreement will not (x) grant any exclusive right to negotiate with such counterparty, (y) prohibit the Company from satisfying its obligations under the merger agreement or (z) require the Company or its subsidiaries to pay or reimburse the counterparty’s fees, costs or expenses;

 

   

engage in discussions or negotiations (including solicitation of revised acquisition proposals) with any qualified person (and the representatives of such qualified person) regarding any acquisition proposal; or

 

   

amend, or grant a waiver or release under, any standstill or similar agreement with respect to any Company common stock with any qualified person.

However, the Company may only furnish such non-public information and engage in such discussions or negotiations if: (x) the Company and its subsidiaries are not in material breach of their non-solicitation



 

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obligations pursuant to the terms of the merger agreement and (y) the board of directors of the Company has determined that the failure to take such actions would be reasonably likely to be inconsistent with its fiduciary obligations under applicable law. The Company must promptly make available to Parent any non-public information concerning the Company and its subsidiaries that is provided to any such person or its representatives that was not previously made available to Parent. You should read “The Merger Agreement (Proposal One) — Restrictions on Solicitation of Other Offers” beginning on page 93 for the definition of “acquisition proposal,” “superior proposal” and “Company stockholder approval.”

Restrictions on Changes of Recommendation to Company Stockholders (Page 95).

Under the merger agreement, the board of directors must submit the merger agreement to the Company’s stockholders for adoption and must recommend that the Company’s stockholders vote in favor of adopting the merger agreement. Prior to the earlier of the termination of the merger agreement and the receipt of the Company stockholder approval:

 

   

the board of directors (a) must not withhold, withdraw or modify, in a manner adverse to Parent, its recommendation to the Company’s stockholders that the Company’s stockholders adopt the merger agreement at the special meeting, (b) must publicly reaffirm its recommendation within ten business days of a request therefor in writing by Parent (the Company will have no obligation to make such reaffirmation on more than three (3) separate occasions), (c) must not (and any committee thereof must not) make or fail to make any recommendation or public statement in connection with a tender or exchange offer, other than a recommendation against such offer or a “stop, look and listen” communication by the board of directors (or any committee thereof) to the stockholders of the Company pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication) (though the board of directors (or any committee thereof) may refrain from taking a position with respect to an acquisition proposal until the close of business on the tenth business day after the commencement of a tender or exchange offer in connection with such acquisition proposal), (d) must not fail to include its recommendation in this proxy statement, and (e) must not, except as contemplated by the terms of the merger agreement, adopt, approve, endorse or recommend any acquisition proposal or any proposal that is reasonably expected to lead to an acquisition proposal (we refer to the actions listed in the preceding clauses (a) through (e) as a “Company board recommendation change”); and

 

   

the Company must not enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement providing for the consummation of a transaction contemplated by any acquisition proposal (other than entering into a confidentiality agreement in the circumstances described above in the section entitled “— Restrictions on Solicitations of Other Offers”).

However, prior to receipt of the Company stockholder approval, the board of directors may effect a board recommendation change in response to a superior proposal or an intervening event if each of the following conditions is satisfied: (a) the board of directors has determined in good faith (after consultation with outside counsel and its outside financial advisor) that the failure to effect a Company board recommendation change would be reasonably likely to be inconsistent with its fiduciary obligations under applicable law; (b) the Company and its subsidiaries are not in material breach of their obligations pursuant to the merger agreement with respect to an acquisition proposal underlying such Company board recommendation change; (c) the Company has notified Parent in writing that it intends to effect a Company board recommendation change, describing in reasonable detail the reasons for such Company board recommendation change (which we refer to as a “recommendation change notice”); (d) if requested by Parent, the Company has made its representatives available to negotiate (to the extent that Parent desires to so negotiate) with Parent’s representatives any proposed modifications to the terms and conditions of the merger agreement during the three business day period following



 

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delivery by the Company to Parent of such recommendation change notice; and (e) if Parent has delivered to the Company a written, binding and irrevocable offer to alter the terms or conditions of the merger agreement during such three business day period, the board of directors has determined in good faith (after consultation with outside counsel), after considering the terms of such offer by Parent, that the failure to effect a Company board recommendation change would still be reasonably likely to be inconsistent with its fiduciary obligations under applicable law.

In the event of any material revisions to an acquisition proposal underlying a potential Company board recommendation change, the Company is required to notify Parent of such revisions and the applicable three business day period described above will be extended until two business days after the time Parent receives notification from the Company of such revisions.

Conditions to the Merger (Page 105).

The obligation of the parties to effect the merger are subject to the satisfaction of a number of conditions, including:

 

   

the Company’s stockholders have adopted the merger agreement at the special meeting;

 

   

the waiting period (and any extension thereof) under the HSR Act has expired or early termination thereof has been granted;

 

   

no governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (preliminary or permanent) or statute, rule or regulation which is in effect and which has the effect of making the merger illegal or otherwise prohibiting consummation of the merger;

 

   

each party’s respective representations and warranties in the merger agreement are true and correct as of the closing date, subject to specified exceptions, including the Company’s representation regarding the absence of a Company Material Adverse Effect (as defined below under “The Merger Agreement (Proposal One) — Definition of Company Material Adverse Effect”) since June 30, 2020;

 

   

each party has performed in all material respects its covenants and obligations required to be performed by it under the merger agreement on or prior to closing date; and

 

   

each of Parent and the Company has received a certificate signed by an executive officer of the other party certifying as to the satisfaction of the foregoing conditions relating to the other party’s respective representations and warranties in the merger agreement and performance of the other party’s covenants and obligations in the merger agreement.

Termination (Page 106)

The merger agreement may be terminated and the merger may be abandoned:

 

   

by mutual written consent of Parent and the Company at any time prior to the effective time of the merger;

 

   

by either Parent or the Company, if the effective time of the merger has not occurred on or before April 30, 2021, which we refer to as the “outside date,” except that (a) a party to the merger agreement will not be permitted to terminate the merger agreement under this provision if the failure of such party to fulfill any obligation under the merger agreement has been a principal cause of or primarily resulted in the failure of the effective time to occur on or before the outside date, (b) if the marketing period (described below) has commenced but has not been completed by the date that is three business days prior to the outside date, but all other conditions to the closing (other than those conditions that by their



 

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terms are to be satisfied at the closing) have been satisfied or, to the extent permitted by law, waived, then the outside date will be extended to the third business day following the final day of the marketing period, and such date will become the outside date; and (c) no party will be permitted to terminate the merger agreement within the three business day notice period referenced in the final bullet in this section entitled “— Termination;”

 

   

by either Parent or the Company at any time prior to the effective time if a governmental entity of competent jurisdiction has issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining, or otherwise prohibiting the consummation of the merger, except that a party to the merger agreement will not be permitted to terminate the merger agreement in accordance with the foregoing if the failure of such party to fulfill any obligation under the merger agreement has been a principal cause of or primarily resulted in the issuance of any such order, decree, ruling or the taking of such other action;

 

   

by Parent or the Company if the Company stockholder approval is not obtained at the special meeting or at any adjournment or postponement thereof at which a vote on the adoption of the merger agreement was taken; provided, however, that a party will not be permitted to terminate the merger agreement for such reason if such failure to obtain the Company stockholder approval is attributable to the failure of such party to perform in any material respect any covenant in the merger agreement required to be performed by such party at or prior to the effective time of the merger;

 

   

by Parent, prior to the effective time of the merger, if the board of directors has effected a Company board recommendation change, which we refer to as a “trigger event,” except that any such termination must occur within 10 business days after the occurrence of the trigger event;

 

   

by the Company, at any time prior to receipt of the Company stockholder approval, in the event that: (a) the Company has received a superior proposal; (b) the board of directors has determined in good faith (after consultation with outside counsel) that the failure to proceed with such superior proposal would be reasonably likely to be inconsistent with its fiduciary obligations under applicable law; (c) the Company and its subsidiaries are not in material breach of their obligations under the merger agreement with respect to such superior proposal; (d) the Company has notified Parent in writing that it intends to enter into a definitive agreement relating to such superior proposal, specifying the material terms and conditions of such superior proposal, which we refer to as a “superior proposal notice;” (e) if requested by Parent, the Company has made its representatives available to negotiate with Parent’s representatives any proposed modifications to the terms and conditions of the merger agreement during the three business day period following delivery of such superior proposal notice (except that in the event of any material revisions to such superior proposal, the Company will be required to notify Parent of such revisions and the applicable three business day period described above will be extended until two business days after the time Parent receives notification from the Company of such revisions); (f) if Parent has delivered to the Company a written, binding and irrevocable offer to alter the terms or conditions of the merger agreement during such three Business Day period, the board of directors has determined in good faith (after consultation with outside counsel), after considering the terms of such offer by Parent, that the superior proposal giving rise to such superior proposal notice continues to be a superior proposal and it would still be reasonably likely to be inconsistent with the fiduciary obligations of the board of directors under applicable law not to accept such superior proposal; and (g) concurrently with the termination of the merger agreement, the Company pays Parent the termination fee (described below) and enters into the definitive agreement to consummate the transaction contemplated by such superior proposal;

 

   

by Parent, prior to the effective time of the merger, if there has been a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Company set forth in the merger agreement, which breach or failure to perform would cause one of certain conditions to the obligations



 

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of Parent to effect the closing set forth in the merger agreement not to be satisfied, and will not have been cured within 20 business days following receipt by the Company of written notice of such breach or failure to perform from Parent; except that neither Parent nor Merger Sub is then in material breach of any representation, warranty or covenant under the merger agreement;

 

   

by the Company, prior to the effective time, if there has been a breach of, or failure to perform any representation, warranty, covenant or agreement of Parent or Merger Sub set forth in the merger agreement, which breach or failure to perform would cause one of certain conditions to the obligations of the Company to effect the closing set forth in the merger agreement not to be satisfied, and will not have been cured within 20 business days following receipt by Parent of written notice of such breach or failure to perform from the Company; except that the Company is not then in material breach of any representation, warranty or covenant under the merger agreement; or

 

   

by the Company if (a) the mutual closing conditions and the closing conditions to the obligations of Parent (other than those conditions that by their nature are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) have been satisfied, (b) the Company has confirmed by notice to Parent after the end of the marketing period that all closing conditions applicable to the Company have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing) or that it is willing to waive any unsatisfied conditions; and (c) the merger has not been consummated within three business days after delivery of such notice.

Termination Fees (Page 108)

Subject to certain limitations, the Company will pay Parent a termination fee equal to $37,393,000 in the event that the merger agreement is terminated:

 

   

by Parent if the board of directors has effected a Company board recommendation change;

 

   

by the Company in order to enter into a definitive agreement providing for a superior proposal; or

 

   

(i) by either Parent or the Company if the effective time of the merger has not occurred on or before the outside date and such termination occurs prior to obtaining the Company stockholder approval, (ii) by Parent or the Company if the Company stockholder approval is not obtained at the Company stockholders meeting (or applicable adjourned or postponed meeting) or (iii) by Parent if there has been a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Company set forth in the merger agreement, which breach or failure to perform would cause one of certain closing conditions set forth in the merger agreement not to be satisfied, and will not have been cured within 20 business days following receipt by the Company of written notice of such breach or failure to perform from Parent, if (in each of the preceding clauses (i), (ii) and (iii)) (A) before the date of such termination, an acquisition proposal has been publicly announced and not withdrawn, (B) with respect to a termination for failure to obtain the stockholder approval, at the time of the stockholder vote, the financing letters will not have been terminated, withdrawn or rescinded without being replaced by alternative financing commitments sufficient to consummate the transactions contemplated by the merger agreement and (C) within 12 months after the date of termination, the Company has consummated any acquisition transaction or entered into a definitive agreement with respect to an acquisition transaction that is thereafter consummated.

Subject to certain limitations, Parent will pay the Company a termination fee equal to $119,656,000 in the event that the merger agreement is terminated:

 

   

by the Company, prior to the effective time, if there has been a material breach of or failure to perform Parent’s financing covenants, which material breach or failure to perform would cause one of certain



 

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closing conditions set forth in the merger agreement not to be satisfied and will not have been cured within 20 business days following receipt by Parent of written notice of such breach or failure to perform from the Company; or

 

   

by the Company if (i) the closing conditions applicable to Parent (other than those conditions that by their nature are to be satisfied by actions taken at the closing, each of which is capable of being satisfied at the closing) have been satisfied, (ii) the Company has confirmed by notice to Parent after the end of the marketing period that all closing conditions applicable to the Company have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing) or that it is willing to waive any unsatisfied conditions; and (iii) the merger will not have been consummated within three business days after delivery of such notice.

Voting Agreement (Page 111)

On November 1, 2020, concurrently with the execution of the merger agreement, Parent entered into a voting and support agreement, which we refer to as the “voting agreement,” with certain funds affiliated with Goldman Sachs and certain funds affiliated with Warburg Pincus, each a stockholder of the Company, pursuant to which such stockholders agreed, among other things, to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock in favor of the adoption of the merger agreement, and agreed to certain restrictions on their ability to take actions with respect to the Company and such shares. As of the record date, these stockholders beneficially owned approximately 48% of the issued and outstanding shares of Company common stock. A copy of the voting agreement is attached as Annex D to this proxy statement.

Market Price of Company Common Stock (Page 115)

On September 25, 2020, the last full trading day prior to media speculation about a potential acquisition of the Company, the closing price for Company common stock on the Nasdaq Stock Market was $5.30. On October 30, 2020, the last full trading day prior to the public announcement of the merger, the closing price for Company common stock on the Nasdaq Stock Market was $5.81 per share. On December 11, 2020, the latest practicable trading day before the printing of this proxy statement, the closing price for Company common stock on the Nasdaq Stock Market was $9.43 per share. You are encouraged to obtain current market quotations for Company common stock in connection with voting your shares of Company common stock.

Appraisal Rights (Page 119)

If the merger is effected, record holders of Company common stock who submit a written demand for appraisal before the vote is taken on the adoption of the merger agreement, who do not vote in favor of the adoption of the merger agreement, who hold their shares of Company common stock continuously through the effective time of the merger and who otherwise fully comply with the procedures set forth in Section 262 of the DGCL may elect to pursue their appraisal rights to receive, in lieu of the $9.50 per share merger consideration, an amount in cash equal to the judicially determined “fair value” of their shares. The amount determined to be fair value by the court will be determined as of the effective time of the merger and could be more or less than, or the same as, the per share merger consideration for the Company common stock. Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to the Company. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares. For a summary of the procedures set forth in Section 262 of the DGCL, see “Appraisal Rights” beginning on page 119. An executed proxy that is not marked “AGAINST” or “ABSTAIN” with respect to the adoption of the merger agreement will be voted “FOR” the adoption of the merger agreement and the stockholder submitting that proxy will lose the right to seek an appraisal of his, her or its shares of Company common stock.



 

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A copy of Section 262 of the DGCL is reproduced in its entirety in Annex E to this proxy statement. Failure to follow the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights. We urge you to read these provisions carefully and in their entirety.

ANY COMPANY STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO SHOULD REVIEW ANNEX E CAREFULLY AND SHOULD CONSULT HIS, HER OR ITS LEGAL ADVISOR, SINCE FAILURE TO TIMELY AND FULLY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.

Delisting and Deregistration of Company Common Stock (Page 124)

If the merger is consummated, the Company common stock will be delisted from, and no longer be traded on, the Nasdaq Stock Market and deregistered under the Exchange Act. Accordingly, following the consummation of the merger, we would no longer file periodic reports with the Securities and Exchange Commission, which we refer to as the “SEC,” on account of the Company common stock.

Conduct of Our Business if the Merger is Not Completed (Page 124)

In the event that the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any consideration from Parent or Merger Sub for their shares of Company common stock. Instead, we would remain a public company, our common stock would continue to be listed and traded on the Nasdaq Stock Market and our stockholders would continue to be subject to the same risks and opportunities to which they currently are subject with respect to their ownership of Company common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of our shares, including the risk that the market price of Company common stock may decline to the extent that the current market price of our stock reflects a market assumption that the merger will be completed. If the merger is not completed, our business could be disrupted, including our ability to retain and hire key personnel, potential adverse reactions or changes to our business relationships and uncertainty surrounding our future plans and prospects.



 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 126.

 

Q.

What is the proposed transaction and what effects will it have on the Company?

 

A.

The proposed transaction is the acquisition of the Company by Parent pursuant to the merger agreement. If the proposal to adopt the merger agreement is approved by our stockholders and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into the Company, with the Company being the surviving corporation. As a result of the merger, the Company will become a wholly owned subsidiary of Parent and will no longer be a publicly held corporation, and you will no longer have any rights as a Company stockholder other than your right to receive the merger consideration. In addition, the Company common stock is expected to be delisted from and no longer be traded on, the Nasdaq Stock Market and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of Company common stock. For additional information about the merger, please review the merger agreement attached to this proxy statement as Annex A and incorporated by reference into this proxy statement. We urge you to read the merger agreement carefully and in its entirety, as it is the principal document governing the merger.

 

Q.

What will I receive if the merger is consummated?

 

A.

Upon completion of the merger, you will be entitled to receive the per share merger consideration of $9.50 in cash, without interest and subject to deduction for any required withholding tax, for each share of Company common stock that you own immediately prior to the effective time, unless you are entitled to and have properly demanded appraisal under Section 262 of the DGCL. For example, if you own 1,000 shares of Company common stock immediately prior to the effective time, you will receive $9,500 in cash in exchange for your shares of Company common stock, without interest and subject to deduction for any required withholding tax. You will not receive any shares of the capital stock in the surviving corporation.

 

Q.

How does the per share merger consideration compare to the market price of Company common stock prior to announcement of the merger?

 

A.

The merger consideration of $9.50 per share of Company common stock represents a 79% premium over the Company’s closing share price of $5.30 on September 25, 2020, the last full trading day prior to media speculation about a potential acquisition of the Company, and a 64% premium over its closing share price of $5.81 on October 30, 2020, the last full trading day prior to the public announcement of the merger.

 

Q.

What will holders of Company stock awards receive if the merger is consummated?

 

A.

Effective as of immediately prior to the effective time of the merger, each then-outstanding and unexercised option to purchase shares of Company common stock will vest in full. If any such Company stock option is not exercised prior to the effective time of the merger, then at the effective time of the merger such Company stock option will automatically be canceled and converted into the right to receive an amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying such Company stock option multiplied by (ii) the excess, if any, of the merger consideration over the exercise price per share of such Company stock option, without any interest thereon and subject to all applicable

 

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  withholding taxes. In the event that the exercise price of any Company stock option is equal to or greater than the merger consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit, other than a specified restricted stock unit as described in the next paragraph, that is then outstanding and unvested will vest in full. Each Company restricted stock unit, other than a specified restricted stock unit, that is outstanding as of the effective time of the merger will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (B) the merger consideration without any interest thereon and subject to all applicable withholding taxes.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that was granted (i) on or after October 27, 2020 to new hires or (ii) in connection with any acquisition that closed in 2020, which we refer to collectively as the “specified restricted stock units,” will automatically be cancelled and converted into the right to receive an amount in cash equal to the merger consideration the holder of the specified restricted stock unit would have received pursuant to the preceding paragraph, with payment of the merger consideration made at the vesting dates, subject to the holder of the specified restricted stock units remaining in continuous service with Parent, the surviving corporation or any of its subsidiaries through each such vesting date. The specified restricted stock units granted on or after October 27, 2020 to new hires will vest as to one-third on the first anniversary of their date of grant and the remainder on the first anniversary of the effective time of the merger, subject to acceleration in full upon a termination without cause, and the specified restricted stock units granted in connection with any acquisition that closed in 2020 will vest based on their pre-effective time vesting schedules with certain accelerations to be determined and with further acceleration upon a termination without cause within 12 months following the effective time of the merger. The merger consideration payable with respect to the specified restricted stock units will be net of any applicable withholding taxes and will be paid on the first administratively practicable payroll date following the vesting date.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock award that is then outstanding and unvested will vest in full and will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock award multiplied by (B) the merger consideration, without any interest thereon and net of any applicable withholding taxes.

 

Q.

How does the board of directors recommend that I vote?

 

A.

The board of directors recommends that you vote “FOR” approval of the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger and “FOR” approval of the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

 

Q.

Why is the board of directors recommending that I vote “FOR” approval of the proposal to adopt the merger agreement?

 

A.

After consideration of various factors described in the section entitled “The Merger — Reasons for the Merger; Recommendation of the Board of Directors,” the board of directors, by a unanimous vote of all directors, (a) determined and declared that the merger agreement, the merger and the other transactions contemplated thereby, on the terms and subject to the conditions set forth therein, are advisable and in the best interests of the Company and the Company’s stockholders, (b) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (c) declared that

 

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  the terms of the merger are fair to the Company and its stockholders, (d) determined that it is advisable and in the best interests of the Company for the board of directors to submit the merger agreement to the Company’s stockholders for adoption and directed that the merger agreement be submitted to the Company’s stockholders at a special meeting of the Company’s stockholders for their adoption and (e) recommended that the Company’s stockholders adopt the merger agreement.

 

Q.

When do you expect the merger to be consummated?

 

A.

We are working towards completing the merger as soon as possible. In order to complete the merger, the Company must obtain the stockholder approval described in this proxy statement, and the other closing conditions under the merger agreement must be satisfied or waived. Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the proposal to adopt the merger agreement, we currently anticipate that the merger will be consummated during the first fiscal quarter of 2021, although the Company cannot assure completion by any particular date, if at all. Since the merger is subject to a number of conditions, the exact timing of the merger cannot be determined at this time.

 

Q.

What happens if the merger is not consummated?

 

A.

If the merger agreement is not adopted by the stockholders of the Company or if the merger is not consummated for any other reason, the stockholders of the Company would not receive any payment for their shares of Company common stock in connection with the merger. Instead, the Company would remain an independent public company, and the Company common stock would continue to be listed and traded on the Nasdaq Stock Market. Under specified circumstances, the Company may be required to pay to Parent a fee with respect to the termination of the merger agreement or Parent may be required to pay to the Company a fee with respect to the termination of the merger agreement, as described in the section entitled “The Merger Agreement — Termination Fees” beginning on page 108.

 

Q.

Is the merger expected to be taxable to me?

 

A.

Yes. The exchange of shares of Company common stock for cash pursuant to the merger will generally be a taxable transaction to U.S. holders and certain non-U.S. holders for U.S. federal income tax purposes. A U.S. holder (or a non-U.S. holder that is subject to U.S. federal income tax on its gain from the merger) who exchanges shares of Company common stock for cash pursuant to the merger agreement generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the stockholder’s adjusted tax basis in such shares. You should read “The Merger — U.S. Federal Income Tax Consequences of the Merger” beginning on page 77 for the definition of “U.S. holder” and “non-U.S. holder” and a more detailed discussion of the U.S. federal income tax consequences of the merger. Because individual circumstances may differ, you should also consult your tax advisor for a complete analysis of the effect of the merger on your U.S. federal, state and local and/or foreign taxes.

 

Q.

Do any of the Company’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a stockholder?

 

A.

Yes. In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. The board of directors was aware of these interests and considered them, among other matters, in reaching the determination that the terms and conditions of the merger and the merger agreement were fair to, advisable and in the best interests of the Company and its stockholders, in reaching its decision to approve and adopt the merger agreement, and in making their recommendation that our stockholders vote in favor of adoption

 

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  of the merger agreement. For additional information regarding the interests of our directors and executive officers in the merger, see “The Merger — Interests of Certain Persons in the Merger” beginning on page 69.

 

Q.

Why am I receiving this proxy statement and proxy card or voting instruction form?

 

A.

You are receiving this proxy statement and proxy card or voting instruction form in connection with the solicitation of proxies by the board of directors for use at the special meeting because you have been identified as a holder of Company common stock as of the close of business on the record date for the special meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of Company common stock with respect to such matters.

 

Q.

When and where is the special meeting?

 

A.

The special meeting of stockholders of the Company will be held on January 14, 2021 at 10:00 a.m., Eastern time. Due to public health and travel concerns related to coronavirus (COVID-19), the special meeting will be held virtually, conducted via live audio webcast. You may attend the special meeting online, vote your shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join and participate in the special meeting. Instructions on how to attend and participate online will be posted at www.virtualshareholdermeeting.com/EIGI2021SM before the special meeting. Online check-in will begin at 9:45 a.m. We encourage you to access the meeting prior to the start time to allow ample time to complete the online check-in process. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be provided on the log-in page.

 

Q.

What am I being asked to vote on at the special meeting?

 

A.

You are being asked to consider and vote on:

 

   

a proposal to adopt the merger agreement that provides for the acquisition of the Company by Parent, as it may be amended from time to time in accordance with its terms;

 

   

a proposal to approve, on a nonbinding advisory basis, the “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger as reported on the Golden Parachute Compensation table on page 76; and

 

   

a proposal to approve one or more adjournments of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

 

Q.

What vote is required for the Company’s stockholders to approve the proposal to adopt the merger agreement?

 

A.

The adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of the shares of Company common stock that are issued and outstanding as of the record date. Pursuant to the voting and support agreement entered into on November 1, 2020 between Parent and certain funds affiliated with Goldman Sachs and certain funds affiliated with Warburg Pincus, each a stockholder of the Company, such stockholders agreed, among other things, to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock in favor of the adoption of the merger agreement and any matter that would reasonably be expected to facilitate the merger. As of the record date, these stockholders beneficially owned approximately 48% of the issued and outstanding shares of Company common stock.

 

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Because the affirmative vote required to approve the proposal to adopt the merger agreement is based upon the total number of outstanding shares of Company common stock rather than on the number of votes actually cast, if you fail to submit a proxy or to vote online while virtually attending the special meeting, or if you vote “ABSTAIN,” or if you do not provide your bank, brokerage firm or other nominee with voting instructions, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Q.

What vote is required for the Company’s stockholders to approve the proposal regarding “golden parachute” compensation and the proposal to adjourn the special meeting, if necessary or appropriate?

 

A.

Approval of the proposals regarding “golden parachute” compensation, on a nonbinding advisory basis, and adjournment of the special meeting, if necessary or appropriate, require the affirmative vote of a majority of the votes cast by the holders of all of the shares present or represented at the special meeting and voting on each of these proposals.

If you vote “ABSTAIN” on the proposal regarding “golden parachute” compensation or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement, this will have no effect on these proposals. If you fail to submit a proxy or to vote online while virtually attending the special meeting, or if you do not provide your bank, brokerage firm or other nominee with voting instructions, your shares of Company common stock will not be voted on these proposals, and thus will have no effect on these proposals.

 

Q.

Why am I being asked to cast a nonbinding advisory vote to approve “golden parachute” compensation that the Company’s named executive officers will receive in connection with the merger?

 

A.

The SEC’s rules require us to seek a nonbinding advisory vote with respect to certain payments that will be made to our named executive officers in connection with the merger, or “golden parachute” compensation.

 

Q.

What will happen if stockholders do not approve the “golden parachute” compensation at the special meeting?

 

A.

Approval of “golden parachute” compensation payable under existing agreements with the Company and, in certain cases, new agreements with Parent that our named executive officers may receive in connection with the merger is not a condition to completion of the merger. The vote with respect to “golden parachute” compensation is an advisory vote and will not be binding on us. Therefore, regardless of whether stockholders approve the “golden parachute” compensation, if the merger agreement is adopted by the stockholders and the merger is completed, the “golden parachute” compensation will still be paid to our named executive officers to the extent payable in accordance with the terms of such compensation.

 

Q.

Who can vote at the special meeting?

 

A.

All of our holders of Company common stock of record as of the close of business on December 11, 2020, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. Each holder of Company common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of Company common stock that such holder owned as of the close of business on the record date.

 

Q.

What is a “broker non-vote”?

 

A.

Under the rules of the Nasdaq Stock Market, banks, brokerage firms or other nominees who hold shares in “street name” for customers have the authority to vote on “discretionary” proposals when they have not

 

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  received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-discretionary matters, such as the proposal to adopt the merger agreement, the proposal to approve the nonbinding advisory proposal regarding “golden parachute” compensation and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-discretionary matters, which we refer to generally as “broker non-votes.” Because none of the proposals to be voted on at the special meeting are routine matters for which brokers may have discretionary authority to vote, the Company does not expect any broker non-votes at the special meeting.

 

Q.

What constitutes a quorum for the special meeting?

 

A.

A quorum is necessary to adopt the merger agreement and approve the proposal regarding “golden parachute” compensation at the special meeting. The presence at the special meeting, virtually or by proxy, of the holders of a majority of the shares of Company common stock that are issued and outstanding at the close of business on the record date constitutes a quorum for the purposes of the special meeting. Abstentions and “broker non-votes” (as described above), if any, will be counted as present for the purpose of determining whether a quorum is present. Because none of the proposals to be voted on at the special meeting are routine matters for which brokers may have discretionary authority to vote, the Company does not expect any broker non-votes at the special meeting. As such, if you fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted towards a quorum at the special meeting. The special meeting may be adjourned whether or not a quorum is present.

 

Q.

How do I attend the special meeting virtually?

 

A.

Due to public health and travel concerns related to coronavirus (COVID-19), we will be hosting the special meeting via live audio webcast on the Internet. You will not be able to attend the meeting in person. You may attend the special meeting online, vote your shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join the special meeting.

The webcast will start at 10:00 a.m., Eastern time, on January 14, 2021. Online check-in will begin at 9:45 a.m. Instructions on how to attend and participate online will be posted at www.virtualshareholdermeeting.com/EIGI2021SM before the special meeting. We encourage you to access the meeting prior to the start time to allow ample time to complete the online check-in process. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be provided on the log-in page.

 

Q.

How do I vote?

 

A.

Whether or not you plan to attend the special meeting, we urge you to submit a proxy to ensure your vote is counted. You may still attend and vote at the special meeting even if you have already submitted a proxy to vote your shares. If you are a stockholder of record, you may vote your shares of Company common stock on matters presented at the special meeting in any of the following ways:

 

   

Online while virtually attending the special meeting — the special meeting will be held virtually via live audio webcast. You may attend and vote at the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join and participate in the special meeting.

 

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By proxy—stockholders of record have a choice of having their shares voted by proxy by submitting a proxy in one of the following ways:

 

   

over the Internet—the website for Internet proxy submission is on your proxy card;

 

   

by using a toll-free telephone number noted on your proxy card; or

 

   

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope.

If you hold your shares of Company common stock in “street name,” please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner of shares of Company common stock held in “street name” and wish to vote online while virtually attending the special meeting, you must request and obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee.

A control number, located on your proxy card, is designed to verify your identity and allow you to submit a proxy for your shares of Company common stock, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the Internet or by telephone.

 

Q.

What is the difference between holding shares as a stockholder of record and in “street name”?

 

A.

If your shares of Company common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares of Company common stock, as the “stockholder of record.” This proxy statement, and your proxy card, have been sent directly to you by the Company.

If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of Company common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the stockholder of record. As the beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee how to vote your shares of Company common stock by following their instructions for voting.

 

Q.

If my shares of Company common stock are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee vote my shares of Company common stock for me?

 

A.

Your bank, brokerage firm or other nominee will only be permitted to vote your shares of Company common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of Company common stock. If you do not instruct your bank, brokerage firm or other nominee to vote your shares of Company common stock, your shares of Company common stock will not be voted and the effect will be the same as a vote “AGAINST” the proposal to adopt the merger agreement and your shares of Company common stock will not have an effect on approval of the advisory proposal regarding “golden parachute” compensation or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement.

 

Q.

How can I change or revoke my proxy?

 

A.

If you are the record holder of Company common stock, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised at the final vote at the special meeting, by submitting a later-dated proxy through any of the methods available to you, by giving written notice of revocation to our tabulator, Broadridge Financial Solutions, Inc., not later than January 13, 2021, the day before the special meeting, or by voting online while virtually attending the special meeting.

 

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Your most current proxy card or telephone or Internet proxy is the one that is counted.

 

Q.

What is a proxy?

 

A.

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of Company common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Company common stock is called a “proxy card.” The board of directors has designated Jeffrey H. Fox, Marc Montagner, David Bryson and Timothy Oakes, and each of them singly, with full power of substitution, as proxies for the special meeting.

 

Q.

If a stockholder gives a proxy, how will its shares of Company common stock be voted?

 

A.

Regardless of the method you choose to submit your proxy, the individuals named on the enclosed proxy card, as your proxies, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone proxy processes or the enclosed proxy card, you may specify whether your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement.

 

Q.

How are votes counted?

 

A.

With respect to the proposal to adopt the merger agreement, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes will have the same effect as votes “AGAINST” the proposal to adopt the merger agreement.

With respect to the proposal regarding “golden parachute” compensation and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes will have no effect on these proposals.

 

Q.

What do I do if I receive more than one proxy or set of voting instructions?

 

A.

If you hold shares of Company common stock in more than one account, you may receive more than one proxy or set of voting instructions relating to the special meeting. These should each be voted or returned separately in accordance with the instructions provided in this proxy statement in order to ensure that all of your shares of Company common stock are voted.

 

Q.

What happens if I sell my shares of Company common stock before the special meeting?

 

A.

The record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of Company common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies the Company in writing of such special arrangements, you will retain your right to vote such shares at the special meeting but will transfer the right to receive the per share merger consideration to the person to

 

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  whom you transfer your shares. You will also lose the ability to exercise appraisal rights in connection with the merger with respect to the transferred shares.

 

Q.

Who will solicit and pay the cost of soliciting proxies?

 

A.

The Company has engaged Morrow Sodali to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay Morrow Sodali a fee of approximately $12,000. The Company will also reimburse Morrow Sodali for reasonable out-of-pocket expenses and will indemnify Morrow Sodali and its affiliates against certain claims, expenses, losses, damages, liabilities and judgments. The Company may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company common stock for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q.

What do I need to do now?

 

A.

Even if you plan to virtually attend the special meeting, after carefully reading and considering the information contained in this proxy statement, please submit your proxy promptly to ensure that your shares are represented at the special meeting. If you hold your shares of Company common stock in your own name as the stockholder of record, please submit a proxy for your shares of Company common stock by (a) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope, (b) using the telephone number printed on your proxy card or (c) using the Internet proxy instructions printed on your proxy card. If you decide to vote online while virtually attending the special meeting, your vote at the special meeting will revoke any proxy previously submitted. If you are a beneficial owner of shares of Company common stock held in “street name,” please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

 

Q.

Should I send in my stock certificates now?

 

A.

No. A letter of transmittal will be mailed to you promptly, and in any event within two business days, after the effective time of the merger, describing how you should surrender your shares of Company common stock for the per share merger consideration. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your “street name” shares of Company common stock in exchange for the per share merger consideration. Please do NOT return your stock certificate(s) with your proxy.

 

Q.

What should I do if I have lost my stock certificate?

 

A.

If you have lost your stock certificate, please contact our transfer agent, American Stock Transfer & Trust Company, LLC, at 1-800-937-5449 or info@astfinancial.com, to obtain replacement certificates.

 

Q.

What rights do I have if I oppose the merger?

 

A.

Stockholders are entitled to exercise appraisal rights under Delaware law in connection with the merger but only if they follow the procedures and satisfy the requirements specified in Section 262 of the DGCL. A copy of Section 262 of the DGCL is reproduced in its entirety in Annex E to this proxy statement. We urge you to read these provisions carefully and in their entirety. See “Appraisal Rights” beginning on page 119.

 

Q.

Are there any other risks to me from the merger that I should consider?

 

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A.

Yes. There are risks associated with all business combinations, including the merger. See “Cautionary Statement Concerning Forward-Looking Information” beginning on page 27.

 

Q.

Who can help answer my other questions?

 

A.

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Company common stock, or need additional copies of this proxy statement or the enclosed proxy card, please call Morrow Sodali, our proxy solicitor, at +1 (212) 300-2470.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement, and the documents to which we refer you in this proxy statement, including all documents incorporated by reference in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us, contain a number of “forward-looking statements,” including all statements relating directly or indirectly to the timing or likelihood of completing the merger to which this proxy statement relates, litigation and other information with respect to our plans and strategies. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “intends,” “anticipates,” “plans,” “estimates,” “expects” and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause actual events or our actual results to differ materially from those indicated by such forward-looking statements, including the occurrence of any event or proceeding that could give rise to the termination of the merger agreement; the inability to complete the merger due to the failure of the closing conditions to be satisfied; the outcome of any legal proceedings that may be instituted in connection with the merger; and the other factors described in the Company’s Annual Report on Form 10-K for the period ended December 31, 2019 and in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020, in each case filed with the SEC. In addition, any forward-looking statements represent our estimates only as of the date they were made and should not be relied upon as representing our estimates as of any subsequent date. Except to the extent otherwise required by law, while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change whether as a result of new information, future events or otherwise.

 

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THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the board of directors for use at the special meeting to be held on January 14, 2021, starting at 10:00 a.m., Eastern time, or at any adjournment or postponement thereof. Due to public health and travel concerns related to coronavirus (COVID-19), the special meeting will be held virtually, conducted via live audio webcast. You may attend the special meeting online, vote your shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join and participate in the special meeting. Instructions on how to attend and participate online will be posted at www.virtualshareholdermeeting.com/EIGI2021SM before the special meeting. Online check-in will begin at 9:45 a.m. We encourage you to access the meeting prior to the start time to allow ample time to complete the online check-in process. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be provided on the log-in page.

At the special meeting, holders of Company common stock will be asked to consider and vote on (i) the proposal to adopt the merger agreement as it may be amended from time to time in accordance with its terms, (ii) the proposal, to approve the nonbinding advisory proposal regarding “golden parachute” compensation that will or may become payable to our named executive officers in connection with the merger and (iii) the proposal to approve one or more adjournments of the special meeting, to a later date or dates, if necessary or appropriate, for the purpose of soliciting additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

We do not expect that any matters other than the proposals set forth above will be brought before the special meeting, and only matters specified in the notice of the meeting may be acted upon at the special meeting.

Our stockholders must approve the proposal to adopt the merger agreement in order for the merger to be consummated. If our stockholders fail to approve the proposal to adopt the merger agreement, the merger will not be consummated. A copy of the merger agreement is attached as Annex A to this proxy statement, which we urge you to read carefully in its entirety.

Record Date and Quorum

We have fixed the close of business on December 11, 2020 as the record date for the special meeting, and only holders of record of Company common stock as of the close of business on the record date are entitled to receive notice of and vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on the record date. As of the close of business on the record date, there were 141,713,327 shares of Company common stock outstanding and entitled to vote. Each share of Company common stock owned as of the close of business on the record date entitles its holder to one vote on all matters properly coming before the special meeting.

A majority of the shares of Company common stock that are issued and outstanding at the close of business on the record date, present virtually or represented by proxy, at the special meeting constitutes a quorum for the purposes of the special meeting. Shares of Company common stock represented at the special meeting but not voted, including shares of Company common stock for which a stockholder directs voting “ABSTAIN,” as well as broker non-votes, if any, will be counted for purposes of establishing a quorum. Because none of the proposals to be voted on at the special meeting are routine matters for which brokers may have discretionary authority to vote, the Company does not expect any broker non-votes at the special meeting. As such, if you fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted towards a quorum at the special meeting. A quorum is necessary to adopt the merger agreement and approve the proposal regarding “golden parachute” compensation at the special meeting. Once a share of Company common stock is represented

 

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at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any recess or adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or recessed.

Attendance

Only stockholders of record or their duly authorized proxies have the right to attend the special meeting. If your shares of Company common stock are held through a bank, brokerage firm or other nominee, please request and obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee.

Vote Required

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of Company common stock that are issued and outstanding as of the record date. For the proposal to adopt the merger agreement, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Voting “ABSTAIN” will not be counted as a vote cast in favor of the proposal to adopt the merger agreement but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote online while virtually attending the special meeting, or if you vote “ABSTAIN,” it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

If your shares of Company common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares of Company common stock, the “stockholder of record.” This proxy statement and proxy card have been sent directly to you by the Company.

If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of Company common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the stockholder of record. As the beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting. If you hold your shares of Company common stock in “street name,” please contact your bank, brokerage firm or other nominee for their instructions on how to vote your shares.

Under the rules of the Nasdaq Stock Market, banks, brokerage firms or other nominees who hold shares in “street name” for customers have the authority to vote on “discretionary” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-discretionary matters, such as the proposal to adopt the merger agreement, the proposal to approve the nonbinding advisory proposal regarding “golden parachute” compensation and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-discretionary matters, which we refer to generally as “broker non-votes.” These broker non-votes, if any, will be counted for purposes of determining a quorum, but will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Because none of the proposals to be voted on at the special meeting are routine matters for which brokers may have discretionary authority to vote, the Company does not expect any broker non-votes at the special meeting. As such, if you fail to instruct your broker, bank or other nominee how to vote your shares, your shares will not be counted towards a quorum at the special meeting.

Approval of the advisory proposal regarding “golden parachute” compensation and approval of the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, for the purpose of soliciting

 

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additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement, require a majority of the votes cast on each of these proposals. For the nonbinding advisory proposal regarding “golden parachute” compensation and the proposal to adjourn the special meeting, if necessary or appropriate, you may vote “FOR,” “AGAINST” or “ABSTAIN.” For purposes of each of these proposals, if you fail to submit a proxy or to vote online while virtually attending the special meeting, or if you have given a proxy and vote “ABSTAIN,” the shares of Company common stock will not be counted in respect of, and will not have any effect on, the proposal.

If you are a stockholder of record, you may vote your shares of Company common stock on matters presented at the special meeting in any of the following ways:

 

   

Online while virtually attending the special meeting — the special meeting will be held virtually via live audio webcast. You may attend and vote at the special meeting by visiting www.virtualshareholdermeeting.com/EIGI2021SM. You will need to have your 16-Digit Control Number, included in your proxy card or in the instructions that accompanied your proxy materials, to join the virtual special meeting.

 

   

By proxy — stockholders of record have a choice of voting by proxy:

 

   

over the Internet — the website for Internet proxy submission is on your proxy card;

 

   

by using a toll-free telephone number noted on your proxy card; or

 

   

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope.

If you are a beneficial owner of Company common stock held in “street name,” you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Company common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner of Company common stock held in “street name” and wish to vote online while virtually attending the special meeting, you must request and obtain a 16-Digit Control Number from your bank, brokerage firm or other nominee.

A control number, located on your proxy card, is designed to verify your identity and allow you to submit a proxy for your shares of Company common stock, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the Internet or by telephone.

Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for submitting a proxy over the Internet or by telephone. If you choose to submit your proxy by mailing a proxy card, your proxy card must be received by our tabulator, Broadridge Financial Solutions, Inc., not later than January 13, 2021, the day before the special meeting. Please do not send in your stock certificates with your proxy card. Following the consummation of the merger, a separate letter of transmittal will be mailed to you that will enable you to surrender your stock certificates and receive the per share merger consideration.

If you vote by proxy, regardless of the method you choose to submit a proxy, the individuals named as your proxies on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone proxy processes or the enclosed proxy card, you may specify whether your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares of Company common stock represented by your properly signed proxy will be voted “FOR” the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement.

 

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If you have any questions or need assistance voting your shares, please call Morrow Sodali, our proxy solicitor, at +1 (212) 300-2470.

IT IS IMPORTANT THAT YOU SUBMIT A PROXY FOR YOUR SHARES OF COMPANY COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO VIRTUALLY ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS MAY REVOKE THEIR PROXIES BY VOTING ONLINE WHILE VIRTUALLY ATTENDING THE SPECIAL MEETING.

Shares Owned by Our Directors and Executive Officers

As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, 73,505,584 shares of Company common stock, representing 52% of the outstanding shares of Company common stock on the record date. The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock “FOR” the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement. The shares described above include shares beneficially owned by investment funds and entities affiliated with Warburg Pincus and Goldman Sachs. James C. Neary, Chandler J. Reedy and Justin L. Sadrian are partners of Warburg Pincus & Co., an affiliate of Warburg Pincus. All shares indicated as owned by Messrs. Neary, Reedy and Sadrian are included because of their affiliation with the Warburg Pincus entities. Joseph P. DiSabato is a managing director of Goldman Sachs. All shares indicated as owned by Mr. DiSabato are included because of his affiliation with the Goldman Sachs entities. Warburg Pincus and Goldman Sachs are obligated, pursuant to voting and support agreement entered into on November 1, 2020 between Parent and each of such stockholders, to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock, in favor of the adoption of the merger agreement and any matter that would reasonably be expected to facilitate the merger.

Proxies and Revocation

Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, or by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote online while virtually attending the special meeting. If you are a stockholder of record, your proxy must be received by telephone or the Internet by January 13, 2021, the day before the special meeting, in order for your shares to be voted at the special meeting. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or to vote online while virtually attending the special meeting, or if you vote “ABSTAIN,” or if you do not provide your bank, brokerage firm or other nominee with voting instructions, your shares of Company common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised at the special meeting, by submitting a later-dated proxy through any of the methods available to you, by giving written notice of revocation to our tabulator, Broadridge Financial Solutions, Inc., not later than January 13, 2021, the day before the special meeting, or by voting online while virtually attending the special meeting (your attendance at the special meeting virtually will not, by itself, revoke your proxy; you must vote virtually at the special meeting to revoke your proxy).

Adjournments and Recesses

Although it is not currently expected, the special meeting may be adjourned or recessed to a later date or dates, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the special

 

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meeting to approve the proposal to adopt the merger agreement or if a quorum is not present at the special meeting. Other than an announcement to be made at the special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or recess of the special meeting for the purpose of soliciting additional proxies will allow the Company’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or recessed.

Anticipated Date of Completion of the Merger

We are working towards completing the merger as soon as possible. Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the proposal to adopt the merger agreement, we currently anticipate that the merger will be consummated during the first quarter of 2021, although the Company cannot assure completion by any particular date, if at all. Since the merger is subject to a number of conditions, the exact timing of the merger cannot be determined at this time.

Appraisal Rights

If the merger is effected, record holders of our common stock who submit a written demand for appraisal before the vote is taken on the adoption of the merger agreement, who do not vote in favor of the proposal to adopt the merger agreement, who hold their shares of Company common stock continuously through the effective time of the merger and who otherwise fully comply with the procedures set forth in Section 262 of the DGCL may elect to exercise their appraisal rights to receive, in lieu of the $9.50 per share merger consideration, an amount in cash equal to the judicially determined “fair value” of their shares. The amount determined to be fair value by the court will be determined as of the effective time of the merger and any appraisal amount determined by the court could be more or less than, or the same as, the per share merger consideration for the common stock. Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to the Company. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares. For a summary of the procedures set forth in Section 262 of the DGCL, see “Appraisal Rights” beginning on page 119. An executed proxy that is not marked “AGAINST” or “ABSTAIN” will be voted “FOR” the adoption of the merger agreement and the stockholder submitting that proxy will lose the right to seek an appraisal of his, her or its shares of Company common stock.

A copy of Section 262 of the DGCL is reproduced in its entirety in Annex E to this proxy statement. Failure to follow the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights. We encourage you to read these provisions carefully and in their entirety.

ANY COMPANY STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO SHOULD REVIEW ANNEX E CAREFULLY AND SHOULD CONSULT HIS, HER OR ITS LEGAL ADVISOR, SINCE FAILURE TO TIMELY AND FULLY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.

Solicitation of Proxies; Payment of Solicitation Expenses

The Company has engaged Morrow Sodali to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay Morrow Sodali a fee of approximately $12,000. The Company will also reimburse Morrow Sodali for reasonable out-of-pocket expenses and will indemnify Morrow Sodali and its affiliates against certain claims, expenses, losses, damages, liabilities and judgments. The Company may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company common stock for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Questions and Additional Information

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call Morrow Sodali, our proxy solicitor, at +1 (212) 300-2470.

 

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PARTIES TO THE MERGER

THE COMPANY

Endurance International Group Holdings, Inc.

10 Corporate Drive

Burlington, Massachusetts 01803

(781) 852-3450

Endurance is a leading provider of cloud-based platform solutions that helps millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, business solutions, and more. Our family of brands includes: Constant Contact, Bluehost, HostGator, and Domain.com, among others. Headquartered in Burlington, Massachusetts, Endurance employs over 3,800 people across the United States, Brazil, India and the Netherlands. Shares of Endurance common stock are traded on The Nasdaq Global Select Market under the symbol “EIGI.” The principal executive offices of Endurance are located at 10 Corporate Drive, Burlington, Massachusetts 01803, and its telephone number is (781) 852-3450.

For more information about the Company, see “Where You Can Find More Information” beginning on page 126.

PARENT

Endure Digital Intermediate Holdings, Inc.

c/o Clearlake Capital Group, L.P.

233 Wilshire Boulevard, Suite 800

Santa Monica, CA 90401

(310) 400-8800

Endure Digital Intermediate Holdings, Inc., is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and the other transactions contemplated thereby. Parent is owned by funds managed by affiliates of Clearlake and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement and the related financing transactions. Upon completion of the merger, the Company will be a direct wholly-owned subsidiary of Parent. The principal executive offices of Parent are located at 233 Wilshire Boulevard, Suite 800, Santa Monica, CA 90401, and its telephone number is (310) 400-8800.

MERGER SUB

Endure Digital, Inc.

c/o Clearlake Capital Group, L.P.

233 Wilshire Boulevard, Suite 800

Santa Monica, CA 90401

(310) 400-8800

Endure Digital, Inc. is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and the other transactions contemplated thereby. Merger Sub is a wholly-owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement and the related financing transactions. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the merger, which we refer to as the “surviving corporation.” The principal executive offices of Merger Sub are located at 233 Wilshire Boulevard, Suite 800, Santa Monica, CA 90401, and its telephone number is (310) 400-8800.

 

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THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to do business following the merger. As a result of the merger, the Company will cease to be a publicly traded company. You will not own any shares of the capital stock of the surviving corporation.

Overview of the Merger

The Company, Parent and Merger Sub entered into the merger agreement on November 1, 2020. Under the terms of the merger agreement, among other things, Merger Sub will be merged with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. The following will occur in connection with the merger:

 

   

Each share of Company common stock issued and outstanding immediately prior to the effective time of the merger (other than the excluded shares) will be automatically converted into the right to receive the per share merger consideration, without interest and subject to deduction for any required withholding tax.

 

   

Effective as of immediately prior to the effective time of the merger, each then-outstanding and unexercised option to purchase shares of Company common stock will vest in full. If any such Company stock option is not exercised prior to the effective time of the merger, then at the effective time of the merger such Company stock option will automatically be canceled and converted into the right to receive an amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying such Company stock option multiplied by (ii) the excess, if any, of the merger consideration over the exercise price per share of such Company stock option, without any interest thereon and subject to all applicable withholding. In the event that the exercise price of any Company stock option is equal to or greater than the merger consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect.

 

   

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit, other than a specified restricted stock unit as described in the next paragraph, that is then outstanding and unvested will vest in full. Each Company restricted stock unit, other than a specified restricted stock unit, that is outstanding as of the effective time of the merger will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (B) the merger consideration without any interest thereon and subject to all applicable withholding taxes.

 

   

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that was granted (i) on or after October 27, 2020 to new hires or (ii) in connection with any acquisition that closed in 2020, which we refer to collectively as the “specified restricted stock units,” will automatically be cancelled and converted into the right to receive an amount in cash equal to the merger consideration the holder of the specified restricted stock unit would have received pursuant to the preceding bullet, with payment of the merger consideration made at the vesting dates, subject to the holder of the specified restricted stock units remaining in continuous service with Parent, the surviving corporation or any of its subsidiaries through each such vesting date. The specified restricted stock units granted on or after October 27, 2020 to new hires will vest as to one-third on the first anniversary of their date of grant and the remainder on the first anniversary of the effective time of the merger,

 

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subject to acceleration in full upon a termination without cause, and the specified restricted stock units granted in connection with any acquisition that closed in 2020 will vest based on their pre-effective time vesting schedules with certain accelerations to be determined and with further acceleration upon a termination without cause within 12 months following the effective time of the merger. The merger consideration payable with respect to the specified restricted stock units will be net of any applicable withholding taxes and will be paid on the first administratively practicable payroll date following the vesting date.

 

   

Effective as of immediately prior to the effective time of the merger, each Company restricted stock award that is then outstanding and unvested will vest in full and will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock award multiplied by (B) the merger consideration, without any interest thereon and subject to all applicable withholding taxes.

Following and as a result of the merger:

 

   

as of the effective time of the merger, all shares of Company common stock will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder will cease to have any rights with respect thereto, except the right to receive the merger consideration. Company stockholders will no longer have any interest in, and will no longer be stockholders of, the Company, and will not participate in any of the Company’s future earnings or growth;

 

   

shares of Company common stock are expected to be delisted from and will no longer be traded on the Nasdaq Stock Market, and price quotations with respect to shares of Company common stock in the public market will no longer be available; and

 

   

the registration of shares of Company common stock under the Exchange Act is expected to be terminated.

Directors and Officers of the Surviving Corporation

The directors of Merger Sub immediately prior to the effective time of the merger will be the initial directors of the surviving corporation. The officers of the Company immediately prior to the effective time of the merger will be the initial officers of the surviving corporation.

Background of the Merger

The board of directors, together with members of the Company’s senior management, regularly reviews and assesses the Company’s operations, financial condition, competitive landscape and industry developments in the context of the Company’s strategic plans and, in connection with this review and assessment, periodically considers strategic acquisitions, strategic alliances, business combinations, capital raising opportunities and other strategic alternatives. In addition, from time to time the Company and the board of directors had informal discussions in connection with such review and assessment with representatives of Centerview and Goldman Sachs, who were selected based their reputation and experience as financial advisors in the Company’s industry.

In late 2018, Party A (a private equity firm) and Party B (a potential strategic counterparty) inquired about exploring a potential strategic transaction with the Company, and the Company engaged in exploratory discussions with them. Pursuant to non-disclosure agreements, the Company provided certain business information to each of Party A and Party B. The non-disclosure agreement with Party A included standstill obligations that would terminate upon the signing of a definitive agreement with a third party for the sale of the Company. The non-disclosure agreement with Party B did not include a standstill provision.

On October 30, 2019, the board of directors held a regularly scheduled meeting, with members of senior management and representatives of the Company’s financial advisors, Centerview and Goldman Sachs, and legal

 

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counsel, WilmerHale, present. As part of a general update process for the board of directors, representatives of Centerview and Goldman Sachs reviewed with the board of directors various strategic alternatives available to the Company, including the continued operation of the Company on a standalone basis (including the possibility of making acquisitions or raising additional equity capital), the divestiture of individual businesses and the sale of the Company as a whole. The financial advisors also identified certain potential participants if the Company were to conduct a sale process of some or all of the Company. The board of directors determined to continue to discuss available strategic alternatives and agreed to schedule a meeting of the board of directors in December 2019 to continue such discussion together with representatives of Centerview and Goldman Sachs.

On December 4, 2019, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs reviewed with the board of directors certain considerations in determining whether to pursue a sale of all or a part of the Company, and discussed with the board of directors parties that might be interested in acquiring all or a part of the Company. A representative of WilmerHale reviewed for the board of directors the fiduciary duties of directors in considering a possible strategic transaction and certain governance considerations relating to potential conflicts of interest in a sale process. The board of directors authorized management to resume exploratory discussions with Party B in response to renewed outreach from Party B, but advised management that it was not making a decision at that time as to whether to pursue a transaction with Party B or any other business combination transaction.

On January 21, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs led a discussion with the board of directors regarding unsolicited inquiries received by the Company and provided an update on exploratory conversations with Party B about a potential strategic transaction with the Company, noting that Party B had indicated that it was not interested in pursuing a cash acquisition of the Company. The financial advisors also discussed how the Company might structure a sale process, including an indicative timeline, as well as a preliminary list of potentially interested parties to contact with respect to the sale of all or a portion of the Company, selected based on their likely interest in a potential transaction. The board of directors determined to defer any decision as to whether to pursue a potential sale of the Company until an updated three-year financial plan of the Company to be prepared by the Company’s management could be reviewed.

On February 5, 2020, the board of directors held a regularly scheduled meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs provided an update on market conditions and presented illustrative preliminary financial analyses, based on financial information provided to the financial advisors by the Company’s management. The financial advisors also discussed with the board of directors a potential sale process for the Company, including a timeline, a range of potential strategic and financial buyers, and potential next steps in such a process. The board of directors instructed the Company’s management to continue to work to finalize the Company’s three-year financial plan and to work with the Company’s financial advisors to develop for further consideration a process that might be followed if the board of directors were to determine to pursue a potential sale of the Company.

On February 13, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of WilmerHale present. Representatives of WilmerHale reviewed the fiduciary duties of directors generally and as they pertain to a potential sale of the Company.

On March 10, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Mr. Fox, the Chief Executive Officer of the Company, described the Company’s response to the COVID-19 pandemic, and the board of directors discussed significant market disruptions that had resulted from the pandemic and its impact on the Company’s share price. Representatives of Centerview and Goldman Sachs and the board of directors discussed

 

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considerations regarding a potential sale process, including a list of potential strategic and financial buyers that had been circulated to the board of directors. The financial advisors then discussed the impact of the COVID-19 pandemic on the equity and credit markets, including the significant decline in the price of the Company’s common stock. Management discussed the Company’s current financial condition and prospects. After considering the then current economic and business conditions, the board of directors determined that the Company should continue to pursue its strategic plan as an independent company and that the Company and its advisors should cease any further discussion of a potential sale transaction.

On April 27, 2020, the board of directors held a regularly scheduled telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs updated the board of directors on recent market developments in response to the COVID-19 pandemic, including the impact on trading of the Company’s common stock and potential capital raising options in light of the uncertain economic environment. They then updated the board of directors on recent unsolicited inbound inquiries from potential strategic partners. Consistent with its prior determination at the March 10th 2020 meeting, the board of directors reconfirmed that the Company should not initiate a process to explore a potential sale of the Company and should continue to pursue its strategic plan as an independent company.

On June 11, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs advised the board of directors on recent market developments, including strategic transactions involving competitors of the Company, and unsolicited inbound inquiries that had been received by the Company. The financial advisors also discussed potential capital raising alternatives that the Company might consider to facilitate its pursuit of its strategic plan as an independent company, and the board of directors authorized management to continue to explore those capital raising alternatives.

On July 14, 2020, in response to an unsolicited inbound inquiry to the Company’s financial advisors earlier in the year, Mr. Fox had an introductory telephonic conversation with representatives of Party C, a private equity firm, regarding the possibility of a strategic transaction.

On July 27, 2020, a representative of Party C contacted Mr. Reedy, a director of the Company, by telephone to express its interest in a potential transaction with the Company.

On July 28, 2020, in response to an unsolicited inbound inquiry to the Company’s financial advisors earlier in the year, members of senior management, including Mr. Fox had an introductory telephonic conversation with representatives of Party D, a private equity firm, regarding the possibility of a strategic transaction.

On July 29, 2020, the board of directors held a regularly scheduled telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs provided an update on market developments and the performance of the Company’s stock price. The board of directors and the financial advisors also discussed observations regarding an increase in unsolicited interest in the Company occurring while the Company’s stock was trading at a 52-week high. The financial advisors also provided an update on the introductory discussions with Party C and Party D, as well as an overview of a potential outreach process, including a list of potential financial and strategic buyers that could be contacted. The board of directors then discussed the potential advantages and risks of pursuing a sale of the Company rather than continuing to operate independently, along with the alternative possibility of raising additional capital. Management reviewed with the board of directors the Company’s three-year financial plan. After discussion regarding the Company’s strategic alternatives, including whether to initiate a sale process or to explore raising additional capital, the board of directors determined that management should instruct Centerview and Goldman Sachs to initiate outreach to the potential buyers identified by the financial advisors and reviewed with the board of directors.

 

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Following the July 29, 2020 meeting of the board of directors, and as directed by the board of directors, Centerview and Goldman Sachs contacted 25 parties that had been identified in discussions with the board of directors as parties with potential interest in a strategic transaction with the Company, including Clearlake. From August to September 2020, the Company negotiated and entered into non-disclosure agreements with 12 potential bidders, including Clearlake on September 1, 2020, Party A on August 24, 2020 (which replaced the earlier non-disclosure agreement with Party A, which had expired), Party C on August 14, 2020, and Party D on August 14, 2020. The non-disclosure agreements with each of the 12 potential bidders contained standstill obligations with a term of 12 months that would terminate upon the signing of a definitive agreement with a third party for the sale of the Company. Each of the 12 parties that executed a non-disclosure agreement with the Company received a telephonic management presentation regarding the business of the Company and access to a limited virtual data room containing financial and organizational information regarding the Company, including the three-year financial plan, which had been provided to the board of directors. Such parties (other than two of the 12 participants that had already withdrawn from the process) were sent a process letter requesting submission of a preliminary, non-binding written indication of interest to acquire the Company by September 23, 2020, which would serve as the basis for determining whether one or more parties would be invited to conduct a more detailed investigation of the Company, including additional meetings with management and access to a more extensive virtual data room.

On August 26, 2020, Party A submitted a preliminary, non-binding indication of interest to acquire the Company for a price of $7.15 per share in cash. Party A’s proposal acknowledged the first round bidding date in September, but suggested that the Company permit Party A to accelerate their due diligence efforts in order to allow Party A to re-affirm value and deliver a proposed form of merger agreement in three weeks, which Party A suggested should be followed by a short exclusivity period to negotiate definitive transaction documents. On August 26, 2020, the closing price for Company common stock on The Nasdaq Stock Market was $6.34 per share.

On September 2, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives from Centerview and Goldman Sachs provided an update on the outreach process to date. They then discussed the proposal from Party A. After discussion, the board of directors determined not to accept Party A’s proposal and directed Centerview and Goldman Sachs to encourage Party A to submit a proposal at a higher price by the September 23, 2020 deadline for receiving proposals.

From September 15 through September 21, 2020, the Company conducted telephonic meetings with certain participants, including Clearlake, to answer follow-up questions arising from the management presentations.

On September 23, 2020, Clearlake, Party A and Party C each submitted to the Company preliminary, non-binding indications of interest for a potential transaction, each subject to certain conditions, including the completion of due diligence. Clearlake submitted a proposal to acquire the Company for a price of $7.00 to 7.25 per share in cash. Party A submitted a confirmation of its prior proposal to acquire the Company for a price of $7.15 per share in cash. The Party A proposal included a request for four weeks of exclusivity to complete due diligence and negotiate definitive transaction documents. Party C submitted a proposal to acquire the Company for a price of $7.00 to 7.50 per share in cash. None of the other parties that executed a non-disclosure agreement, including Party D, submitted proposals or continued to participate in the process. On September 23, 2020, the closing price for Company common stock on The Nasdaq Stock Market was $5.11 per share.

On September 24, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives from Centerview and Goldman Sachs provided an update on the sale process, describing the scope of the outreach efforts and summarizing the three proposals that had been received as a result of that outreach. The board of directors then discussed with Centerview and Goldman Sachs potential responses to Clearlake, Party A and Party C. In view of the range of proposed prices, the board of directors determined that further evaluation of the Company’s

 

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standalone alternatives, including potential capital raising efforts, was warranted before responding to Clearlake, Party A and Party C and asked Centerview and Goldman Sachs to provide further analysis of those alternatives at a subsequent meeting of the board of directors.

On September 28, 2020, an article was published by Bloomberg reporting that the Company was exploring a potential sale. On September 25, 2020, the last full trading day prior to the article being published, the closing price for Company common stock on The Nasdaq Stock Market was $5.30 per share.

On September 28, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Mr. Fox provided an overview of the Company’s standalone strategic plan, including a discussion of the assumptions and execution risks associated with the plan. Representatives of Centerview and Goldman Sachs then discussed the Company’s alternatives for raising additional capital to support the Company’s business plan as an independent company, including the potential advantages and disadvantages of different approaches, and presented certain preliminary illustrative financial analyses of the potential impact of certain capital raising scenarios, based on financial information provided to the financial advisors by the Company’s management. The board of directors next discussed with Centerview and Goldman Sachs potential responses to the proposals received on September 23, 2020 from Clearlake, Party A and Party C, in order to seek to increase the prices being proposed. The board of directors instructed management to schedule a call with Centerview and Goldman Sachs the following day, to which all the directors would be invited, to determine appropriate messaging to Clearlake, Party A and Party C.

On September 29, 2020, the board of directors, members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale had an informal meeting by teleconference and discussed potential responses to Clearlake, Party A and Party C. The consensus of the board of directors was that the prices indicated by Clearlake, Party A and Party C did not justify proceeding to comprehensive due diligence with any of Clearlake, Party A, Party C or their respective lenders and that Clearlake, Party A and Party C should instead be provided with limited access to additional due diligence material to support a second round of bidding.

Following the meeting of the board of directors, representatives of Centerview and Goldman Sachs spoke to each of Clearlake, Party A and Party C by telephone and, consistent with the direction by the board of directors, informed them that their respective proposals were not at a price at which the Company was prepared to proceed with a transaction or to permit them to perform comprehensive due diligence or share non-public information with their lenders. Clearlake, Party A and Party C were informed they would receive limited access to additional diligence material to support a second round of bidding, following which the Company would assess whether to allow one or more parties to proceed to more comprehensive due diligence and to share non-public information with their lenders to allow them to obtain debt financing commitments.

On October 2, 2020, the Company provided access to additional diligence materials through a virtual data room to Clearlake, Party A and Party C to facilitate their ongoing due diligence.

From October 5 to October 16, 2020, representatives of Clearlake, Party A and Party C attended telephonic meetings with the Company at which members of the Company’s management provided information regarding the Company’s business, operations and financial performance.

On October 15, 2020, Centerview and Goldman Sachs provided formal instructions for the second round of bidding by email to each of Clearlake, Party A and Party C. Each of Clearlake, Party A and Party C was told to submit an updated proposal by October 19, 2020.

On October 19, 2020, Clearlake and Party C each submitted to the Company updated non-binding indications of interest for a potential transaction. Clearlake submitted a proposal to acquire the Company for a price of $7.65 per share in cash and requested an unspecified period of exclusivity to negotiate definitive transaction documents. The Clearlake proposal was accompanied by a proposed form of merger agreement. Clearlake’s

 

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proposed form of merger agreement was subsequently abandoned in favor of the form of merger agreement prepared by WilmerHale that was made available on October 21, 2020, as described below. Clearlake also separately contacted representatives of Centerview and Goldman Sachs, as well as Mr. Reedy, to discuss its proposal and reiterate its strong interest, including a potential willingness to move up in price contingent upon receipt of more information regarding the Company to support such a decision. Party C submitted a proposal to acquire the Company for a price of $7.60 per share in cash and included a proposed form of exclusivity letter, which contemplated a period of exclusivity through November 2, 2020 to complete due diligence and negotiate definitive transaction documents. On October 19, 2020, the closing price for Company common stock on The Nasdaq Stock Market was $5.91 per share.

On October 20, 2020, Party A submitted an updated non-binding indication of interest proposing to acquire the Company for a price of $8.15 per share in cash. The proposal indicated that Party A was not prepared to move forward without exclusivity.

On October 20, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs provided an update to the board of directors on the sale process and a summary of the proposals submitted by each of Clearlake, Party A and Party C, noting that each had requested exclusivity, that Clearlake had suggested in calls subsequent to the submission of its proposal an ability to increase its price and that Party A had suggested that it would only be willing to proceed with exclusivity. Representatives of Centerview and Goldman Sachs then reviewed with the board of directors certain preliminary financial analyses of proposals by Clearlake, Party A and Party C and of the Company on a standalone basis, based on the long-term financial projections that had been prepared by the Company’s management and provided to the financial advisors prior to the meeting. The board of directors then discussed steps to be taken to seek to increase the prices being proposed by Clearlake, Party A and Party C. After discussion, the board of directors decided not to enter into exclusive negotiations with any party and instructed Centerview and Goldman Sachs to inform Party C that it was being eliminated from the process and to inform Clearlake and Party A that they would need to increase their proposed prices and that the board of directors would consider granting exclusivity only after it had received a firm proposal accompanied by a revised version of the then forthcoming draft merger agreement and an indication of committed financing.

On October 20, 2020, following the meeting of the board of directors, as directed by the board of directors, representatives of Centerview and Goldman Sachs contacted each of Clearlake, Party A and Party C. The Company’s financial advisors informed Clearlake and Party A that they would need to increase their proposed prices and that the board of directors would consider granting exclusivity only after it had received a firm proposal accompanied by a revised version of the then forthcoming draft merger agreement and an indication of committed financing. Both Clearlake and Party A agreed to remain in the process without exclusivity and received permission from the Company to share non-public information with their lenders to allow them to obtain debt financing commitments. The Company’s financial advisors informed Party C that it had been eliminated from the process. Party C responded that it was prepared to improve its proposal if it were allowed to remain in the process. Later that day, members of the Company’s senior management and representatives of Centerview, Goldman Sachs and WilmerHale met by teleconference to discuss the feedback from Party C. The Company concluded that Party C should be allowed to rejoin the process and continue to participate if it significantly increased its price. That evening, Party C submitted to the Company a revised non-binding indication of interest proposing a price of $8.05 to $8.25 per share in cash.

On October 21, 2020, management notified the board of directors by email of the revised proposal from Party C and advised the board of directors that Party C was being allowed to continue to participate in the process.

On October 21, 2020, a draft merger agreement prepared by WilmerHale was made available to Clearlake, Party A and Party C.

 

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Between October 21 and October 28, 2020, members of senior management of the Company, with representatives of Centerview, Goldman Sachs and WilmerHale attending, conducted numerous due diligence teleconferences with representatives of Clearlake, Party A and Party C and their respective legal counsel and other advisors. The Company made available additional information to each of Clearlake, Party A and Party C through the virtual data room to support ongoing due diligence during this period.

On October 23, 2020, Party A delivered to Centerview and Goldman Sachs an issues list outlining Party A’s position on key issues in the draft merger agreement and a plan outlining a proposed reorganization of the Company into separate web presence and email marketing divisions to facilitate Party A’s proposed transaction and financing structure.

On October 24, 2020, Mr. Fox spoke by teleconference with representatives of Party C. The parties discussed generally the business of the Company.

On October 24, 2020, Sidley Austin LLP, outside legal counsel to Clearlake and referred to as Sidley, delivered to WilmerHale a revised draft of the merger agreement.

On October 26, 2020, Party A’s outside legal counsel delivered to WilmerHale a revised draft of the merger agreement, which contemplated a reorganization to separate the web presence and email marketing businesses. Party C did not submit a revised version of the October 21, 2020 draft of the merger agreement.

Also on October 26, 2020, at the request of Clearlake, Mr. Fox and a representative of Centerview met in person with representatives of Clearlake. The parties discussed generally the business of the Company. Consistent with instructions given by the Company’s financial advisors to Clearlake before the meeting, there was no discussion regarding Mr. Fox’s potential employment arrangements or compensation.

Also on October 26, 2020, Mr. Fox spoke by teleconference with representatives of Party A. The parties discussed generally the business of the Company.

On October 27, 2020, Centerview and Goldman Sachs delivered a revised draft of the merger agreement prepared by WilmerHale to each of Clearlake, Party A and Party C and requested comments to the draft by October 29, 2020. The revised draft of the merger agreement addressed certain comments received from Clearlake and Party A.

Following the meeting of the board of directors, representatives of Centerview and Goldman Sachs spoke by telephone to each of Clearlake, Party A and Party C and requested best and final proposals no later than 12:30 p.m. Eastern time on October 30, 2020.

On October 29, 2020, each of Clearlake, Party A and Party C submitted revised drafts of the draft merger agreement circulated on October 27, 2020. Party C also provided copies of commitment letters executed by Party C’s debt financing sources.

On October 30, 2020, Clearlake, Party A and Party C each submitted updated proposals to representatives of Centerview and Goldman Sachs. Party C submitted a revised written proposal increasing its proposed price to $8.75 per share. Clearlake stated that it was raising its price to $8.90 per share in cash and reiterated its request for exclusivity. Clearlake subsequently provided a commitment letter executed by Clearlake’s lead debt financing bank. Party A submitted a revised written proposal increasing its proposed price to $9.16 per share. Party A’s proposal stated that it was Party A’s best and final proposal, and was contingent on the Company granting exclusivity to Party A. Party A’s proposal was accompanied by copies of commitment letters executed by Party A’s debt financing sources and stated that it would expire if not accepted prior to 5:00 p.m. Eastern time on that date. On October 30, 2020, the closing price for Company common stock on The Nasdaq Stock Market was $5.81 per share.

 

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Also on October 30, 2020, a draft exclusivity agreement prepared by WilmerHale was made available to Clearlake, Party A and Party C.

On October 30, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives WilmerHale present. A representative of WilmerHale reviewed the proposed terms of engagement letters between the Company and each of Centerview and Goldman Sachs with the board of directors, noting that, in light of Mr. DiSabato’s position as a managing director at Goldman Sachs and his service on the board of directors, the engagement of Goldman Sachs would be subject to the Company’s related person transaction policy and would need to be approved by the audit committee under that policy. A representative of WilmerHale then reviewed the fiduciary duties of the board of directors in connection with the potential sale of the Company for cash consideration. Representatives of Centerview and Goldman Sachs then joined the meeting. Representatives of Centerview and Goldman Sachs summarized the terms of the revised proposals received from Clearlake, Party A and Party C and reviewed certain preliminary financial analyses prepared by the Company’s financial advisors. A representative of WilmerHale reviewed a summary of the comments by Clearlake, Party A and Party C to certain key terms of the draft merger agreement. The Company’s financial advisors then reviewed the discussions with each of Clearlake, Party A and Party C regarding their proposals. The board of directors also reviewed and discussed the structures, amounts, terms and potential execution risks relating to the proposed financing for each of Clearlake, Party A and Party C. In particular, the board of directors discussed the uncertainties and risks associated with the proposed structure and financing plan of Party A. After discussion, the board of directors instructed Centerview and Goldman Sachs to inform each of Clearlake, Party A and Party C that the bidding remained competitive and to ask each bidder to indicate its capacity to increase its offer price. The board of directors then discussed the potential benefits of forming an ad hoc committee of directors to allow for flexible and timely support of management in responding to Clearlake, Party A and Party C under circumstances when it might not be practical to assemble the full board of directors, and the board of directors determined to establish such ad hoc committee, consisting of Ms. Ayers, Mr. Reedy and Ms. Wellman, with authority to grant exclusivity to Clearlake, Party A or Party C if deemed advisable. The board of directors agreed that all directors would be invited to attend meetings of the ad hoc committee. The board of directors then reviewed a summary of Centerview’s and Goldman Sachs’ relationships with Clearlake, Party A and Party C over the last two years. The meeting of the board of directors was then recessed, and a meeting of the audit committee of the board of directors was convened to consider whether to approve the terms of Goldman Sachs’ engagement in accordance with the Company’s related person transaction policy. After the audit committee approved Goldman Sachs’ engagement, the meeting of the board of directors was then reconvened, and the board of directors, with Mr. DiSabato abstaining due to his affiliation with Goldman Sachs, authorized management to execute engagement letters with Centerview and Goldman Sachs on terms consistent with those discussed at the meeting, which engagement letters were executed the next day. The board of directors then recessed the meeting until later that day.

Thereafter, representatives of Centerview and Goldman Sachs contacted each of Clearlake, Party A and Party C by telephone, advised them that bidding remained competitive and discussed with each bidder its capacity to raise its price. Clearlake and Party C each responded that they were willing and able to raise their prices, but needed guidance from the Company as to the price level that would need to be proposed to be granted exclusivity. Party A stated that its decision to increase its price to the price in its last proposal had been difficult and that it would not be able to increase its proposed price by more than a nominal amount. Party A also updated the deadline on its proposal to 6:20 p.m. Eastern time on October 30, 2020. Party A communicated a similar message in a call to the Company’s Chairman on that date.

Later on October 30, 2020, the board of directors reconvened by telephone with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs summarized their calls with each of Clearlake, Party A and Party C and discussed with the board of directors the best path to achieve the highest reasonably available price for stockholders. After discussions with the Company’s financial advisors, the board of directors determined that Party A was not expected to significantly increase its proposed price given its prior communications with the Company’s financial advisors

 

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and Chairman. The board of directors then determined that Clearlake and Party C should be informed that it was likely that the board of directors would grant a short period of exclusivity to a participant that would increase its price to $9.50 per share. The board of directors again recessed the meeting of the board of directors to later in the day when further reports on the responses of Clearlake and Party C could be provided.

Thereafter, representatives of Centerview and Goldman Sachs contacted Clearlake and Party C by telephone and conveyed the message authorized by the board of directors and asked for a response by 7:00 p.m. Eastern time. Later that day, Clearlake communicated to the Company’s financial advisors that it would increase its proposed price to $9.50 per share and would also increase the Parent termination fee in the merger agreement from 7% to 8% of the Company’s equity value. Party C communicated to the Company’s financial advisors that it was likely willing to raise its price, but needed more time to determine its best and final offer.

Later on October 30, 2020, the board of directors reconvened by telephone with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview and Goldman Sachs summarized their calls with each of Clearlake and Party C, and Mr. Neary stated that he had received a text and a phone call from a representative of Party A indicating, consistent with the response provided to Centerview and Goldman Sachs earlier that evening, that Party A’s proposal was expiring and that it had very little if any capacity to increase its proposed price. During the meeting, a representative of Goldman Sachs received an email from Party C to relay Party C’s best and final offer of $9.25 per share. In light of the increase of Clearlake’s offered price to $9.50 per share in cash, the board of directors authorized the Company to enter into an agreement with Clearlake granting exclusivity through 3:00 p.m. Eastern time the following day and to finalize the terms of the merger agreement. Shortly following the meeting, Clearlake and the Company entered into an exclusivity agreement providing for exclusivity through 3:00 p.m. Eastern time on October 31, 2020.

From October 30 to November 1, 2020, WilmerHale and Sidley negotiated the terms of the definitive merger agreement, including the provisions relating to the ability of the Company to respond to unsolicited proposals, the information required to be provided by the Company to Parent and Merger Sub in connection with its debt financing and the circumstances under which the termination fees are payable. WilmerHale also provided a proposed form of voting agreement to Sidley on October 30, 2020, which was accepted by Clearlake later that day.

On October 31, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of WilmerHale presented a summary of the principal terms of the definitive merger agreement between Parent and the Company previously distributed to the directors, highlighting certain provisions that remained under negotiation. Representatives of Centerview and Goldman Sachs then reviewed with the board of directors their respective financial analyses of the $9.50 per share merger consideration, based on financial forecasts that had been prepared by the Company’s management and delivered to the Company’s financial advisors, and which were approved by the board of directors for such purpose. For a detailed discussion of the financial forecasts, see the section below captioned under the heading “ — Financial Forecasts.” There was discussion regarding the status of the merger agreement and financing commitments, and the financial advisors advised the board of directors that Clearlake would likely require some additional time to finalize its financing commitment letters. The board of directors authorized the Company to extend Clearlake’s exclusivity period through midnight that night. Shortly following the meeting, Clearlake and the Company entered into an amendment to the exclusivity agreement extending exclusivity until 11:59 p.m. Eastern time on October 31, 2020.

Later on October 31, 2020, the ad hoc committee met by telephone with other members of the board of directors, members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of Centerview, Goldman Sachs and WilmerHale provided an update on status and discussed with the committee the possibility of a further extension of exclusivity in order to finalize the merger agreement and financing commitments.

 

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Later on October 31, 2020, members of senior management met by telephone with representatives of Centerview, Goldman Sachs and WilmerHale. Mr. Fox advised the group that he had spoken to members of the board of directors and all supported a further extension of exclusivity through 3:00 p.m. Eastern time the following day. Shortly following the meeting, Clearlake and the Company entered into an amendment to the exclusivity agreement extending exclusivity through 3:00 p.m. Eastern time on November 1, 2020.

On November 1, 2020, the board of directors held a telephonic meeting, with members of senior management and representatives of Centerview, Goldman Sachs and WilmerHale present. Representatives of WilmerHale reviewed the changes to the terms of the definitive merger agreement from the prior draft that had been presented to the board of directors at the October 31, 2020 meeting. Representatives of Centerview and Goldman Sachs noted that there were no changes to their financial analyses presented at the October 31, 2020 meeting. Representatives of Centerview then rendered to the board of directors an oral opinion, which was subsequently confirmed by delivery of a written opinion dated November 1, 2020, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in preparing its opinion, the $9.50 per share merger consideration to be paid to the holders of Company common stock (other than excluded shares, dissenting shares and shares held by any affiliate of the Company or Parent) pursuant to the merger agreement was fair, from a financial point of view, to such holders. For a detailed discussion of Centerview’s opinion, please see below under the caption “The Merger —Opinion of the Company’s Financial Advisors — Opinion of Centerview Partners LLC.” A representative of Goldman Sachs then rendered to the board of directors an oral opinion, which was subsequently confirmed by delivery of a written opinion dated November 1, 2020, to the effect that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in preparing its opinion, the $9.50 per share merger consideration to be paid to the holders (other than Parent and its affiliates) of Company common stock was fair from a financial point of view to such holders. For a detailed discussion of Goldman Sachs’ opinion, please see below under the caption “The Merger — Opinion of the Company’s Financial Advisors — Opinion of Goldman Sachs & Co. LLC.” After discussion, the board of directors unanimously voted to approve the merger agreement and the transactions contemplated thereby, including the merger and the voting agreement, and to recommend the merger agreement to the Company’s stockholders

Following the meeting of the board of directors on November 1, 2020, the Company and Parent executed and delivered the merger agreement. Concurrently, Parent executed and delivered the equity commitment letter and the guaranty, and provided the debt commitment letters executed and delivered by the debt commitment parties. On November 2, 2020, the Company issued a press release announcing the transaction.

Reasons for the Merger; Recommendation of the Board of Directors

At a meeting held on November 1, 2020, the board of directors, by a unanimous vote of all directors, (a) determined and declared that the merger agreement, the merger and the other transactions contemplated thereby, on the terms and subject to the conditions set forth therein, are advisable and in the best interests of the Company and its stockholders, (b) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (c) declared that the terms of the merger are fair to the Company and the Company’s stockholders, (d) determined that it is advisable and in the best interests of the Company for the board of directors to submit the merger agreement to the Company’s stockholders for adoption and directed that the merger agreement be submitted to the Company’s stockholders at a special meeting of the Company’s stockholders for their adoption, and (e) recommended that the Company’s stockholders adopt the merger agreement.

Before reaching the determination that the terms and conditions of the merger and the merger agreement were fair to, advisable and in the best interests of the Company and its stockholders, reaching its decision to approve and adopt the merger agreement, and making its recommendation, the board of directors consulted with its outside legal and financial advisors and with the Company’s senior management team. In reaching its

 

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recommendation, the board of directors considered a number of factors including, but not limited to, the following material factors that it believes support its decision to enter into the merger agreement and consummate the merger (which factors are not necessarily presented in order of relative importance):

 

   

Best Alternative for Maximizing Stockholder Value. The board of directors believed that receipt of the merger consideration of $9.50 per share in cash was more favorable to the Company stockholders than the likely value that would result from other potential transactions or remaining independent. This decision was based on, among other things, the board of directors’ assessment of:

 

   

the Company’s historical operating and financial performance;

 

   

the Company’s competitive position;

 

   

the advantages of entering into the merger agreement in comparison with the risks and uncertainties of remaining independent, including risks related to the Company’s future prospects; risks related to executing the Company’s business plan and achieving the Company’s financial projections as a standalone company, including competitive pressures that could require greater investment in customer acquisition and technology acquisition costs with resultant pressure on margins; the risks inherent in the Company’s industry, including whether the adverse effects of the pandemic on the Company’s customers were not yet fully reflected given the annual renewal cycles for many existing customers; risks in the economy and capital markets as a whole, including whether the Company could raise equity capital and reduce and/or refinance existing indebtedness to provide increased operating flexibility and provide increased float for the Company’s common stock that could attract additional investment interest; and the various additional risks and uncertainties that are described in the Company’s most recent annual report on Form 10-K filed with the SEC or subsequently filed quarterly reports on Form 10-Q;

 

   

the possible alternatives to a sale of the entire Company, including continuing as a standalone company, which alternatives the board of directors evaluated with the assistance of its outside legal and financial advisors and determined did not present the best reasonably available alternative for our stockholders in light of, among other factors, the potential risks, rewards and uncertainties associated with those alternatives;

 

   

the board of directors’ belief that its negotiations with multiple competitive bidders, including Clearlake, had resulted in the highest price per share for the Company common stock that Clearlake (or any other party) was willing to pay; and

 

   

the board of directors’ belief that the process conducted by the Company had resulted in the highest price reasonably available to the stockholders of the Company.

 

   

Attractive Value. The board of directors concluded that the consideration of $9.50 per share represented the highest valuation reasonably attainable by the Company and an opportunity for the Company’s stockholders to receive a significant premium over the market price of the Company common stock. The board of directors reviewed the historical market prices, volatility and trading information with respect to the Company common stock, and the active sale process undertaken by the Company, including:

 

   

the fact that the $9.50 per share price to be paid in cash in respect of each share of Company common stock represents (i) an approximately 64% premium over its closing share price on October 30, 2020, the last full trading day prior to the public announcement of the merger, (ii) an approximately 79% premium to the closing price per share of the Company’s common stock on September 25, 2020, the last full trading day before media speculation about a potential acquisition of the Company, (iii) an approximately 45% premium to the highest closing price per share of the Company common stock for the 52-week period ended October 30, 2020, (iv) an approximately 65% premium to the volume weighted average price of the Company common stock for the 30-day period ended September 25, 2020 and (v) an approximately 89% premium to

 

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the volume weighted average price of the Company common stock for the 90-day period ended September 25, 2020;

 

   

the fact that Goldman Sachs and Centerview, at the board of directors’ instruction, contacted 25 prospective buyers regarding a potential acquisition and that of these prospective buyers, only three parties (including Clearlake) submitted proposals to acquire the Company;

 

   

the fact that the Company had not received any other substantive alternative acquisition proposals, despite media speculation since the article published by Bloomberg on September 28, 2020 that the Company was exploring a potential sale;

 

   

the fact that the Company actively solicited increases in the offer made by Parent and the other parties who were participating in the Company’s sale process and no other party submitted an offer containing merger consideration in excess of Parent’s final offer and the fact that Clearlake increased its proposed price for the acquisition of the Company three times, from a range of $7.00 to $7.25 per share to $9.50 per share, during the course of negotiations;

 

   

the fact that the board of directors believed that, based on the negotiations with Clearlake and its advisors, the merger consideration represented the highest price per share of Company common stock that Clearlake was willing to pay; and

 

   

the risk that prolonging the sale process further could have resulted in the loss of an opportunity to consummate a transaction with Parent and distracted senior management from implementing the Company’s business plan.

 

   

Greater Certainty of Value. The proposed consideration consists solely of cash, which provides immediate liquidity and certainty of value to our stockholders. The receipt of cash consideration also eliminates for our stockholders the risk attendant to the continued execution of our business on a stand-alone basis and the risk related to the financial markets generally.

 

   

Business Reputation of Clearlake. The board of directors considered the business reputation, management and financial resources of Clearlake, with respect to the transaction. The board of directors believed these factors supported the conclusion that a transaction with affiliates of Clearlake could be completed relatively quickly and in an orderly manner.

 

   

Relationships with Financial Advisor. The determination of the board of directors that the relationships between Goldman Sachs, on the one hand, and each of the Company and Clearlake, on the other hand, would not impair the ability of Goldman Sachs to provide impartial advice to the board of directors.

 

   

Likelihood of Completion. The likelihood that the merger will be consummated, particularly in view of the terms of the merger agreement, including the closing conditions therein, based on, among other things:

 

   

the fact that Parent and Merger Sub had obtained committed debt and equity financing for the transaction, the limited number and nature of the conditions to the debt and equity financing, the reputation of the financing sources and the obligation of Parent to use its reasonable best efforts to obtain the debt financing, each of which, in the reasonable judgment of the board of directors, increases the likelihood of such financings being completed;

 

   

that the merger is not subject to any financing-related condition;

 

   

the limited number of conditions to the merger;

 

   

the fact that the merger agreement provides that, in the event of a failure of the merger to be consummated under certain circumstances, Parent will pay the Company a $119,656,000 reverse termination fee, without the Company having to establish any damages, and the guarantee of such payment obligation pursuant to and subject to the terms of the limited guarantee;

 

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the Company’s ability, under certain circumstances pursuant to the merger agreement and the equity commitment letters, to seek specific performance of Parent’s obligation to cause the equity commitment to be funded; and

 

   

the relative likelihood of obtaining antitrust clearance and Parent’s obligation to effect remedies to obtain antitrust clearance.

 

   

Receipt of Opinions from Centerview and Goldman Sachs. The financial analyses presented to the board of directors by Centerview and Goldman Sachs, as well as:

 

   

the opinion of Centerview rendered to the board of directors on November 1, 2020, which was subsequently confirmed by delivery of a written opinion dated November 1, 2020, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the merger consideration to be paid to the holders of Company common stock (other than excluded shares, dissenting shares and shares held by any affiliate of the Company or Parent) pursuant to the merger agreement was fair, from a financial point of view, to such holders, as more fully described below in “The Merger — Opinion of Centerview Partners LLC” beginning on page 50 and the full text of such opinion is attached to this proxy statement as Annex B.

 

   

the opinion of Goldman Sachs, rendered to the board of directors on November 1, 2020, which was subsequently confirmed by delivery of a written opinion dated November 1, 2020, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Goldman Sachs in preparing its opinion, the merger consideration to be paid to the holders (other than Parent and its affiliates) of shares of the Company’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders as more fully described below in “The Merger Opinion of Goldman Sachs & Co. LLC” beginning on page 57 and the full text of such opinion is attached to this proxy statement as Annex C.

 

   

Terms of Merger Agreement. The terms and conditions of the merger agreement, including the Company’s ability to consider and respond to, under certain circumstances specified in the merger agreement, unsolicited acquisition proposals from third parties (as more fully described under the heading “The Merger Agreement — Restrictions on Solicitation of Other Offers”), and the board of directors’ right, after complying with the terms of the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal (as more fully described under the heading “The Merger Agreement — Termination”), subject to certain match rights in favor of Parent and upon payment of a termination fee to Parent of $37,393,000, which is approximately 2.5% of the equity value of the Company, as described under “The Merger Agreement — Termination Fees” beginning on page 108.

 

   

Required Stockholder Approval. The merger agreement is subject to adoption by the Company’s stockholders, who are free to reject the merger agreement.

 

   

Voting Agreement. The board of directors considered that certain stockholders of the Company entered into a voting agreement obligating them to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock in favor of, among other things, the approval and adoption of the merger agreement and the transactions contemplated thereby, and that the voting agreement terminates upon, among other things, a Company board recommendation change.

 

   

Appraisal Rights. The board of directors considered the fact that stockholders who properly exercise and perfect their appraisal rights under Delaware law will be entitled to such appraisal rights in connection with the merger.

 

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The board of directors also weighed the factors described above against the following factors and risks that generally weighed against entering into the merger agreement (which factors and risks are not necessarily presented in order of relative importance):

 

   

No Stockholder Participation in Future Growth or Earnings. The Company will no longer exist as an independent company, and accordingly, Company stockholders will no longer participate in any future growth the Company may have or any potential future increase in its value.

 

   

Effect of Failure to Complete Transactions. While the Company expects that the merger will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, and thus it is possible that the merger may not be completed in a timely manner or at all. If the merger is not completed, (i) the Company will have incurred significant risk and transaction and opportunity costs, including the possibility of disruption to our operations, diversion of management and employee attention, employee attrition and a potentially negative effect on our business and customer and supplier relationships, (ii) the trading price of shares of Company common stock would likely be adversely affected and (iii) the market’s perceptions of the Company’s prospects could be adversely affected.

 

   

Closing Conditions. The fact that completion of the merger would require antitrust clearance in the United States and the satisfaction of certain other closing conditions which conditions are not entirely within the Company’s control and that there can be no assurances that any or all such conditions will be satisfied.

 

   

Risk Associated with Financing. The risk that the merger might not be consummated in a timely manner or at all, including the risk that the merger will not occur if the financing contemplated by the equity and debt commitments, described under the caption “The Merger — Financing of the Merger,” is not obtained, as Parent does not on its own possess sufficient funds to consummate the merger.

 

   

Interim Restrictions on Business. The focus and resources of the Company’s management may become diverted from other important business opportunities and operational matters while working to implement the merger, and the merger agreement imposes restrictions on the conduct of the Company’s business prior to the effective time of the merger, which could adversely affect the Company’s business.

 

   

Risk of Litigation. There is a risk of litigation arising in respect of the merger agreement or the transactions contemplated by the merger agreement.

 

   

Taxable Consideration. The merger will be a taxable transaction to the Company’s stockholders that are U.S. holders (as defined under the heading “— U.S. Federal Income Tax Consequences of the Merger” below) for U.S. federal income tax purposes and, therefore, such stockholders generally will be required to pay U.S. federal income tax on any gains they recognize as a result of the merger.

 

   

No Solicitation. The terms of the merger agreement prohibit the Company and its representatives from soliciting third party bids and Parent has the right to match an unsolicited third party bid if made, which terms could reduce the likelihood that other potential acquirers would propose an alternative transaction that may be more advantageous to our stockholders.

 

   

Termination Fee and Expenses. The possibility that if the merger is not consummated, subject to certain limited exceptions, we will be required to pay our own expenses associated with the merger agreement and the transactions contemplated thereby and, under certain circumstances, to pay Parent a termination fee of $37,393,000 in connection with the termination of the merger agreement.

 

   

Parent and Merger Sub. The fact that Parent and Merger Sub are newly formed corporations with no assets other than the equity commitment letter and the debt commitment letter, and that our remedy in the event of breach of the merger agreement by Parent or Merger Sub may be limited to receipt of the reverse termination fee from the Guarantors, on a several basis, in an aggregate amount of $119,656,000, and that, under certain circumstances, we may not be entitled to a reverse termination fee at all.

 

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In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, yours. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in their recommendations with respect to the merger agreement. See the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page 69.

The foregoing discussion of the information and factors considered by the board of directors in reaching its conclusions and recommendations is not intended to be exhaustive, but includes the material factors considered by the directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the board of directors did not find it practicable to, and did not attempt, to quantify, rank or assign any relative or specific weights to the various factors considered in reaching its determination and making its recommendation. In addition, individual directors may have given different weights to different factors. The board of directors considered all of the foregoing factors as a whole and based its recommendation on the totality of the information presented.

The board of directors recommends that you vote “FOR” approval of the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation and “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement.

Opinion of Centerview Partners LLC

On November 1, 2020, Centerview rendered to the board of directors its oral opinion, subsequently confirmed by delivery of a written opinion dated November 1, 2020, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the merger consideration to be paid to the holders of shares of Company common stock (other than Excluded Shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated November 1, 2020, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated herein by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety by the full text of Centerview’s written opinion attached as Annex B. Centerview’s financial advisory services and opinion were provided for the information and assistance of the board of directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, to the holders of shares of the Company common stock (other than Excluded Shares) of the merger consideration to be paid to such holders pursuant to the merger agreement. Centerview’s opinion did not address any other term or aspect of the merger agreement or the Transaction and does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the merger or otherwise act with respect to the Transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:

 

   

an execution copy of the merger agreement dated November 1, 2020;

 

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Annual Reports on Form 10-K of the Company for the years ended December 31, 2019, December 31, 2018 and December 31, 2017;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;

 

   

certain publicly available research analyst reports for the Company;

 

   

certain other communications from the Company to its stockholders; and

 

   

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including certain financial forecasts, analyses and projections relating to the Company prepared by management of the Company and furnished to Centerview by the Company for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Forecasts” and which are collectively referred to in this summary of Centerview’s opinion as the “Internal Data.”

Centerview also participated in discussions with members of the senior management and representatives of the Company regarding their assessment of the Internal Data. In addition, Centerview reviewed publicly available financial and stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of certain other transactions that Centerview deemed relevant, and conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.

Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with the Company’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at the Company’s direction, that the Internal Data (including, without limitation, the Forecasts) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby and Centerview relied, at the Company’s direction, on the Internal Data for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the Internal Data or the assumptions on which it was based. In addition, at the Company’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of the Company, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. Centerview assumed, at the Company’s direction, that the final executed merger agreement would not differ in any respect material to Centerview’s analysis or opinion from the execution copy reviewed by Centerview. Centerview also assumed, at the Company’s direction, that the Transaction will be consummated on the terms set forth in the merger agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or Centerview’s opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerview’s analysis or Centerview’s opinion. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.

Centerview’s opinion expressed no view as to, and did not address, the Company’s underlying business decision to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to the Company or in which the Company might

 

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engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date of Centerview’s written opinion, to the holders of shares of Company common stock (other than Excluded Shares) of the merger consideration to be paid to such holders pursuant to the merger agreement. Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the Transaction, including, without limitation, the structure or form of the Transaction, or any other agreements or arrangements contemplated by the merger agreement (including the voting agreement) or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the Transaction, whether relative to the merger consideration to be paid to the holders of shares of Company common stock (other than Excluded Shares) pursuant to the merger agreement or otherwise. Centerview’s opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’ written opinion. Centerview’s opinion does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the merger or otherwise act with respect to the Transaction or any other matter.

Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the board of directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction. The issuance of Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.

Summary of Centerview Financial Analysis

The following is a summary of the material financial analyses prepared by Centerview and reviewed with the board of directors in connection with Centerview’s opinion, dated November 1, 2020. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s view of the actual value of the Company. Some of the summaries of the financial analyses set forth 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 performed by Centerview. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the Transaction. None of the Company, Parent, Merger Sub or Centerview or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived

 

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from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 30, 2020 (the last trading day before the public announcement of the Transaction) and is not necessarily indicative of current market conditions.

Selected Public Company Analysis

Centerview reviewed certain financial information relating to the Company and compared it to corresponding financial information of certain publicly traded companies that Centerview selected based on its experience and professional judgment. Although none of the selected companies is directly comparable to the Company, the companies listed below were chosen by Centerview, among other reasons, because they are publicly traded companies with certain operational, business and/or financial characteristics that, for purposes of Centerview’s analysis, may be considered similar to those of the Company. The financial data that was used with respect to these selected companies were based on the selected companies’ SEC filings and other data sources as of October 30, 2020.

However, because none of the selected companies is exactly the same as the Company, Centerview believed it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected public company analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the operational, business and/or financial characteristics of the Company and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.

In performing this analysis, Centerview calculated, for each of the selected companies, the company’s enterprise value (calculated as the equity value (determined using the treasury stock method and taking into account outstanding in-the-money options, warrants, restricted stock units and other convertible securities) plus the face value of debt and certain liabilities less cash and cash equivalents and certain other investments), as a multiple of Wall Street research analyst consensus of such selected company’s estimated 2021 Adjusted EBITDA. “Adjusted EBITDA” is a non-GAAP measure, defined for this purpose as earnings from continuing operations (before deducting non-recurring items and stock-based compensation expense) before interest, taxes, depreciation and amortization. The selected companies and the results of this analysis are summarized as follows:

 

Selected Companies

      

Blucora, Inc.(1)

  

Cimpress PLC

  

dotdigital Group PLC

  

GoDaddy Inc.

  

J2 Global, Inc.

  

Tucows Inc.

  

United Internet AG

  

Yelp Inc.

  

Median EV / 2021E Adjusted EBITDA Multiple

     7.5x  

EV / 2021E Adjusted EBITDA Multiple Range

     7.0x to 22.3x  

 

  (1)

Pro forma for acquisition of HK Financial Services

Based on its experience and professional judgment, for purposes of its analysis Centerview selected an enterprise value to estimated 2021 Adjusted EBITDA multiple reference range of 7.0x to 8.5x. In selecting this reference range, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected comparable companies that could affect their public trading values in order to provide a context in which to consider the results of the quantitative analysis.

 

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Centerview applied the Adjusted EBITDA multiple reference range to the Company’s estimated 2021 Adjusted EBITDA of $311 million as set forth in the Forecasts to derive a range of implied enterprise values for the Company. Centerview subtracted from each of these ranges of implied enterprise values the face value of the Company’s net debt as of September 30, 2020 as set forth in the Internal Data to derive a range of implied equity values for the Company. Centerview then divided these implied equity values by the number of shares of Company common stock outstanding as of October 26, 2020 (on a fully diluted basis using the treasury stock method) as set forth in the Internal Data, which resulted in a range of implied values per share of Company common stock of $4.17 to $7.15. Centerview then compared the results of the above analysis to the merger consideration of $9.50 per share of Company common stock in cash, without interest, to be paid to the holders of shares of Company common stock (other than Excluded Shares) pursuant to the merger agreement.

Selected Precedent Transactions Analysis

Centerview reviewed and compared certain information relating to the following selected transactions that Centerview, based on its professional judgment and experience, deemed relevant to consider in relation to the Company and the Transaction.

However, because no company or transaction used in this analysis is identical or directly comparable to the Company or the transaction, Centerview believed it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected precedent transaction analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the operational, business or financial characteristics of the Company and each selected target company as well as the Transaction and the selected transactions that could affect the transaction values of each in order to provide a context in which to consider the results of the quantitative analysis. Although none of the selected transactions is directly comparable to the Transaction, the transactions listed below were chosen by Centerview because, among other reasons, their participants, size or other factors, for purposes of Centerview’s analysis, may be considered similar to the Transaction. Centerview used its experience, expertise and knowledge of these industries to select transactions that involved companies with certain operational, business and/or financial characteristics that, for purposes of this analysis, may be considered similar to certain characteristics of the Company. The reasons for and the circumstances surrounding each of the selected transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected transactions analysis.

Using publicly available information obtained from SEC filings and other data sources as of October 30, 2020, Centerview calculated, for each selected transaction, the enterprise value implied for the applicable target company based on the consideration payable in the applicable selected transactions as a multiple of the target company’s Adjusted EBITDA for the last 12-month period, which we refer to as LTM, for which financial information had been made public at the time of the announcement of such transactions (excluding non-recurring items and stock-based compensation expense where that information was available).

The selected precedent transactions considered in this analysis are summarized as follows:

 

Announcement
Date

 

Target

 

Acquiror

October 22, 2019   Cision Ltd.   Platinum Equity Advisors, LLC
April 14, 2019   Epsilon Data Management, LLC   Publicis Groupe SA
August 6, 2018   Web.com Group, Inc.   Siris Capital Group, LLC
July 18, 2017   PlusServer GmbH   BC Partners LLP
December 15, 2016   Strato AG   United Internet AG
December 6, 2016   Host Europe Group   GoDaddy Inc.
November 8, 2016   1&1 Internet SE   Warburg Pincus LLC
November 2, 2015   Constant Contact, Inc.   Endurance International Group Holdings, Inc.

 

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Announcement
Date

 

Target

 

Acquiror

October 23, 2014   Digital River, Inc.   Siris Capital Group, LLC
September 11, 2014   Conversant, Inc.   Alliance Data Systems Corporation
July 19, 2013   Host Europe Group   Cinven
November 7, 2011   Endurance International Group Holdings, Inc.  

Warburg Pincus LLC

GS Capital Partners, LLC

August 3, 2011   Network Solutions LLC   Web.com Group, Inc.
July 1, 2011   GoDaddy Inc.  

KKR & Co. Inc.

Silver Lake Partners

November 19, 2009   Strato AG   Deutsche Telekom AG

Median TEV / LTM Adjusted EBITDA Multiple: 11.1x

TEV / LTM Adjusted EBITDA Multiple Range: 7.6x to 15.8x

Based on its analysis of the relevant metrics for each of the selected precedent transactions and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a reference range of multiples of enterprise value to LTM Adjusted EBITDA of 8.0x to 11.0x. In selecting this reference range, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of the Company and the target companies included in the selected transactions and other factors that could affect the public trading, acquisition or other values of such companies or the Company in order to provide a context in which to consider the results of the quantitative analysis. Centerview then applied this reference range to the Company’s LTM Adjusted EBITDA of $313 million for the period ended September 30, 2020 (based on the Forecasts) to calculate an illustrative range of implied enterprise values of the Company. Centerview subtracted from this range of implied enterprise values the face value of the Company’s net debt as of September 30, 2020 as set forth in the Internal Data to derive a range of implied equity values for the Company. Centerview then divided this range of implied equity values by the number of shares of Company common stock outstanding as of October 26, 2020 (on a fully diluted basis using the treasury stock method) as set forth in the Internal Data, which resulted in a range of implied values per share of Company common stock of $6.25 to $12.15. Centerview then compared this range to the merger consideration of $9.50 per share of Company common stock in cash, without interest, to be paid to the holders of shares of Company common stock (other than Excluded Shares) pursuant to the merger agreement.

Discounted Cash Flow Analysis

Centerview performed a discounted cash flow analysis of the Company based on the Forecasts and certain internal financial analyses and forecasts for the tax assets of the Company prepared by management of the Company, as approved for Centerview’s use by the Company, which are referred to as the “Company Tax Assets,” in each case discussed below under the heading “— Financial Forecasts.” A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset or set of assets by calculating the “present value” of estimated future cash flows of the asset or set of assets. “Present value” refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

In performing this analysis, Centerview calculated a range of implied equity values for the Company’s shares by (a) discounting to present value, as of September 30, 2020, using discount rates ranging from 9.0% to 10.0% (reflecting Centerview’s analysis of the Company’s weighted average cost of capital) and the mid-year convention: (i) the forecasted unlevered free cash flows of the Company over the period beginning October 1, 2020 and ending December 31, 2025 as set forth in the Forecasts, (ii) a range of implied terminal values of the Company, calculated by Centerview applying an illustrative range of equity values to forward Adjusted EBITDA multiples of 7.0x-8.5x to the terminal year, which Centerview selected utilizing its professional judgment and

 

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experience and which implied perpetuity growth rates ranging from 0.6% to 2.9% to the terminal year estimate of unlevered free cash flow set forth in the Forecasts and (iii) the Company Tax Assets, and (b) subtracting from the foregoing results the Company’s net debt as of September 30, 2020, as set forth in the Internal Data. Centerview calculated the forward Adjusted EBITDA by projecting the Company’s next-twelve-month Adjusted EBITDA as of December 31, 2025 applying a 3% year-over-year revenue growth rate applied to 2025 revenue set forth in the Forecasts, and assuming an Adjusted EBITDA margin of 29.3%, which was equal to the Adjusted EBITDA margin for fiscal year 2025 set forth in the Forecasts. Centerview then divided these implied equity values by the number of shares of Company common stock outstanding as of October 26, 2020 (on a fully diluted basis using the treasury stock method) as set forth in the Internal Data, which resulted in a range of implied values per share of Company common stock of $7.23 to $10.42. Centerview then compared the results of the above analysis to the merger consideration of $9.50 per share of Company common stock in cash, without interest, to be paid to the holders of shares of Company common stock (other than Excluded Shares) pursuant to the merger agreement.

Other Factors

Centerview noted for the board of directors certain additional factors solely for informational purposes, including, among other things, the following:

 

   

Premia Paid Analysis. Centerview performed an analysis of premiums paid in 26 selected all-cash acquisitions over the past three years in which a public U.S.-based target was acquired in a transaction valued from $2 billion to $4 billion, excluding transactions where the target was in the biotechnology, energy, financial, insurance and real estate industries. The premiums in this analysis were calculated by comparing the per share acquisition price in each transaction to the closing price of the target company’s common stock on the date one day prior to the date on which the trading price of the target company’s common stock was perceived to be affected by a potential transaction. Based on the analysis above and other considerations that Centerview deemed relevant in its professional judgment, Centerview applied a reference range of approximately 20% to 50% to the Company’s closing stock price on September 25, 2020 (the last trading day before rumors in the press of a potential transaction) of $5.30, which resulted in an implied range of prices per share of Company common stock of approximately $6.36 to $7.95 per share of Company common stock.

 

   

Analyst Price Target Analysis. Centerview reviewed stock price targets for the shares of Company common stock in publicly available Wall Street research analyst reports as of October 30, 2020, which indicated low and high stock price targets for the shares of Company common stock ranging from $2.40 per share to $9.00 per share.

 

   

Historical Stock Price Trading Analysis. Centerview reviewed historical closing trading prices of the shares of Company common stock during the 52-week period ended October 30, 2020, which reflected low and high closing prices for the shares of Company common stock during such period of $1.49 and $6.54 per share.

General

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 summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.

Centerview’s financial analyses and opinion were only one of many factors taken into consideration by the board of directors in its evaluation of the Transaction. Consequently, the analyses described above should not be viewed as determinative of the views of the board of directors or management of the Company with respect to the

 

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merger consideration or as to whether the board of directors would have been willing to determine that a different consideration was fair. The consideration for the Transaction was determined through arm’s-length negotiations between the Company and Parent and was approved by the board of directors. Centerview provided advice to the Company during these negotiations. Centerview did not, however recommend any specific amount of consideration to the Company or the board of directors or that any specific amount of consideration constituted the only appropriate consideration for the Transaction.

Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion, Centerview was not engaged to provide financial advisory or other services to Warburg Pincus (affiliates of which own approximately 37% of the outstanding Company common stock) and Centerview did not receive any compensation from Warburg Pincus during such period. In the two years prior to the date of its written opinion, except for its current engagement in connection with the Transaction, Centerview had not been engaged to provide financial advisory or other services to the Company, and Centerview did not receive any compensation from the Company during such period. In the two years prior to the date of its written opinion, Centerview was not engaged to provide financial advisory or other services to Parent or Merger Sub, and Centerview did not receive any compensation from Parent during such period. In the two years prior to the date of its written opinion, Centerview was not engaged to provide financial advisory or other services to Clearlake and Centerview did not receive any compensation from Clearlake during such period. Centerview may provide financial advisory and other services to or with respect to the Company, Warburg Pincus, Parent or Clearlake or their respective affiliates, including portfolio companies of Warburg Pincus or Clearlake, in the future, for which Centerview may receive compensation. Certain (i) of Centerview and its affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, the Company, Warburg Pincus, Parent, Clearlake or any of their respective affiliates, including portfolio companies of Warburg Pincus or Clearlake, or any other party that may be involved in the Transaction.

The board of directors selected Centerview as its financial advisor in connection with the Transaction based on Centerview’s reputation and experience as a financial advisor in the Company’s industry. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Transaction.

In connection with Centerview’s services as the financial advisor to the board of directors, the Company has agreed to pay Centerview an aggregate fee that, based on information available as of the date of the announcement of the merger is estimated to be approximately $21,100,000, of which $1,000,000 was payable upon the rendering of Centerview’s opinion and the remainder of which is payable contingent upon consummation of the Transaction. In addition, the Company has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.

Opinion of Goldman Sachs & Co. LLC

Goldman Sachs rendered its opinion to the Company’s board of directors that, as of November 1, 2020 and based upon and subject to the factors and assumptions set forth therein, the $9.50 in cash per share of the Company’s common stock to be paid to the holders (other than Parent and its affiliates) of shares of the Company’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 1, 2020, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C. Goldman Sachs provided advisory services and its

 

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opinion for the information and assistance of the board of directors of the Company in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of the Company’s common stock should vote with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the merger agreement;

 

   

annual reports to stockholders and Annual Reports on Form 10-K of the Company for the five fiscal years ended December 31, 2019;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;

 

   

certain other communications from the Company to its stockholders;

 

   

certain publicly available research analyst reports for the Company;

 

   

certain internal financial analyses and forecasts for the tax assets of the Company prepared by management of the Company, as approved for Goldman Sachs’ use by the Company, which we refer to as the “Tax Asset Projections;” and

 

   

certain internal financial analyses and forecasts for the Company prepared by its management, as approved for Goldman Sachs’ use by the Company, which we refer to as the “Forecasts.”

Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company; reviewed the reported price and trading activity for the Company common stock; compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the SMB digital enablement industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering this opinion, Goldman Sachs, with the Company’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the Company’s consent that the Forecasts and the Tax Asset Projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the Company or on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the merger will be consummated on the terms set forth in the agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of the Company to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the $9.50 in cash per share of the Company’s common stock to be paid to holders (other than Parent and its affiliates) of shares of the Company’s common stock pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the agreement or entered into or amended in connection with

 

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the merger, including, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons in connection with the merger, whether relative to the $9.50 in cash per share of the Company’s common stock to be paid to the holders (other than Parents and its affiliates) of shares of the Company’s common stock pursuant to the merger agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which the shares of the Company’s common stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on the Company, Parent or the merger, or as to the impact of the merger on the solvency or viability of the Company or Parent, or the ability of the Company or Parent to pay their respective obligations when they come due. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

Financial Analyses of the Financial Advisors to the Company

The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of directors of the Company in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 30, 2020, the last trading day before the announcement of the merger, and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis

Goldman Sachs analyzed the consideration to be paid to holders of shares of the Company’s common stock pursuant to the merger agreement in relation to the closing price per share of the Company’s common stock on October 30, 2020, the closing price per share of the Company’s common stock on September 25, 2020, which was the last trading day prior to a media report of a possible sale of the Company, the highest price per share of the Company’s common stock during the 52-week period ended October 30, 2020, and the volume weighted average price (VWAP) per share for the 90-day and 30-day periods ended September 25, 2020.

This analysis indicated that the price per share of the Company’s common stock to be paid the holders of the Company’s common stock pursuant to the merger agreement represented:

 

   

a premium of 64% based on the closing price of $5.81 per share on October 30, 2020;

 

   

a premium of 79% based on the closing price of $5.30 per share on September 25, 2020;

 

   

a premium of 45% based on the highest price per share of the Company’s common stock during the 52-week period ended October 30, 2020 of $6.54;

 

   

a premium of 65% based on the VWAP for the 30-day period ended September 25, 2020 of $5.75; and

 

   

a premium of 89% based on the VWAP for the 90-day period ended September 25, 2020 of $5.02.

Selected Companies Analysis

Goldman Sachs reviewed and compared the multiples represented by the ratio of enterprise value (EV) (defined as equity value plus net debt) to estimated 2021 earnings before interest, tax, depreciation and amortization,

 

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adjusted to exclude non-recurring items and stock-based compensation (Adjusted EBITDA), using publicly available Wall Street research estimates and closing trading prices as of October 30, 2020 (or, in the case of the Company, as of September 25, 2020), for the Company and the following publicly traded corporations in the SMB digital enablement industry (collectively referred to as the “selected companies”):

 

   

Go Daddy

 

   

dotdigital Group plc

 

   

Tucows Inc.

 

   

Cimpress plc

 

   

Blucora

 

   

Yelp

 

   

United Internet AG

 

   

J2 Global, Inc.

Although none of the selected companies is directly comparable to the Company, the selected companies were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of the Company.

The results of this analysis are summarized as follows:

 

     EV/2021E Adjusted EBITDA Range    EV/2021E Adjusted EBITDA Median

Selected Companies

   7.0x to 22.3x    7.5x

The EV/2021E Adjusted EBITDA for the Company was calculated as 7.8x

Goldman Sachs then applied an illustrative range of multiples of 7.0x to 8.5x, determined based on its professional judgment and experience, taking into account the analysis of the selected companies and the Company, to the estimated Adjusted 2021E EBITDA of the Company, using the Forecasts, to calculate a range of implied EVs for the Company. Goldman Sachs then subtracted net debt, as provided by management of the Company, from the range of EVs to determine a range of implied equity values for the Company. Goldman Sachs then divided these equity values by the number of fully diluted shares of the Company, as provided by management of the Company and using the treasury stock method. This analysis resulted in a range of implied values per share of the Company’s common stock of $4.17 to $7.15.

 

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Selected Transactions Analysis

Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the SMB digital enablement industry since November 19, 2009:

 

Announced

  

Acquiror

  

Target

November 11, 2009    Deutsche Telekom    Strato
July 1, 2011    KKR & Silver Lake    GoDaddy
August 3, 2011    Web.com    Network Solutions
November 7, 2011    Warburg Pincus & GS Capital    Endurance
July 19, 2013    Cinven    Host Europe
September 11, 2014    Alliance Data    Conversant
October 23, 2014    Siris    Digital River
November 2, 2015    Endurance    Constant Contact
November 8, 2016    Warburg Pincus    1&1 Hosting
December 6, 2016    GoDaddy    Host Europe
December 15, 2016    United Internet    Strato
July 18, 2017    BC Partners    PlusServer
August 6, 2018    Siris    Web.com
April 14, 2019    Publicis    Epsilon
October 22, 2019    Platinum Equity    Cision

For each of the selected transactions, Goldman Sachs used publicly available information to calculate and compare the EV for the target represented by the consideration payable in the transaction as a multiple of the Adjusted EBITDA of the target for the last twelve-month (LTM) period preceding the announcement of the transaction. While none of the target companies in the selected transactions are directly comparable to the Company and none of the selected transactions are directly comparable to the merger, the target companies in the selected transactions are companies with certain operations that, for the purposes of analysis, may be considered similar to certain operations of the Company.

The results of this analysis are summarized as follows:

 

     EV/LTM Adjusted EBITDA Range    EV/LTM Adjusted EBITDA Median

Selected Transactions

   7.6x to 15.8x    11.1x

Goldman Sachs then applied an illustrative range of multiples of 8.0x to 11.0x, determined based on its professional judgment and experience, taking into account the analysis of the selected transactions, to the Adjusted EBITDA of the Company for the LTM period ended September 30, 2020, as provided by management of the Company, to calculate a range of implied EVs for the Company. Goldman Sachs then subtracted net debt, as provided by management of the Company, from the range of EVs to determine a range of implied equity values for the Company. Goldman Sachs then divided these equity values by the number of fully diluted shares of the Company, as provided by management of the Company and using the treasury stock method. This analysis resulted in a range of implied values per share of the Company’s common stock of $6.25 to $12.15.

Illustrative Present Value of Future Share Price Analysis

Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of the Company’s common stock. For this analysis, Goldman Sachs used the Forecasts for each of the fiscal years 2021 to 2024. Goldman Sachs first calculated the implied EV of the Company as of December 31 for each of the fiscal years 2020 to 2023, by multiplying the one-year forward Adjusted EBITDA as of such date (using the Forecasts) by an illustrative range of multiples of 7.0x to 8.5x. These illustrative multiples were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical trading data and NTM EV/ EBITDA multiples for the Company. To derive illustrative implied equity

 

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values per Company common stock, Goldman Sachs then subtracted the amount of the Company’s projected net debt as of December 31, 2020, 2021, 2022, and 2023, respectively, as provided by management of the Company and both excluding and including adjustments (the “Equity Issuance Adjustments”) by management of the Company to reflect the illustrative impact of a $100,000,000 issuance of shares of the Company’s common stock for $5.00 per share and the use of the proceeds and $75,000,000 of balance sheet cash to pay down senior notes of the Company, from the range of implied EVs. Goldman Sachs then divided these implied equity values by the number of fully diluted shares of the Company’s common stock, as provided by management of the Company, using the treasury stock method and both including and excluding the Equity Issuance Adjustments, to determine implied equity values per share of the Company’s common stock as of December 31, 2020, 2021, 2022, and 2023. Goldman Sachs then discounted these implied equity values per share to September 30, 2020 using a discount rate of 14%, reflecting an estimate of the Company’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. These analyses resulted in a range of implied present values of $4.12 to $8.74 per share of the Company’s common stock when excluding the Equity Issuance Adjustments and a range of implied present values of $4.16 to $8.12 per share when including the Equity Issuance Adjustments.

Illustrative Discounted Cash Flow Analysis by Goldman Sachs

Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis on the Company. Using discount rates ranging from 9.50% to 10.50%, reflecting estimates of the Company’s weighted average cost of capital, Goldman Sachs discounted to present value as of September 30, 2020 (i) estimates of unlevered free cash flow for the Company for the period beginning October 1, 2020 and ending December 31, 2025 as reflected in the Forecasts, (ii) the Tax Asset Projections and (iii) a range of illustrative terminal values for the Company, which were calculated by applying implied terminal year one-year forward Adjusted EBITDA multiples ranging from 7.0x to 8.5x to a terminal year one-year forward estimate of Adjusted EBITDA as reflected in the Forecasts (which analysis implied perpetuity growth rates ranging from 1.1% to 3.4% to the terminal year estimate of free cash flow to be generated by the Company as reflected in the Forecasts). The illustrative range of one-year forward Adjusted EBITDA multiples was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical trading data and NTM EV/ EBITDA multiples for the Company. Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs derived ranges of illustrative EVs for the Company by adding the ranges of present values it derived as described above. Goldman Sachs then subtracted net debt as of September 30, 2020, as provided by management of the Company, from the range of illustrative EVs it derived for the Company to calculate an illustrative range of implied equity values for the Company. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted shares of the Company, as provided by the management of the Company and using the treasury method, to derive a range of illustrative present values per share ranging from $6.90 to $10.01.

General — Goldman Sachs

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or Parent or the merger.

 

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Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Company’s board of directors as to the fairness from a financial point of view, as of the date of the opinion, to the holders (other than Parent and its affiliates) of the outstanding shares of the Company’s common stock of the $9.50 in cash per share of the Company’s common stock to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The consideration of $9.50 in cash per share of the Company’s common stock was determined through arm’s-length negotiations between the Company and Parent and was approved by the Company’s board of directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to the Company’s board of directors was one of many factors taken into consideration by the board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, Parent, any of their respective affiliates and third parties, including Warburg Pincus, Clearlake, and their respective affiliates and portfolio companies, or any currency or commodity that may be involved in the merger. Goldman Sachs acted as financial advisor to the Company in connection with, and have participated in certain of the negotiations leading to, the merger. Goldman Sachs has provided certain financial advisory and/or underwriting services to Warburg Pincus and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as a joint bookrunner with respect to the public offering of Warburg Pincus’ portfolio company, Nio Inc.’s 4.500% Convertible Senior Notes due 2024 (aggregate principal amount $750,000,000) in January 2019; as a joint bookrunner with respect to the initial public offering of 279,950,000 shares of common stock of Warburg Pincus’ portfolio company, Network International Holdings LLC in April 2019; as a joint bookrunner with respect to the initial public offering of 16,675,000 shares of common stock of Warburg Pincus’ portfolio company, Brigham Minerals Inc. in April 2019; as a joint bookrunner with respect to the follow-on offering of 4,133,984 of shares of common stock of Warburg Pincus’ portfolio company, Avalara, Inc. in June 2019; as a joint bookrunner with respect to the initial public offering of 20,700,000 shares of common stock of Warburg Pincus’ portfolio company, CrowdStrike Holdings Inc. in June 2019; as a joint bookrunner with respect to the public offering of Warburg Pincus’ portfolio company, Allied Universal Holdco LLC’s 6.625% Senior Secured Notes due 2026 and 9.750% Senior Notes due 2027 (aggregate principal amount $2,050,000,000) in July 2019; as financial advisor to Liaison International Inc., a former portfolio company of Warburg Pincus, in connection with a sale of the company in December 2019; as a joint bookrunner with respect to the initial public offering of 10,293,777 shares of common stock of Warburg Pincus’ portfolio company, Outset Medical Inc. in September 2020; and as financial advisor to Avaloq Group AG, a portfolio company of Warburg Pincus, in connection with the pending sale of the company announced in October 2020. During the two-year period ended November 21, 2020, Goldman Sachs has recognized compensation for financial advisory and underwriting services provided by its Investment Banking Division to

 

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Warburg and/or its affiliates and portfolio companies of approximately $56,300,000. Goldman Sachs also has provided certain financial advisory and/or underwriting services to Clearlake and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as a joint lead arranger with respect to the bank loan to Clearlake’s portfolio company in 2019; and as financial advisor to Clearlake’s portfolio company in connection with a sale of a stake of the company in 2019. During the two-year period ended November 21, 2020, Goldman Sachs has recognized compensation (as determined by Goldman Sachs based on its books and records) for financial advisory and underwriting services provided by its Investment Banking Division to Clearlake and/or its affiliates and portfolio companies of approximately $4,600,000. During the two-year period ended November 21, 2020, Goldman Sachs has not been engaged by Parent or its affiliates, other than as described above for Clearlake and its affiliates and portfolio companies (other than Parent), to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to the Company, Parent, Warburg Pincus, Clearlake and their respective affiliates and, as applicable, portfolio companies for which its Investment Banking Division may receive compensation. Affiliates of Goldman Sachs & Co. LLC also may have co-invested with Warburg, Clearlake and their respective affiliates from time to time and may have invested in limited partnership units of respective affiliates of Warburg Pincus and Clearlake from time to time and may do so in the future. In addition, affiliates of Goldman Sachs & Co. LLC (the “GS Funds”) currently own, in the aggregate, approximately 11% of the outstanding Company common stock and receive certain management fees from the Company. In connection with the transaction, the GS Funds have entered into the voting agreement. A Managing Director of Goldman Sachs is a director of the Company.

The board of directors of selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement, dated October 30, 2020, the Company engaged Goldman Sachs to act as its financial advisor in connection with the merger. The engagement letter between the Company and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement of the merger, at approximately $21,000,000, $1,000,000 of which became payable at announcement of the merger, and the remainder of which is contingent upon consummation of the merger. In addition, the Company has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Financial Forecasts

The Company does not, as a matter of course, publicly disclose financial forecasts as to future financial performance, earnings or other results for extended periods due to, among other reasons, the inherent difficulty of accurately predicting future periods and the likelihood that the underlying assumptions and estimates may prove incorrect.

However, in connection with the evaluation of a possible transaction, we provided certain projections to our directors and to prospective bidders, including Clearlake, Party A, Party C, and Party D, in connection with their due diligence review of the Company, as well as to our financial advisors for their use in their analyses in connection with their opinions to the board of directors describe above under the captions “— Opinion of Centerview Partners LLC” and “— Opinion of Goldman Sachs & Co. LLC.” These projections contained certain non-public financial forecasts that were prepared by our management.

A summary of the financial forecasts included in the projections has been included below. This summary is not being included in this document to influence your decision whether to vote for or against the proposal to adopt the merger agreement, but is being included because these financial forecasts were made available to our directors and their advisors as well as to prospective bidders. The inclusion of this information should not be regarded as an indication that our directors or their advisors, or any other person, considered, or now considers,

 

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such financial forecasts to be material or to be necessarily predictive of actual future results, and these forecasts should not be relied upon as such. Our management’s internal financial forecasts, upon which the summary financial forecasts included below were based, are subjective in many respects. There can be no assurance that these financial forecasts will be realized or that actual results will not be significantly higher or lower than forecasted.

In addition, the financial forecasts were not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles, which we refer to as “GAAP,” the published guidelines of the SEC regarding projections or the use of non-GAAP financial measures or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither our independent registered public accounting firm, nor any other independent accountants, have audited, compiled, examined or performed any procedures with respect to the financial forecasts contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

These financial forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond our control. We believe the assumptions that our management used as a basis for this projected financial information were reasonable, and that the bases on which the financial forecasts were prepared reflected the best currently available estimates and judgments of management of the future financial performance of the Company, at the time our management prepared these financial forecasts, given the information our management had at the time. Important factors that may affect actual results and cause these financial forecasts not to be achieved include, but are not limited to, risks and uncertainties relating to our business (including our ability to achieve strategic goals, objectives and targets over the applicable periods), industry performance, general business and economic conditions, the regulatory environment and other factors described in or referenced under “Cautionary Statement Concerning Forward-Looking Information” beginning on page 27 and “Reasons for the Merger; Recommendation of the Board of Directors” beginning on page 45 and those risks and uncertainties detailed in the Company’s public periodic filings with the SEC. In addition, the forecasts also reflect assumptions that are subject to change and do not reflect revised prospects for our business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the financial forecasts were prepared. Accordingly, there can be no assurance that these financial forecasts will be realized or that our future financial results will not materially vary from these financial forecasts.

No one has made or makes any representation to any of the Company’s stockholders regarding the information included in the financial forecasts set forth below. We have made no representation to Parent or Merger Sub in the merger agreement concerning these financial forecasts.

We have not updated and do not intend to update or otherwise revise the financial forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions on which such forecasts were based are shown to be in error. In light of the foregoing factors and the uncertainties inherent in these projections, the Company’s stockholders are cautioned not to place undue, if any, reliance on these projections.

In preparing the financial forecasts our management made the following material assumptions:

 

   

Increased investment on the Company’s strategic brands to accelerate top line growth;

 

   

A 25% increase over the next three years in engineering and development spending to expand the suite of customer products and services and the Company’s total addressable market;

 

   

An approximately 20% increase in program marketing spend over the next three years to increase revenue growth;

 

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An approximately 2% increase in gross margins over three years to be achieved through continued simplification of the Company’s business and increased scale; and

 

   

Relatively flat capital expenditures over the next three years.

The estimates of adjusted EBITDA and unlevered free cash flows were calculated using GAAP and other measures which are derived from GAAP, but such estimates constitute non-GAAP financial measures within the meaning of applicable rules and regulations of the SEC. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies.

The following is a summary of the financial forecasts for the Company prepared by our management and provided to our directors and our financial advisors, as well as to prospective bidders:

Financial Forecasts

 

(in millions)

  2020(1)     2021     2022     2023     2024(2)     2025(2)  

Revenue

  $ 1,104     $ 1,145     $ 1,198     $ 1,266     $ 1,323     $ 1,377  

Adjusted EBITDA(3)

  $ 308     $ 311     $ 336     $ 380     $ 387     $ 404  

Unlevered Free Cash Flow (Cash EBITDA—CapEx)(4)

  $ 243     $ 254     $ 283     $ 332       n/a       n/a  

 

(1)

At the direction of the Company, Centerview and Goldman Sachs used a Revenue amount for 2020 for purposes of their financial analyses of $1,106, which reflects actual performance in the third fiscal quarter of 2020 that was not available at the time the revenue forecasts were made available to potential bidders. The Adjusted EBITDA forecast for 2020 included an amount for the fourth fiscal quarter of 2020 of $73.

 

(2)

The financial forecasts provided to prospective bidders did not include forecasts for fiscal years 2024 or 2025, which were subsequently prepared by the Company and provided by the Company to Centerview and Goldman Sachs to use in their financial analyses.

 

(3)

Adjusted EBITDA is calculated as earnings from continuing operations (before deducting non-recurring items and stock-based compensation expense) before interest, taxes, depreciation and amortization.

 

(4)

Unlevered Free Cash Flow (Cash EBITDA—CapEx) is calculated as Adjusted EBITDA, plus changes in deferred revenue and changes in costs of goods sold for domain registration fees, less an ASC 606 adjustment to sales and marketing expenses, less capital expenditures.

Based solely on the financial forecasts provided by the Company, Centerview and Goldman Sachs calculated and assumed the following unlevered free cash flow amounts for the Company, which were approved by the board of directors for use by Centerview and Goldman Sachs in their discounted cash flow analyses, and which were not provided by the Company to prospective bidders: $151 million for 2020; $148 million for 2021; $170 million for 2022; $215 million for 2023; $222 million for 2024; and $232 million for 2025. The Unlevered Free Cash Flow forecasts calculated by Centerview and Goldman Sachs also included an amount for the fourth fiscal quarter of 2020 of $18 million. Unlevered free cash flow is calculated as (i) EBITA, which is calculated as Adjusted EBITDA less depreciation and stock-based compensation; less (ii) taxes, before the use of tax assets, at an assumed effective tax rate of 25% of EBITA; plus (iii) depreciation, increases in deferred revenue and other sources of cash; less (iv) capital expenditures and other uses of cash.

The Company also approved for use by Centerview and Goldman Sachs in their financial analyses the following forecasts of estimated tax savings attributable to its tax assets: $5 million for the fourth fiscal quarter of 2020; $29 million for 2021; $33 million for 2022; $21 million for 2023; $12 million for 2024; $14 million for 2025; $14 million for 2026; $6 million for 2027; $4 million for 2028; $3 million for 2029; $2 million for 2030; and $0 million for each of 2031 through 2034.

 

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Financing of the Merger

Debt Financing

On November 1, 2020, in connection with the merger agreement, Merger Sub entered into a debt commitment letter with JPMCB, Bank of America, BofA Securities, Deutsche Bank, and UBS for commitments with respect to the financing required by Merger Sub to consummate the merger, to retire or redeem the Company notes and to refinance the Company’s credit facility.

The provision of debt financing under the debt commitment letter is not a condition to the closing of the transaction.

The financing under the debt commitment letter, the availability of which is contingent on the satisfaction of certain conditions, including the closing of the merger, provides for credit facilities in an aggregate principal amount of up to $2,500 million, consisting of: (i) a senior secured first lien term loan facility in an aggregate principal amount of $1,830 million, (ii) a senior secured revolving credit facility in an aggregate principal amount of $200 million and (iii) a senior unsecured bridge facility in an aggregate principal amount of up to $470 million, which would be incurred by Merger Sub to the extent Merger Sub has not, or cannot, on or prior to the consummation of the merger, issue “Rule 144A-for-life” senior unsecured notes generating up to $470 million in gross proceeds in a private placement.

Pursuant to the debt commitment letter, JPMCB agreed to act as the administrative agent and collateral agent for each of the senior secured first lien term loan facility and the senior secured revolving credit facility, and JPMCB, BofA Securities, DBSI and UBSS agreed to act as joint lead arrangers and joint bookrunners for such senior secured credit facilities, in each case, on the terms and subject to the conditions set forth therein. The senior secured credit facilities will bear interest at LIBOR or the base rate plus an applicable margin. The senior secured credit facilities will be secured by liens on substantially all of the Company’s assets, and will be guaranteed by, and secured by the assets of, its direct parent entity and certain of its subsidiaries. Pursuant to the debt commitment letter, Bank of America agreed to act as the administrative agent and collateral agent for the bridge facility, and JPMCB, BofA Securities, DBSI and UBSS agreed to act as joint lead arrangers and joint bookrunners for such bridge facility, in each case, on the terms and subject to the conditions set forth therein. The bridge facility is structured as increasing rate loans customary for facilities of this type, with a rate based on LIBOR or the base rate plus an applicable margin which increases up to a total cap whose level will be determined based on timing of the closing of the transaction and other factors. The bridge facility will be unsecured but guaranteed by the same guarantors as those under the senior secured credit facilities. Various economic and other terms of the credit facilities are subject to change in the process of syndication.

The debt commitment letter contains conditions to funding of the debt financing customary for commitments of this type, including but not limited to:

 

   

consummation of the merger in all material respects pursuant to the merger agreement;

 

   

the absence of a material adverse effect on the Company and its subsidiaries;

 

   

repayment of indebtedness outstanding under, and termination of commitments provided in, the Company’s existing credit facility;

 

   

retirement or redemption of the Company notes;

 

   

solvency of the Company and its subsidiaries on a consolidated basis after giving effect to the merger and the transactions contemplated by the debt commitment letter;

 

   

delivery of customary financial information and conclusion of marketing periods for the senior secured credit facilities and the bridge facility; and

 

   

the accuracy of certain specified representations and warranties in the merger agreement and the credit agreement governing the senior secured credit facilities.

 

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Equity Financing

In connection with the signing of the merger agreement, on November 1, 2020, the Guarantors delivered the equity commitment letter to Parent, pursuant to which such entities committed to contribute an aggregate amount of up to $980 million to Parent in connection with the merger solely for the purpose of funding a portion of the merger consideration required to be paid by Parent pursuant to the merger agreement, as further set forth in the equity commitment letter. The obligation of each Guarantor to fund its respective share of the equity commitment is subject to the following conditions:

 

   

satisfaction or waiver by Parent of the mutual closing conditions and the conditions precedent to Parent’s and Merger Sub’s obligations to complete the merger;

 

   

the debt financing (including any alternative financing) has been or will be funded in accordance with the terms thereof at the closing (if the commitments are or were to be funded by the Guarantors); and

 

   

the Company has irrevocably confirmed in writing to Parent that it stands ready, willing and able to consummate the merger.

The obligation of each Guarantor to fund its respective share of the equity commitment will automatically and immediately terminate on the earlier of (a) with respect to each respective Guarantor, the funding of its commitment, (b) the closing of the merger or (c) the valid termination of the merger agreement in accordance with its terms.

If the Company is entitled to specific performance of the obligations of Parent to cause the equity commitment under the equity commitment letter to be funded to fund the merger or to consummate the merger, then the Company will be an express third-party beneficiary of the rights granted to Parent under the equity commitment letter solely for the purpose of seeking specific performance of Parent’s right to cause (which may be enforced directly if Parent fails to so cause) the equity commitment to be funded under equity commitment letter.

Limited Guarantee

In connection with entering into the merger agreement, the Guarantors provided the Company with a limited guarantee pursuant to which each Guarantor guarantees, severally, and not jointly, the payment and performance of such Guarantor’s respective percentage of Parent’s obligations to the Company with respect to the payment of the Parent termination fee (as discussed below), enforcement expenses related to the Parent termination fee and certain indemnification obligations related to financing cooperation and any debt tender offer (as described below), subject to a maximum aggregate obligation of $119,656,000.00.

Subject to certain exceptions, the limited guarantee will terminate upon the earliest of (a) the closing of the merger, (b) the payment and satisfaction in full of the guaranteed obligations, (c) the date that is six months following the termination of the merger agreement in accordance with its terms, unless prior to such date the Company shall have delivered a written notice with respect to nonpayment of any of the guaranteed obligations, in which case the limited guarantee shall survive solely with respect to such amounts of such guaranteed obligations and (d) the Company asserts in any legal proceeding that certain provisions of the limited guarantee are illegal, invalid or unenforceable in whole or in part, or asserts any theory of liability against the Guarantors or certain related parties with respect to the transactions contemplated by the merger agreement, other than certain claims permitted under the limited guarantee.

Closing and Effective Time of the Merger

The closing of the merger will occur no later than the later of (i) the second business day following the satisfaction or waiver of all of the closing conditions set forth in the merger agreement (described in the section entitled “The Merger Agreement — Conditions to the Merger” beginning on page 105) and (ii) the first business day after the final day of the marketing period, as described in the section entitled “The Merger Agreement — Marketing Period” beginning on page 82.

 

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Assuming timely satisfaction of the necessary closing conditions, we currently anticipate that the merger will be consummated during the first quarter of 2021, although we cannot assure completion by any particular date, if at all. Since the merger is subject to a number of conditions, the exact timing of the merger cannot be determined at this time. The merger will become effective upon the filing of a certificate of merger with the Delaware Secretary of State or at such subsequent time or date as Parent and the Company may agree and specify in the certificate of merger, which we refer to as the “effective time.”

Payment of Merger Consideration and Surrender of Stock Certificates

Promptly, and in any event within two business days, after the effective time of the merger, a letter of transmittal will be mailed to each record holder of shares of Company common stock (other than the excluded shares) describing how such holder should surrender its shares of Company common stock for the per share merger consideration.

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent (described in the section entitled “The Merger Agreement — Payment Procedures” beginning on page 83) without a letter of transmittal.

If your shares of Company common stock are certificated, you will not be entitled to receive the per share merger consideration until you deliver a duly completed and executed letter of transmittal to the paying agent and you must also surrender your stock certificate or certificates to the paying agent. If your shares of Company common stock are held in book entry, which we refer to as uncertificated shares, surrender of any uncertificated shares will be effected in accordance with the paying agent’s customary procedures with respect to securities that are uncertificated or represented by book entry and no holder of uncertificated shares will be required to deliver a certificate or an executed letter of transmittal to the paying agent in order to receive the merger consideration to which such holder is otherwise entitled under the merger agreement. If ownership of your shares is not registered in the transfer records of the Company, a check for any cash to be delivered will only be issued if the applicable letter of transmittal is accompanied by all documents reasonably required by the Company to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the merger consideration, you will have to make an affidavit of the loss, theft or destruction, and Parent or the paying agent may, in its reasonable determination and as a condition to receiving the merger consideration, require you to deliver a bond, in such reasonable and customary amount as Parent or the paying agent may direct, as indemnity against any claim that may be made against Parent or the paying agent with respect to such certificate. These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its entirety.

Interests of Certain Persons in the Merger

In considering the recommendation of the board of directors with respect to the merger agreement, you should be aware that the Company’s directors and executive officers may have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally, as more fully described below. The board of directors was aware of these interests and considered them, among other matters, in reaching the determination that the terms and conditions of the merger and the merger agreement were fair to, advisable and in the best interests of the Company and its stockholders, in reaching its decision to approve and adopt the merger agreement, and in making their recommendation that our stockholders vote in favor of adoption of the merger agreement as described in the section entitled “The Merger — Reasons for the Merger; Recommendation of the Board of Directors” beginning on page 45.

Please see the section of this proxy statement entitled “The Merger — Golden Parachute Compensation” beginning on page 75 for additional information with respect to the compensation that our named executive officers may receive in connection with the merger.

 

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Interests with Respect to Company Equity

Treatment of Company Stock Awards

Effective as of immediately prior to the effective time of the merger, each then-outstanding and unexercised option to purchase shares of Company common stock will vest in full. If any such Company stock option is not exercised prior to the effective time of the merger, then at the effective time of the merger such Company stock option will automatically be canceled and converted into the right to receive an amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying such Company stock option multiplied by (ii) the excess, if any, of the merger consideration over the exercise price per share of such Company stock option, without any interest thereon and subject to all applicable withholding. In the event that the exercise price of any Company stock option is equal to or greater than the merger consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect. Any amounts payable in respect of Company stock options will be paid upon the later of (i) five business days after the closing date and (ii) the date of the Company’s first regularly scheduled payroll after the closing date.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit, other than a specified restricted stock unit as described in the next paragraph, that is then outstanding and unvested will vest in full. Each Company restricted stock unit, other than a specified restricted stock unit, that is outstanding as of the effective time of the merger will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (B) the merger consideration without any interest thereon and subject to all applicable withholding taxes. Any amounts payable in respect of Company restricted stock units will be paid upon the later of (i) five business days after the closing date and (ii) the date of the Company’s first regularly scheduled payroll after the closing date.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that was granted (i) on or after October 27, 2020 to new hires or (ii) in connection with any acquisition that closed in 2020, which we refer to collectively as the specified restricted stock units, will automatically be cancelled and converted into the right to receive an amount in cash equal to the merger consideration the holder of the specified restricted stock unit would have received pursuant to the preceding paragraph, with payment of the merger consideration made at the vesting dates, subject to the holder of the specified restricted stock units remaining in continuous service with Parent, the surviving corporation or any of its subsidiaries through each such vesting date. The specified restricted stock units granted on or after October 27, 2020 to new hires will vest as to one-third on the first anniversary of their date of grant and the remainder on the first anniversary of the effective time of the merger, subject to acceleration in full upon a termination without cause, and the specified restricted stock units granted in connection with any acquisition that closed in 2020 will vest based on their pre-effective time vesting schedules with certain accelerations to be determined and with further acceleration upon a termination without cause within 12 months following the effective time of the merger. The merger consideration payable with respect to the specified restricted stock units will be net of any applicable withholding taxes and will be paid on the first administratively practicable payroll date following the vesting date.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock award that is then outstanding and unvested will vest in full and will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock award multiplied by (B) the merger consideration, without any interest thereon and subject to all applicable withholding taxes. Any amounts payable in respect of Company restricted stock awards will be paid upon the later of (i) five business days after the closing date and (ii) the date of the Company’s first regularly scheduled payroll after the closing date.

The exception to the above-described treatment of the equity awards is that Parent and the Company may agree to treat equity compensation held by Company employees subject to non-U.S. law differently to the extent necessary to take into account applicable non-U.S. law or tax or employment considerations.

 

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Security Holdings of Certain Persons

The following table sets forth, for each person who has served as a director or executive officer of the Company since the beginning of our last fiscal year:

 

   

the aggregate number of outstanding shares of Company common stock held directly and indirectly;

 

   

the cash consideration payable with respect to such outstanding shares of Company common stock based on the $9.50 per share merger consideration, before tax;

 

   

the aggregate number of shares of Company common stock subject to unexercised Company stock options;

 

   

the cash consideration payable with respect to such unexercised Company stock options, before tax;

 

   

the aggregate number of shares of Company common stock subject to Company restricted stock unit awards held that may vest or otherwise be delivered in connection with the merger;

 

   

the cash consideration payable with respect to shares of Company common stock subject to Company restricted stock unit awards based on the $9.50 per share merger consideration, before tax; and

 

   

the aggregate cash consideration payable with respect to such shares of Company common stock held directly and indirectly, subject to unexercised Company stock options and subject to Company restricted stock unit awards (which is the sum of the third, fifth, and seventh columns below).

The estimated aggregate amounts set forth in the third, fifth, and seventh columns below equal the $9.50 per share merger consideration, multiplied by the total number of shares of Company common stock subject to each applicable category of shares of Company common stock described above, less, in the case of Company stock options, the applicable exercise price per share. The amounts in the following table were calculated as of December 11, 2020 assuming that the closing of the merger occurs on February 11, 2021 (which is the date assumed solely for the purposes of this disclosure) and the amounts reflect vesting of equity-based awards through such assumed closing date; depending upon when the closing date occurs, certain of the equity-based awards in the table may vest in accordance with their existing terms, which vesting is not reflected in the following table. The amounts shown also do not attempt to forecast any grants, dividends, deferrals, shares sold to cover taxes or forfeitures following December 11, 2020. The following table also assumes that the equity-based awards that are not vested as of the closing of the merger will become vested pursuant to the terms of the merger agreement.

 

Director or Officer   Number of
Shares of
Common
Stock (#)
    Cash
Consideration
Payable for
Shares of
Common
Stock ($)
    Number of
Company
Stock
Options (#)
    Cash
Consideration
Payable for
Company
Stock Options
($)(1)
    Number of
Company
Restricted
Stock Units
(#)
    Cash
Consideration
Payable for
Company
Restricted
Stock Units
($)
    Aggregate
Value ($)
 

Jeffrey H. Fox

    2,231,173       21,196,144       1,113,044       1,827,677       1,370,869       13,023,256       36,047,077  

Marc Montagner

    826,224       7,849,128       859,361       475,650       481,070       4,570,165       12,894,943  

Christine Barry

    201,216       1,911,552       112,663       170,318       325,226       3,089,647       5,171,517  

David C. Bryson

    505,892       4,805,974       415,587       127,245       122,352       1,162,344       6,095,563  

John Orlando

    315,543       2,997,659       198,966       290,410       322,545       3,064,178       6,352,247  

Kimberly S. Simone

    238,721       2,267,850       66,932       110,867       325,226       3,089,647       5,468,364  

James C. Neary(2)

    52,562,956       499,348,082       —         —         —         —         499,348,082  

Andrea J. Ayers

    31,897       303,022       —         —         71,428       678,566       981,588  

Dale Crandall

    109,956       1,044,582       78,250       —         71,428       678,566       1,723,148  

Joseph P. DiSabato(3)

    15,378,522       146,095,959       —         —         —         —         146,095,959  

Tomas Gorny(4)

    2,429,960       23,084,620       78,250       —         71,428       678,566       23,763,186  

Peter J. Perrone

    124,956       1,187,082       78,250       —         71,428       678,566       1,865,648  

Chandler J. Reedy(2)

    52,562,956       499,348,082       —         —         —         —         499,348,082  

Justin L. Sadrian(2)

    52,562,956       499,348,082       —         —         —         —         499,348,082  

Alexi A. Wellman

    31,897       303,022       —         —         71,428       678,566       981,588  

Michael Hayford(5)

    78,929       749,826       —         —         —         —         749,826  

 

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(1)

The cash consideration payable for each Company stock option is the difference between the merger consideration of $9.50 per share and the exercise price of the option, multiplied by the number of shares of Company common stock underlying such option. Stock options that have an exercise price equal to or greater than $9.50 will be canceled, without any consideration being payable in respect thereof.

(2)

Messrs. Neary, Reedy and Sadrian are partners of Warburg Pincus & Co. and managing directors of Warburg Pincus LLC. All shares indicated as owned by Messrs. Neary, Reedy and Sadrian are owned by investment funds and entities affiliated with Warburg Pincus and the shares are included for Messrs. Neary, Reedy and Sadrian because of their affiliation with Warburg Pincus.

(3)

Mr. DiSabato is a managing director of Goldman Sachs & Co. LLC. All shares indicated as owned by Mr. DiSabato are owned by investment funds and entities affiliated with Goldman Sachs and the shares are included for Mr. DiSabato because of his affiliation with Goldman Sachs.

(4)

The number of shares of common stock includes those held by The Tomas and Aviva Gorny Family Trust, The Tomas and Aviva Gorny Irrevocable Trust and The Gorny 2013 Irrevocable Trust.

(5)

The number of shares reported as beneficially owned by Mr. Hayford is based upon disclosure in a Form 4 filed by Mr. Hayford on April 30, 2018. Mr. Hayford resigned from the board of directors effective April 29, 2019.

Employment Agreements and Severance/Change in Control Benefits

Pursuant to (i) employment or severance agreements into which the Company has entered with its executive officers, and (ii) the restricted stock unit award agreements and option agreements into which the Company has entered with its executive officers under the Company’s amended and restated 2013 stock incentive plan and the Constant Contact, Inc. amended and restated 2011 stock incentive plan, which we refer to respectively as the “2013 plan” and the “2011 plan,” the Company’s executive officers are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including a termination following a change in control of the Company.

Pursuant to his employment agreement with the Company dated August 11, 2017, if Mr. Fox’s employment is terminated by the Company without cause and not for death or disability, or if Mr. Fox resigns for good reason (as each of those terms is defined in his employment agreement), and subject to his execution of a separation and release of claims agreement and his abiding by restrictive covenants that apply to him (including two-year non-competition and non-solicitation covenants), he will be entitled to the following severance payments: (i) continued payment of his base salary for a period of 24 months; (ii) payment of two times his annual bonus at target for the year prior to the year of termination payable over a period of 24 months, or if the termination occurs within nine months prior to a change in control (provided that negotiations related to the change in control are ongoing on the termination date) or within two years after a change in control, payment of two times’ the greater of (x) his annual bonus paid with respect to the year prior to the year of termination or (y) his annual bonus at target for the year of termination; (iii) a lump sum payment equal to $40,000; and (iv) payment of his annual bonus for the year of termination based on the Company’s actual performance against the performance goals established under the Company’s Management Incentive Plan for such year, prorated based on the portion of the year during which Mr. Fox provided services to the Company. In addition, pursuant to Mr. Fox’s employment agreement, in the event that, within nine months prior to a change in control (provided that negotiations related to the change in control are ongoing on the termination date) or within two years after a change in control, Mr. Fox is terminated without cause (other than due to disability or death) or he resigns his employment for good reason, he will be entitled to full acceleration of all unvested equity awards he holds as of his termination date, on the later to occur of the completion of the change in control and his termination date. Furthermore, in the event the acquiring or succeeding corporation in a change in control does not agree to assume Mr. Fox’s outstanding equity awards as of immediately prior to the change in control, or to substitute substantially equivalent awards for the outstanding equity awards, then all of Mr. Fox’s then outstanding but unvested equity awards will vest in full immediately prior to the change in control, and any such awards subject to performance standards will vest at the target amount associated with their grant, unless the Company’s board of directors or compensation committee determines that a higher level of vesting is appropriate.

 

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Pursuant to his employment agreement with the Company dated August 3, 2015, if Mr. Montagner’s employment is terminated by the Company without cause and not for death or disability, or if Mr. Montagner resigns for good reason (as each of those terms is defined in his employment agreement), and subject to his execution of a separation and release of claims agreement and his abiding by restrictive covenants that apply to him (including 18 month non-competition and non-solicitation covenants), he will be entitled to the following severance payments: (i) continued payment of his base salary for a period of 12 months (increased to 24 months if the termination occurs within 12 months following a change in control (as such term is defined in his employment agreement)); (ii) payment of his annual bonus at target over 12 months (or over 24 months if the termination occurs within 12 months following a change in control); and (iii) reimbursement on a monthly basis for the COBRA premiums that he would be required to pay to continue group health insurance coverage for a period of up to 18 months following his termination. In addition, pursuant to Mr. Montagner’s employment agreement, in the event that, within 12 months following a change in control, Mr. Montagner is terminated without cause (other than due to disability or death), he will be entitled to full acceleration of all unvested equity awards he holds as of his termination date.

Pursuant to employment agreements dated March 7, 2016, March 27, 2017, October 29, 2018, and May 19, 2020, between the Company and each of Mr. Bryson, Mr. Orlando, Ms. Barry, and Ms. Simone, respectively, if the executive’s employment is terminated by the Company without cause and not for death or disability or on non-renewal of the employment agreement, or if the executive resigns for good reason (as each of those terms is defined in the applicable employment agreement), and subject to execution of a separation and release of claims agreement and his or her abiding by restrictive covenants that apply to him or her (including 18 month non-competition and non-solicitation covenants for Mr. Bryson, Mr. Orlando, and Ms. Simone, and 12 month non-competition and 18 month non-solicitation covenant for Ms. Barry), the executive will be entitled to the following severance payments: (i) continued payment of base salary for a period of 12 months (increased to 18 months if the termination occurs within 12 months following a change in control (as such term is defined in the applicable employment agreement)); (ii) payment of annual bonus at target over 12 months (or over 18 months if the termination occurs within 12 months following a change in control); and (iii) reimbursement on a monthly basis for the COBRA premiums that the executive would be required to pay to continue group health insurance coverage for a period of up to 18 months following termination. In addition, pursuant to the employment agreements, in the event that, within 12 months following a change in control, the executive is terminated without cause (other than due to disability or death), he or she will be entitled to full acceleration of all unvested equity awards he or she holds as of his or her termination date.

Generally, the Company’s forms of equity award agreements for employees, including the Company’s executive officers, provide for vesting acceleration on a “double trigger” basis, and a change in control does not by itself trigger acceleration of vesting. Parent is not replacing or assuming the Company’s outstanding equity awards, and they are instead being accelerated and cashed out immediately prior to the effective time of the merger as described under “The Merger Agreement (Proposal One) — Treatment of Company Stock Awards beginning on page 85.

Please see the section of this proxy statement entitled “The Merger — Golden Parachute Compensation” beginning on page 75 for an estimate of the value of the amounts that would be payable to each of our named executive officers pursuant to the arrangements listed above, assuming that the closing of the merger occurred on February 11, 2021 and that each named executive officer’s employment terminated on or after the closing date in a manner that would entitle such named executive officer to the maximum amount of severance benefits described above.

Employee Benefits

Pursuant to the merger agreement, from and after the effective time of the merger, Parent must assume sponsorship of the Company’s 2020 Management Incentive Plan and will cause bonuses to be paid on or around February 15, 2021 if not previously paid by the Company on or around such date. Bonuses are to be calculated

 

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based on the greater of target or actual performance without any discretionary reduction in payments. Payment will be made to employees who remain employed when the payment is due and also to those who both remained employed on December 31, 2020 and left employment before payment only on a termination without cause (as defined in the Company’s severance practices).

For a period of one year following the effective time of the merger, Parent must cause severance in amounts consistent with the current severance practices to be paid to employees not otherwise contractually eligible for severance but who qualify for severance under the Company’s current severance practices and provide an effective release of claims.

Notwithstanding the foregoing, employees located outside the United States will be treated instead in accordance with applicable contracts and applicable law. In addition, no employee will have third party beneficiary rights to sue to enforce these provisions.

Indemnification of Directors and Officers

From and after the effective time of the merger, each of Parent and the surviving corporation will, jointly and severally, indemnify defend and hold harmless each person who is or has been at any time prior to the effective time of the merger a director, manager or officer of the Company or any of its subsidiaries or serves as a director, officer, manager, member, trustee, fiduciary, employee or agent of another person if such service was at the request or for the benefit of the Company or any of its subsidiaries, which we refer to as an “indemnified party” against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that the indemnified party is or was an officer, director, manager, employee or agent of the Company or any of its subsidiaries or, while a director, manager or officer of the Company or any of its subsidiaries, is or was serving at the request of the Company or one of its subsidiaries as an officer, director, manager, member, trustee, fiduciary, employee or agent of another person, whether asserted or claimed prior to, at or after the effective time of the merger, to the fullest extent permitted by law. Each indemnified party will be entitled to advancement of expenses (including attorneys’ fees) incurred in the defense of any such claim, action, suit, proceeding or investigation from each of Parent and the surviving corporation within ten business days of receipt by Parent or the surviving corporation from the indemnified party of a request therefor. However, any indemnified party to whom expenses are advanced must provide an undertaking, to the extent required by the DGCL, the certificate of incorporation or by-laws (or comparable organizational documents) of the Company or any of its subsidiaries or in any indemnification agreement between such indemnified party and the Company or any of its subsidiaries, to repay such advances if it is determined by a final determination of a court of competent jurisdiction (which determination is not subject to appeal) that such indemnified party is not entitled to indemnification under applicable law. Parent and the Company have agreed that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger and rights to advancement of expenses relating thereto now existing in favor of any indemnified party, whether provided in the certificate of incorporation or by-laws (or comparable organizational documents) of the Company or any of its subsidiaries or in any indemnification agreement between such indemnified party and the Company or any of its subsidiaries, will survive the merger and continue in full force and effect, and will not be amended, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such indemnified party.

For six years following the effective time of the merger, Parent and the surviving corporation have agreed that the certificate of incorporation and bylaws or other organizational documents of the surviving corporation and its subsidiaries will contain (and Parent will cause the certificate of incorporation and bylaws or other organizational documents of the surviving corporation and its subsidiaries to so contain) provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of indemnified persons as contained in the Company’s (or such subsidiaries’) certificate of incorporation and by-laws in effect on the date of the merger agreement.

 

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Parent has also agreed to either (i) maintain in effect for six years after the effective time of the merger directors’ and officers’ liability insurance on terms at least as favorable to these individuals as the Company’s existing directors’ and officers’ liability insurance policies with respect to events occurring at or prior to the effective time of the merger, provided that Parent is not obligated to pay more than 300% of the current annual premium paid for the Company’s directors’ and officers’ liability insurance policy, which we refer to as the “Maximum Premium,” or (ii) purchase a “tail” policy and maintain such endorsement for six years after the closing of the merger. Notwithstanding the foregoing, the Company may, prior to the effective time of the merger, elect to purchase its own “tail” policy as long as the tail policy does not cost more than six times the Maximum Premium.

For a more detailed description of these provisions of the merger agreement, please see the section of this proxy statement entitled “The Merger Agreement — Additional Agreements of the Parties to the Merger Agreement — Indemnification” on page 98.

Intent to Vote in Favor of the Merger

As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, 73,505,584 shares of Company common stock, representing 52% of the outstanding shares of Company common stock on the record date. The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock “FOR” the proposal to adopt the merger agreement, “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation and “FOR” the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement. The shares described above include shares beneficially owned by investment funds and entities affiliated with Warburg Pincus and Goldman Sachs. James C. Neary, Chandler J. Reedy and Justin L. Sadrian are partners of Warburg Pincus & Co, an affiliate of Warburg Pincus. All shares indicated as owned by Messrs. Neary, Reedy and Sadrian are included because of their affiliation with the Warburg Pincus entities. Joseph P. DiSabato is a managing director of Goldman Sachs. All shares indicated as owned by Mr. DiSabato are included because of his affiliation with the Goldman Sachs entities. Warburg Pincus and Goldman Sachs are obligated, pursuant to voting and support agreement entered into on November 1, 2020 between Parent and each of such stockholders, to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock in favor of the adoption of the merger agreement and any matter that would reasonably be expected to facilitate the merger.

Golden Parachute Compensation

The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for our named executive officers that is based on or otherwise relates to the merger, assuming that the merger was consummated on February 11, 2021 (which is the date assumed solely for the purposes of this golden parachute disclosure), and that each named executive officer’s employment was terminated on the day that resulted in his or her receipt of the maximum amount of severance benefits under his or her employment or severance agreement as a result of a termination within the applicable period beginning nine months before (if applicable) and ending twelve or twenty-four months (as applicable) following a change in control event.

The table below describes the estimated potential payments to each of our named executive officers under the terms of their respective employment agreements as they may have been amended from time to time, together with the value of the unvested Company stock options and restricted stock units that would be accelerated in accordance with the terms of the merger agreement. The amounts shown in the table do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that have vested or would vest pursuant to their terms, on or prior to the assumed effective date of the merger or the value of payments or benefits that are not based on or otherwise related to the merger.

For purposes of calculating the potential payments set forth in the table below, we have assumed that (a) the merger will become effective on February 11, 2021, (b) unless otherwise noted, that the date of termination of

 

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employment of each of the named executive officers is February 11, 2021; (c) the stock price is $9.50 per share, which is the per share merger consideration; and (d) no withholding taxes are applicable to any payments set forth in the table. The amounts shown in the table are estimates only, are based on assumptions and information available to date, and do not reflect any cutback that may be applied to the payments and benefits otherwise payable to the named executive officer to put him or her in a better after-tax position in the event of the imposition of any excise taxes under Sections 280G and 4999 of the Internal Revenue Code, as contemplated by Mr. Fox’s employment agreement with the Company. The actual amounts that may be paid upon an individual’s termination of employment can only be determined at the actual time of such termination.

 

Name

   Cash($)(1)      Equity($)(2)      Perquisites/
Benefits($)(3)
     Total($)  

Jeffrey H. Fox

     4,453,750        13,275,238        —          17,728,988  

Marc Montagner

     1,591,350        4,657,049        46,193        6,294,592  

Christine Barry

     927,000        3,116,603        46,193        4,089,796  

David C. Bryson

     795,357        1,184,758        33,739        2,013,854  

John Orlando

     929,386        3,117,437        42,395        4,089,218  

 

(1)

The amount listed in this column represents cash severance payments which are “double-trigger” and payable upon a qualifying termination that occurs within nine months prior to, in the case of Mr. Fox, and within twelve or twenty-four months (as applicable) following, in the case of all of the named executive officers, the consummation of change in control event, subject to the named executive officer’s execution and nonrevocation of a release of claims in the Company’s favor. For this purpose, a qualifying termination is generally a termination of employment by the Company without cause (and not for death or disability or on nonrenewal) or a resignation by the executive for good reason, as such terms are defined in the applicable employment agreement. The following table describes the components of cash severance payable to each of the named executive officers.

 

Name

   Base Salary
Continuation($)(a)
     Bonus
Amount

($)(b)
     Bonus for Year
of
Termination($)(c)
 

Jeffrey H. Fox

     1,690,000        1,732,500        1,031,250  

Marc Montagner

     1,060,900        530,450        —    

Christine Barry

     618,000        309,000        —    

David C. Bryson

     568,112        227,245        —    

John Orlando

     619,591        309,795        —    

 

  (a)

Base Salary continuation, for Messrs. Fox and Montagner is equal to the annual base salary he would have received had he remained continuously employed by the Company for 24 months, and is payable in approximately equal installments over a period of 24 months following termination or, with respect to Mr. Fox, if the merger is a “change in control event” as such term is defined in Treas. Reg. Section 1.409A-3(i)(5)(i), then such amount is payable in a single lump sum, and for Messrs. Bryson and Orlando and Ms. Barry is equal to 1.5 times his or her annualized base salary and is payable in approximately equal installments over a period of 18 months following termination. Mr. Fox will receive an additional $40,000 as a lump sum payment in connection with his termination.

  (b)

Bonus compensation on severance for Mr. Fox would be two times’ the greater of (x) his annual bonus paid with respect to the year prior to the year of termination or (y) his annual bonus at target for the year of termination. Messrs. Montagner, Bryson and Orlando and Ms. Barry would receive his or her annual bonus at target for the year of termination paid over 18 months (or, for Mr. Montagner, over 24 months). The bonus amount for Mr. Fox was calculated based on expected Company performance for 2020, estimated as of December 11, 2020.

  (c)

Pursuant to his employment agreement with the Company, Mr. Fox would be entitled to payment of his annual bonus for the year of termination based on the Company’s actual performance against the performance goals established under the Company’s Management Incentive Plan for such year, prorated based on the portion of the year during which Mr. Fox provided services to the Company. For

 

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  purposes of this proxy statement, the Company has assumed that the amount of any actual bonus payable to Mr. Fox for the year of termination would be an amount equal to the maximum amount payable to the named executive officer under the Company’s Management Incentive Plan as in effect in 2020. For purposes of this proxy statement, the Company has assumed that his termination date would be on the last day of the fiscal year (such that he would be entitled to receive 100% of the bonus).

 

(2)

The amount listed in this column represents, in accordance with the terms of the merger agreement, the payments in cancellation of (i) Company restricted stock units held by each named executive officer, calculated as $9.50 per share of Company common stock underlying the Company restricted stock units being canceled and (ii) Company stock options that would be accelerated in accordance with the terms of the merger agreement, calculated as $9.50 per share of Company common stock minus the applicable exercise price. Amounts payable to each of the named executive officers on account of such equity awards will be paid upon the later of (i) five business days after the closing date and (ii) the date of the Company’s first regularly scheduled payroll after the closing date.

These payments in respect of equity awards held by the named executive officers are “single trigger” insofar as the equity awards are accelerated and converted into the right to receive merger consideration.

The number of shares underlying Company restricted stock unit awards and Company stock options that would be accelerated in accordance with the terms of the merger agreement held by each named executive officer to be treated as described in this column are as follows:

 

Name    Shares of
Company
Common Stock
underlying
Unvested
Company
Restricted Stock
Units
     Shares of Company
Common Stock
underlying
Unvested Company
Stock Options(a)
 

Jeffrey H. Fox

     1,370,869        166,876  

Marc Montagner

     481,070        53,663  

Christine Barry

     325,226        17,311  

David C. Bryson

     122,352        13,762  

John Orlando

     322,545        33,018  

 

  (a)

The column includes only unvested stock options that would be accelerated in accordance with the terms of the merger agreement and excludes any options for which the exercise price equals or exceeds $9.50, which options will be canceled without consideration at the effective time of the merger.

 

(3)

The amount listed in this column represents the estimated payments the Company will reimburse for the executives with respect to premiums under COBRA for group health, dental and vision coverage for 18 months following termination of employment.

Accounting Treatment

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

U.S. Federal Income Tax Consequences of the Merger

The following is a summary of the U.S. federal income tax consequences of the merger to “U.S. holders” and certain “non-U.S. holders” (both terms defined below) whose shares of our common stock are converted into the right to receive cash pursuant to the merger. This summary is for information purposes only and is not tax advice. It does not purport to consider all aspects of U.S. federal income taxation that might be relevant for holders of our common stock. This summary is based on the Internal Revenue Code of 1986, as amended, which we refer to as the “Code,” the applicable U.S. Treasury regulations promulgated under the Code, published rulings by the Internal Revenue Service, which we refer to as the “IRS,” and judicial authorities and administrative decisions,

 

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all as in effect as of the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This summary does not address the consequences of any proposed changes in applicable laws. Any change or differing interpretation could alter the tax consequences to the holders described herein. This summary is not binding on the IRS or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged. No ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered, as to the U.S. federal income tax consequences of the merger.

For purposes of this summary, the term “U.S. holder” means a beneficial owner of shares of our common stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (including any entity treated as a corporation) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

   

a trust that (a) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

   

an estate the income of which is subject to U.S. federal income tax regardless of its source.

As used herein, a “non-U.S. holder” means a beneficial owner of shares of our common stock that is neither a U.S. holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partner of a partnership holding our common stock should consult the partner’s tax advisor regarding the U.S. federal income tax consequences of the merger to such partner.

This summary applies only to holders who hold shares of our common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), and does not address or consider all of the U.S. federal income tax consequences that may be applicable to holders of our common stock in light of their particular circumstances. For instance, this summary does not address the alternative minimum tax or the tax consequences to stockholders who validly exercise appraisal rights under the DGCL. In addition, this summary does not address the U.S. federal income tax consequences of the merger to holders who are subject to special treatment under U.S. federal income tax rules, including, for example, banks and other financial institutions; insurance companies; securities dealers or broker-dealers; mutual funds; traders in securities who elect to use the mark-to-market method of accounting; tax-exempt investors; S corporations; holders classified as partnerships or other flow-through entities under the Code; U.S. expatriates; holders who hold their shares of our common stock as part of a hedge, straddle, conversion transaction, or other integrated investment or constructive sale transaction; holders whose functional currency is not the U.S. dollar; holders who acquired their shares of our common stock through the exercise of Company stock options or otherwise as compensation; and, except to the extent described below, holders who actually or constructively own 5% or more of the outstanding shares of our common stock. In addition, this summary does not address the impact of the Medicare contribution tax, any aspects of foreign, state, local, estate, gift, or other tax laws (or any U.S. federal tax laws other than those pertaining to income tax) that may be applicable to a particular holder in connection with the merger.

Further, this summary does not address any tax consequences of the merger to holders of options or restricted stock units whose options or restricted stock units are cancelled in exchange for cash pursuant to the merger. Such holders of options and restricted stock units should consult their tax advisors regarding the tax consequences of the merger to them. Moreover, this summary does not discuss any other matters relating to equity compensation or benefit plans (including our 401(k) plan).

 

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U.S. Holders

A U.S. holder’s receipt of the per share merger consideration in exchange for shares of our common stock will generally be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of common stock are converted into the right to receive cash pursuant to the merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares. The amount of gain or loss must be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered by the U.S. holder in the merger. Such gain or loss will generally be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than 12 months at the effective time of the merger. Long-term capital gains recognized by individual and certain other non-corporate U.S. holders are generally taxed at preferential U.S. federal income tax rates. A U.S. holder’s ability to deduct capital losses may be limited.

Non-U.S. Holders

Cash received in the merger by a non-U.S. holder generally will not be subject to U.S. withholding tax (other than potentially to backup withholding tax, as discussed below) and will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if an income tax treaty applies, is attributable to a United States permanent establishment or fixed base maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as if it were a U.S. holder, and, if the non-U.S. holder is a foreign corporation, such gain may also be subject to an additional branch profits tax at a rate of 30% or at such lower rate as may be specified by an applicable income tax treaty;

 

   

the non-U.S. holder is an individual who was present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain derived from the disposition, which may be offset by certain U.S.-source capital losses of the non-U.S. holder, if any; or

 

   

the Company was a “United States real property holding corporation”, which we refer to as a “USRPHC,” within the meaning of Section 897(c)(2) of the Code for U.S. federal income tax purposes within the five years preceding the merger and the non-U.S. holder owned, actually or constructively, more than 5% of the Company common stock at any time during the five-year period preceding the merger. Generally, a corporation is a USRPHC if the fair market value of its “U.S. real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurances in this regard, the Company does not believe it is, or has been during the five years preceding the merger, a USRPHC for U.S. federal income tax purposes.

Non-U.S. holders should consult their own tax advisors regarding the tax consequences to them of the merger.

Backup Withholding and Information Reporting

A U.S. holder may be subject to backup withholding on all payments to which such U.S. holder is entitled in connection with the merger, unless the U.S. holder provides its correct taxpayer identification number and complies with applicable certification procedures or otherwise establishes an exemption from backup withholding. In addition, if the paying agent is not provided with a U.S. holder’s correct taxpayer identification number or other adequate basis for exemption, the U.S. holder may be subject to certain penalties imposed by the

 

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IRS. Each U.S. holder should complete and sign the IRS Form W-9 included as part of the letter of transmittal and timely return it to the paying agent in order to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent.

Certain non-U.S. holders may also be subject to backup withholding unless they establish an exemption from backup withholding in a manner satisfactory to the paying agent (such as by completing and signing an appropriate IRS Form W-8) and otherwise comply with the backup withholding rules. Non-U.S. holders should consult their own tax advisors regarding these matters.

Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules will generally be allowable as a refund or credit against a holder’s U.S. federal income tax liability, provided that certain required information is timely furnished to the IRS.

Payments made pursuant to the merger will also be subject to information reporting unless an exemption applies.

This summary is provided for general information only and is not tax advice. The U.S. federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder’s tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder’s particular circumstances and the application of state, local, foreign, estate, gift and other tax laws (or any U.S. federal tax laws other than those pertaining to income tax).

Regulatory Approvals

The merger is subject to the reporting and waiting period requirements of the HSR Act. On November 23, 2020, the U.S. Federal Trade Commission granted early termination of the waiting period under the HSR Act with respect to the merger. Under the terms of the merger agreement, the merger cannot be consummated if any governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (preliminary or permanent) or statute, rule or regulation which has the effect of making the merger illegal or otherwise prohibiting consummation of the merger.

Litigation Relating to the Merger

On December, 8, 2020, a complaint was filed against the Company and each of its directors in the United States District Court for the Southern District of New York. The lawsuit, captioned Stamps v. Endurance International Group Holdings Inc., Civil Action No. 1:20-cv-10321, alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder against the defendants for allegedly disseminating a materially incomplete and misleading preliminary proxy statement in connection with the proposed merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. The plaintiff seeks to enjoin the defendants from proceeding with the stockholder vote to approve the proposed merger, or from consummating the proposed merger, unless and until the Company discloses to the Company’s public common stockholders the allegedly material information discussed in the complaint; or, in the event the proposed merger is consummated, the plaintiff seeks to recover damages. The plaintiff also seeks an award of costs, expert fees, and attorneys’ fees.

On December 11, 2020, a complaint was filed against the Company and each of its directors in the United States District Court for the District of Delaware. The lawsuit, captioned Baker v. Endurance International Group Holdings Inc., Civil Action No. 1:20-cv-01691, alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder against the defendants for allegedly disseminating a materially incomplete and misleading preliminary proxy statement in connection with the proposed merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. The plaintiff seeks to enjoin the defendants from proceeding with or consummating the proposed merger, or, in the event the proposed merger is consummated, the plaintiff seeks to rescind it or recover damages and seeks a declaration that the defendants violated Sections 14(a) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9. The plaintiff also seeks an award of costs, expert fees, and attorneys’ fees.

 

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THE MERGER AGREEMENT (PROPOSAL ONE)

The following is a summary of the material terms and conditions of the merger agreement. The description of the merger agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We urge you to read the merger agreement carefully and in its entirety because it is the legal document that governs the merger.

Explanatory Note Regarding the Merger Agreement

The merger agreement and this summary of its terms are included in this proxy statement to provide you with information regarding the material terms of the merger agreement. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by the Company, Parent and Merger Sub were made solely to the parties to, and solely for the purposes of, the merger agreement and as of specific dates and were qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing as facts the matters described therein. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in a disclosure schedule that the Company delivered to Parent in connection with the merger agreement, which we refer to as the “Company Disclosure Schedule.” Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement, and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement. Stockholders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the Company, Parent, Merger Sub or any of their respective subsidiaries or affiliates.

The Merger

Upon the terms and subject to the conditions of the merger agreement, at the effective time, Merger Sub, a wholly owned subsidiary of Parent, will merge with and into the Company, with the Company continuing as the surviving corporation of the merger. As a result of the merger, the separate corporate existence of Merger Sub will cease, and the Company will become a wholly owned subsidiary of Parent. We sometimes refer to the Company after the consummation of the merger as the “surviving corporation.” The certificate of incorporation of the Company will be amended and restated in its entirety, by virtue of the merger, to read as set forth on an exhibit to the merger agreement. The by-laws of the Company will also be amended and restated in their entirety so that, immediately following the effective time of the merger, they are identical to the by-laws of Merger Sub as in effect immediately prior to the effective time of the merger, except that all references to the name of Merger Sub will be changed to refer to the Company. The directors of Merger Sub immediately prior to the effective time of the merger will be the initial directors of the surviving corporation. The officers of the Company immediately prior to the effective time of the merger will be the initial officers of the surviving corporation.

 

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Effective Time of the Merger

The closing of the merger will occur remotely by exchange of documents and signatures (or their electronic counterparts) as soon as practicable (but in any event no later than the second business day) following the satisfaction or waiver of all of the closing conditions set forth in the merger agreement; provided that if the marketing period described below has not ended at the time of the satisfaction or waiver of the closing conditions, then the closing will occur instead on the date following the satisfaction or waiver of the closing conditions that is the earliest of (i) any business day during the marketing period as may be specified by Parent on no less than two business days’ prior notice to the Company and (ii) the first business day following the final day of the marketing period. The merger will become effective upon the filing of a certificate of merger with the Delaware Secretary of State or at such subsequent time or date as Parent and the Company may agree and specify in the certificate of merger. We intend to complete the merger as promptly as practicable, subject to receipt of the Company stockholder approval and satisfaction of the other closing conditions. Although we currently expect to complete the merger during the first quarter of 2021, the Company cannot assure completion by any particular date, if at all. Since the merger is subject to a number of conditions, the exact timing of the merger cannot be determined at this time.

Marketing Period

The “marketing period” refers to the first period of 18 consecutive business days (subject to certain specified business days that are either not counted as business days for purposes of determining the marketing period or reset such 18 consecutive business day period), throughout which (i) Parent has received certain financial information and other pertinent and customary information that is requested by Parent to market, syndicate and consummate the debt financing (which information we refer to as “required financial information”) and such required financial information is “compliant” (as described below) and (ii) the closing conditions related to stockholder approval and termination of the waiting period under the HSR Act have been satisfied and nothing has occurred and no condition exists that would cause the merger to become illegal or prohibit the consummation of the merger or cause any of the other conditions to the obligations of Parent and Merger Sub to close the merger to fail to be satisfied, assuming that the date of the closing were to be scheduled for any time during such 18 consecutive business day period. With respect to the required financial information, the term “compliant” means, subject to certain qualifications, such required financial information (a) taken as a whole, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such required financial information, in light of the circumstances under which the statements contained in the financial information are made, not misleading, (b) in the case of financial information delivered in connection with the offering of high yield debt securities, is compliant in all material respects with all applicable requirements of Regulations S-K and S-X under the Securities Act applicable to offerings of non-convertible debt securities on a registration statement on Form S-1 and (c) in the case of financial information delivered in connection with the offering of high yield debt securities, the independent registered public accountants of the company have consented to or otherwise authorized to the use of their audit opinions related to any audited financial statements included in such financial information and have confirmed they are prepared to provide customary comfort letters with respect to the required financial information.

The marketing period will not be deemed to commence if, prior to the completion of the marketing period, (i) our auditors have withdrawn any audit opinion contained in the required financial information in which case the marketing period will not be deemed to commence unless and until a new unqualified audit opinion is issued with respect thereto by the auditor or another independent public accounting firm reasonably acceptable to Parent and Merger Sub or (ii) the Company issues a public statement indicating its intent to, or determines that it is required to, restate any historical financial statements of the Company or that any such restatement is under consideration, in which case the marketing period is not deemed to commence unless and until such restatement has been completed and the relevant financial statements have been amended or the Company has announced that it has concluded that no restatement is required in accordance with GAAP. The marketing period will end on any earlier date on which all of the debt financing or any alternative financing pursuant to the terms of the merger agreement is obtained.

 

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If we in good faith reasonably believe we have delivered the applicable required financial information, we may deliver to Parent and Merger Sub written notice to that effect (stating when we believe we completed such delivery), in which case the marketing period will be deemed to have commenced on the date specified in that notice unless Parent or Merger Sub in good faith reasonably believes we have not completed delivery of the required financial information and, within three business days after the delivery of such notice by us, delivers written notice to us to that effect (stating with specificity which required financial information we have not delivered), but without prejudice to our right to assert that such financial information was in fact delivered.

Merger Consideration

At the effective time of the merger, each issued and outstanding share of Company common stock, other than shares of Company common stock that are held in the treasury of the Company and any shares of Company common stock owned any subsidiary of the Company, Parent, Merger Sub or any other subsidiary of Parent and any dissenting shares, which are described below in the section entitled “— Appraisal Rights,” will be canceled and automatically converted into the right to receive $9.50 in cash, without interest thereon and subject to deduction for any required withholding tax, which we refer to as the “merger consideration” and all such shares of Company common stock will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder of a thereof will cease to have any rights with respect thereto, except the right to receive the merger consideration.

The merger consideration will be adjusted to reflect fully the effect of any reclassification, stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into Company common stock), reorganization, recapitalization or other like change with respect to Company common stock occurring (or for which a record date is established) after the date of the merger agreement and prior to the effective time.

Any shares of Company common stock that are held in the treasury of the Company and any shares of Company common stock owned any subsidiary of the Company, Parent, Merger Sub or any other subsidiary of Parent will be canceled and no consideration will be paid for such shares.

Any dissenting shares will be entitled to the rights granted by Section 262 of the DGCL, subject to the requirements thereof. These rights are discussed more fully under the section of this proxy statement entitled “Appraisal Rights” beginning on page 119.

Payment Procedures

Prior to the effective time of the merger, Parent will enter into an agreement (in form and substance reasonably acceptable to the Company) with the paying agent for the merger, which we refer to as the “paying agent,” for the paying agent to act in such capacity for the merger and Parent will deposit with the paying agent, for the benefit of the holders of shares of Company common stock outstanding immediately prior to the effective time of the merger, a cash amount sufficient to pay the merger consideration pursuant to the merger agreement in exchange for all of the outstanding shares of Company common stock as of immediately prior to the effective time of the merger, which we refer to as the “payment fund.” The payment fund may not be used for any purpose other than to fund payments to stockholders pursuant to the merger agreement. The payment fund may be invested by the paying agent as directed by Parent, except that these investments must be in obligations of or guaranteed by the United States, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $10 billion (based on the most recent financial statements of such bank which are then publicly available). No gain or loss on the payment fund will affect the amounts payable under the merger agreement and, for one year after the effective time of the merger, Parent must take all actions necessary to ensure that the payment fund includes at all times cash sufficient to satisfy Parent’s obligation to pay the merger consideration under the merger agreement. Any interest and other income resulting from these investments (net of any losses) will be paid to Parent upon termination of the payment fund in accordance with the merger agreement. In the event the payment fund is

 

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diminished below the level required for the paying agent to make prompt cash payments as required under the merger agreement, Parent must, or must cause the surviving corporation to, immediately deposit additional cash into the payment fund equal to the deficiency in the amount required to make such payments.

Promptly (and in any event within two business days) after the effective time, Parent will cause the paying agent to mail to each holder of record of a certificate representing shares of Company common stock, which we refer to as a “certificate,” a letter of transmittal and instructions for use in effecting the surrender of the certificates in exchange for the merger consideration payable with respect thereto. Upon surrender of a certificate (or an affidavit of loss) to the paying agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such certificate will be promptly paid in exchange therefor a cash amount in immediately available funds equal to the number of shares of Company common stock formerly represented by such certificate (or affidavit of loss) multiplied by the merger consideration, and the certificate so surrendered will be cancelled.

Any holder of uncertificated shares that immediately prior to the effective time represented shares of Company common stock, which we refer to as “uncertificated shares,” will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the merger consideration that such holder is entitled to receive pursuant to the merger agreement. In lieu thereof, each holder of record of one or more uncertificated shares will, upon receipt by the paying agent of an “agent’s message” in customary form with respect to any uncertificated share (or such other evidence, if any, of transfer as the paying agent may reasonably request), be promptly paid the merger consideration in respect of such uncertificated share, and such uncertificated share will be cancelled.

No interest will be paid or accrued on the cash payable upon the surrender of certificates or uncertificated shares. In the event of a transfer of ownership of a certificate or uncertificated shares which is not registered in the transfer records of the Company, the merger consideration may be paid to a person other than the person in whose name the certificate or uncertificated shares is registered, if, in the case of a certificate, such certificate is presented to the paying agent, and in each case the transferor provides to paying agent (i) all documents required to evidence and effect such transfer and (ii) evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by the merger agreement, each certificate and all uncertificated shares (other than certificates or uncertificated shares representing dissenting shares) will be deemed at any time after the effective time to represent only the right to receive upon such surrender the merger consideration as contemplated by the merger agreement.

All merger consideration paid upon the surrender of certificates and cancellation of uncertificated shares in accordance with the terms of the merger agreement will be deemed to have been paid in satisfaction of all rights pertaining to the shares of Company common stock formerly represented by such certificates and uncertificated shares, and from and after the effective time there will be no further registration of transfers on the stock transfer books of the surviving corporation of the shares of Company common stock which were outstanding immediately prior to the effective time. If, after the effective time, certificates or uncertificated shares are presented to the surviving corporation or the paying agent for any reason, they will be cancelled and exchanged as provided in the merger agreement. No dividends or other distributions with respect to the capital stock of the surviving corporation with a record date on or after the effective time of the merger will be paid to the holder of any unsurrendered certificates or uncertificated shares.

Any portion of the payment fund that remains undistributed to the holders of certificates and uncertificated shares for one year after the effective time (including all interest and other income received by the paying agent in respect of all funds made available to it) will be delivered to Parent, upon demand, and any holder of a certificate or uncertificated shares who has not previously complied with the merger agreement will be entitled to receive only from Parent or the surviving corporation (subject to abandoned property, escheat and other similar laws) payment of its claim for merger consideration, without interest.

 

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To the extent permitted by applicable law, none of Parent, Merger Sub, the Company, the surviving corporation or the paying agent will be liable to any holder of shares of Company common stock for any amount required to be delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

If any certificate has 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, the paying agent will pay, in exchange for such lost, stolen or destroyed certificate, the merger consideration to be paid in respect of the shares of Company common stock formerly represented thereby pursuant to the merger agreement. Parent or the paying agent may, in its reasonable determination and as a condition precedent to the payment of such merger consideration, require the owners of such lost, stolen or destroyed certificates to deliver a bond in such reasonable and customary amount as it may direct as indemnity against any claim that may be made against Parent or the paying agent with respect to the certificates alleged to have been lost, stolen or destroyed.

You should not send your certificates (if any) to the paying agent until you have received transmittal materials from the paying agent. Do not return your certificates (if any) with the enclosed proxy.

Appraisal Rights

If the merger is completed, shares of Company common stock issued and outstanding immediately prior to the effective time of the merger that are held by a holder who has not voted in favor of the merger or consented to the merger in writing, who has, prior to such vote, made a proper demand for appraisal of such shares of Company common stock in accordance with Section 262 of the DGCL, who continuously holds such shares of record from the date of the making of the demand through the effective time of the merger and who does not thereafter fail to perfect, withdraw or otherwise lose his, her or its rights to appraisal, which we refer to as “dissenting shares,” will not be converted into or represent the right to receive the merger consideration in accordance with the merger agreement. Holders of dissenting shares will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive in lieu of the merger consideration payment in cash of the amount determined by the Delaware Court of Chancery to be the “fair value” of the shares of Company common stock as of the effective time of the merger exclusive of any elements of value arising from the accomplishment or expectation of the merger and together with interest to be paid on the amount determined to be “fair value.” These rights are discussed more fully under the section of this proxy statement entitled “Appraisal Rights” beginning on page 119.

If any dissenting shares lose their status as such (through failure to perfect or otherwise), then, as of the later of the effective time or the date of loss of such status, such shares will thereupon be deemed to have been converted as of the effective time into the right to receive the merger consideration in accordance with the merger agreement, without interest, and will not thereafter be deemed to be dissenting shares.

The Company must give Parent: (i) prompt notice of any written demand for appraisal received by the Company prior to the effective time pursuant to the DGCL, any withdrawal of any such demand and any other demand, notice, withdrawal or instrument delivered to the Company prior to the effective time pursuant to the DGCL that relates to such demand; and (ii) the opportunity to participate in all negotiations and proceedings with respect to any such demand, notice or instrument. The Company will not make any payment or settlement offer for an amount in excess of the merger consideration prior to the effective time with respect to any such demand, notice or instrument unless Parent has given its written consent to such payment or settlement offer.

Treatment of Company Stock Awards

Effective as of immediately prior to the effective time of the merger, each then-outstanding and unexercised option to purchase shares of Company common stock will vest in full. If any such Company stock option is not

 

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exercised prior to the effective time of the merger, then at the effective time of the merger such Company stock option will automatically be canceled and converted into the right to receive an amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying such Company stock option multiplied by (ii) the excess, if any, of the merger consideration over the exercise price per share of such Company stock option, without any interest thereon and subject to all applicable withholding. In the event that the exercise price of any Company stock option is equal to or greater than the merger consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit, other than a specified restricted stock unit as described in the next paragraph, that is then outstanding and unvested will vest in full. Each Company restricted stock unit, other than a specified restricted stock unit, that is outstanding as of the effective time of the merger will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock unit multiplied by (B) the merger consideration without any interest thereon and subject to all applicable withholding taxes.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock unit that was granted (i) on or after October 27, 2020 to new hires or (ii) in connection with any acquisition that closed in 2020, which we refer to collectively as the “specified restricted stock units,” will automatically be cancelled and converted into the right to receive an amount in cash equal to the merger consideration the holder of the specified restricted stock unit would have received pursuant to the preceding paragraph with the payment of the merger consideration made at the vesting dates, subject to the holder of the specified restricted stock units remaining in continuous service with Parent, the surviving corporation or any of its subsidiaries through each such vesting date. The specified restricted stock units granted on or after October 27, 2020 to new hires will vest as to one-third on the first anniversary of their date of grant and the remainder on the first anniversary of the effective time of the merger, subject to acceleration in full upon a termination without cause, and the specified restricted stock units granted in connection with any acquisition that closed in 2020 will vest based on their pre-effective time vesting schedules with certain accelerations to be determined and with further acceleration upon a termination without cause within 12 months following the effective time of the merger. The merger consideration payable with respect to the specified restricted stock units will be subject to all applicable withholding taxes and will be paid on the first administratively practicable payroll date following the vesting date.

Effective as of immediately prior to the effective time of the merger, each Company restricted stock award that is then outstanding and unvested will vest in full and will automatically be cancelled and converted into the right to receive an amount of cash equal to the product of (A) the total number of shares of Company common stock then underlying such Company restricted stock award multiplied by (B) the merger consideration, without any interest thereon and subject to all applicable withholding taxes.

The Company will take all action necessary to effect the cancellation of the Company stock options, Company restricted stock units and Company restricted stock awards upon the effective time of the merger and to give effect to the terms of the merger agreement.

Representations and Warranties

In the merger agreement, the Company made representations and warranties to Parent and Merger Sub, including those relating to:

 

   

the Company’s corporate organization, standing and power;

 

   

the Company’s capitalization;

 

   

the Company’s subsidiaries;

 

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the Company’s authorization (including approval of the board of directors and direction to submit the merger agreement to a stockholder vote and recommendation of stockholder approval), execution, delivery, performance and the enforceability of the merger agreement;

 

   

the absence of conflicts with, or violations of, the Company’s organizational documents, applicable laws, contracts or permits, in each case as a result of the Company’s execution of the merger agreement or consummation of the merger; and the absence of certain governmental consents in connection with the merger;

 

   

documents filed by the Company with the SEC, the accuracy and completeness of the financial statements and other information contained therein; this proxy statement; the Company’s compliance with the Sarbanes-Oxley Act of 2002, as amended; and the Company’s disclosure controls and procedures;

 

   

the absence of certain undisclosed liabilities;

 

   

the absence of a Company Material Adverse Effect (as defined below in the section entitled “ Definition of Company Material Adverse Effect”) since June 30, 2020; the conduct of the business of the Company in the ordinary course between June 30, 2020 and November 1, 2020 except as contemplated in the merger agreement and the absence of certain other changes or events involving the Company from June 30, 2020 until the date of the merger agreement;

 

   

the Company’s filing of tax returns, payment of taxes and other tax matters;

 

   

the Company’s leased and owned real property;

 

   

the Company’s intellectual property;

 

   

the Company’s material contracts;

 

   

the absence of pending or threatened litigation or investigations involving the Company;

 

   

environmental matters with respect to the Company’s operations;

 

   

the Company’s employee benefit plans, matters relating to the Employee Retirement Income Security Act of 1974, as amended, and other matters concerning employee benefits and employment agreements;

 

   

the Company’s compliance with laws;

 

   

the Company’s possession of and compliance with permits, licenses and franchises to conduct its business;

 

   

the Company’s employees and other labor matters;

 

   

the Company’s insurance policies;

 

   

the receipt by the board of directors of opinions from Centerview and Goldman Sachs;

 

   

the inapplicability to the merger of the restrictions set forth in Section 203 of the DGCL; and

 

   

the absence of undisclosed obligations to brokers and investment bankers.

In the merger agreement, Parent and Merger Sub made representations and warranties to the Company, including those relating to:

 

   

Parent’s and Merger Sub’s corporate organization, standing and power;

 

   

Parent’s and Merger Sub’s authorization, execution, delivery, performance and the enforceability of the merger agreement;

 

   

the absence of conflicts with, or violations of, Parent’s and Merger Sub’s organizational documents, applicable laws, contracts or permits, in each case as a result of their execution of the merger

 

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agreement or consummation of the merger; the absence of certain governmental consents in connection with the merger; and the absence of any vote required by holders of Parent’s securities in connection with the merger;

 

   

the information provided by Parent and Merger Sub in writing for inclusion in this proxy statement;

 

   

the operations of Merger Sub;

 

   

the execution, delivery and enforceability of the debt and equity commitment letters, and the absence of any breach or default under the debt and equity commitment letters;

 

   

the enforceability of, and absence of default under, the limited guarantee executed and delivered by the guarantors;

 

   

the solvency of Parent and the surviving corporation as of the effective time and immediately after consummation of the transactions contemplated by the merger agreement;

 

   

the inapplicability to the merger of the restrictions set forth in Section 203 of the DGCL;

 

   

the absence of pending or threatened litigation or investigations involving Parent or Merger Sub;

 

   

the disclosure to the Company of certain agreements and understandings between Parent, Merger Sub or the guarantors and any member of the board of directors or of management of the Company or any stockholder of the Company;

 

   

the absence of obligations to brokers and investment bankers in connection with any of the transactions contemplated by the merger agreement;

 

   

the due diligence investigation of Parent and Merger Sub;

 

   

the absence of representations and warranties by the Company not set forth in the merger agreement; and

 

   

Parent’s and Merger Sub’s non-reliance on Company estimates, projections, forecasts, forward-looking statements and business plans.

Definition of Company Material Adverse Effect

Several of the representations and warranties made by the Company in the merger agreement and certain conditions to the performance by Parent and Merger Sub of their obligations under the merger agreement are qualified by reference to whether the item in question would have a “Company Material Adverse Effect.” The merger agreement provides that a “Company Material Adverse Effect” means any change, event, violation, inaccuracy, effect or circumstance (which we refer to as an “effect”) that (A) is materially adverse to the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole or (B) would prevent the consummation by the Company of the merger. However, none of the following will be deemed to be or constitute a “Company Material Adverse Effect” or will be taken into account when determining whether a “Company Material Adverse Effect” has occurred or may, would or could occur:

 

   

general economic conditions (or changes in such conditions) or conditions in the global economy generally;

 

   

conditions (or changes in such conditions) in the securities markets, credit markets, currency markets or other financial markets, including (i) changes in interest rates and exchange rates and (ii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally;

 

   

conditions (or changes in such conditions) in the industries in which the Company and its subsidiaries conduct business;

 

   

changes in political conditions or acts of war, sabotage or terrorism;

 

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earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild-fires or other natural disasters, weather conditions and other force majeure events;

 

   

other than in the case of representations relating to (a) absence of conflicts with, or violations of, the Company’s organizational documents, applicable laws, contracts or permits, in each case as a result of the Company’s execution of the merger agreement or consummation of the merger and (b) the absence of certain acceleration, vesting, material increases to, or forfeiture of compensation or benefits or an “excess parachute payment” under, Company employee plans, the announcement of the merger agreement or the pendency or consummation of the transactions contemplated by the merger agreement, including (i) the identity of Parent, (ii) the loss or departure of officers or other employees of the Company or any of its subsidiaries directly resulting from, arising out of, attributable to, or related to the transactions contemplated by the merger agreement, (iii) the termination or potential termination of (or the failure or potential failure to renew or enter into) any contracts with customers or other business partners directly or indirectly resulting from, arising out of, attributable to, or related to the transactions contemplated by the merger agreement, and (iv) any other negative development (or potential negative development) in the relationships of the Company or any of its subsidiaries with any of its customers or other business partners directly or indirectly resulting from, arising out of, attributable to, or related to the transactions contemplated by the merger agreement;

 

   

the taking of any action (or failure to take any action) expressly requested by or consented to by Parent or required or contemplated by the merger agreement;

 

   

changes in law or other legal or regulatory conditions (or the interpretation thereof) or changes in GAAP or other accounting standards (or the interpretation thereof) or that result from any action taken for the purpose of complying with any of the foregoing;

 

   

changes in the Company’s stock price or the trading volume of the Company’s stock, or any failure by the Company to meet any public estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period, or any failure by the Company or any of its subsidiaries to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations (but not, in each case, the underlying cause of such changes or failures, unless such changes or failures would otherwise be excepted from this definition);

 

   

pandemics, epidemics or disease outbreaks or any escalation or worsening of any of the foregoing (including, without limitation, any COVID-19 responses);

 

   

the availability or cost of financing to Parent or Merger Sub; or

 

   

any legal proceedings made or brought by any of the current or former stockholders of the Company (on their own behalf or on behalf of the Company) against the Company, Merger Sub, Parent or any of their directors or officers arising out of the Merger or in connection with any other transactions contemplated by the merger agreement;

except to the extent such effects resulting from, arising out of, attributable to or related to the matters described in the first, second, third, fourth, fifth, eighth and tenth bullets above disproportionately adversely affect in a material respect the Company and its subsidiaries, taken as a whole, as compared to other companies that conduct business in the countries and regions in the world and in the industries in which the Company and its subsidiaries conduct business (in which case, only the incremental disproportionate adverse impact of such adverse effects (if any) will be taken into account when determining whether a “Company Material Adverse Effect” has occurred or may, would or could occur).

As used in the merger agreement, the term “COVID-19 response” means any actions taken or omitted in response to the COVID-19 pandemic (a) to the extent reasonably necessary to comply with applicable law in any jurisdiction or (b) that (i) are commercially reasonable, (ii) are intended to protect the health and safety of employees of the Company or its subsidiaries and (iii) are consistent with prevalent practices of similarly situated

 

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businesses in the industries or the locations in which the Company and its subsidiaries operate, and the effects resulting from such taken or omitted actions (including any required quarantines, travel restrictions, “stay-at-home” orders, social distancing measures, other safety measures, or any workplace or worksite shutdowns or slowdowns) but, with respect to clause (b), solely to the extent supported by documentation, information, data, or other evidence reasonably substantiating the necessity or appropriateness of such actions as determined by the Company in good faith.

Definition of Parent Material Adverse Effect

Certain of the representations and warranties made by Parent and Merger Sub in the merger agreement and certain conditions to the performance of the Company’s obligations under the merger agreement are qualified by reference to whether the item in question would have a “Parent Material Adverse Effect.” The merger agreement provides that a “Parent Material Adverse Effect” means any change, event or development that would reasonably be expected to prevent, or materially impair or delay, the ability of Parent or Merger Sub to consummate the merger or any of the other transactions contemplated by the merger agreement or otherwise perform any of its obligations under the merger agreement.

Covenants Relating to the Conduct of the Company’s Business

Except (a)(1) as required by applicable law, (2) by any Company material contract that has been made available to Parent or other agreement, plan or arrangement in effect on the date hereof that is listed in the Company Disclosure Schedule, or (3) as taken in connection with any COVID-19 responses (we refer to clauses (1) through (3), as the “specified exceptions”), (b) as otherwise expressly contemplated or permitted by the merger agreement, (c) as set forth in the Company Disclosure Schedule, or (d) with Parent’s consent (which will not be unreasonably withheld, conditioned or delayed), during the period between the execution of the merger agreement and the closing, which we refer to as the “pre-closing period,” the Company will, and will cause each of its subsidiaries to, use commercially reasonable efforts to act and carry on its business in the ordinary course of business, to preserve intact its business organization and to preserve satisfactory business relationships with material customers, suppliers, licensors, licensees, distributors, lessors and others having material business dealings with the Company or its subsidiaries. Except (a) with respect to the specified exceptions (other than in the case of certain specified items below), (b) as otherwise expressly contemplated or permitted by the merger agreement, (c) as set forth in the Company Disclosure Schedule, or (d) with Parent’s consent (which will not be unreasonably withheld, conditioned or delayed), during the pre-closing period the Company will not, and will not permit any of its subsidiaries to, directly or indirectly, do any of the following:

 

   

declare, set aside or pay any dividends on, or make any other distributions (whether in cash, securities or other property or any combination thereof) in respect of, any of its capital stock or other equity or voting interests (other than dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its parent), (ii) adjust, split, combine, divide, subdivide, reverse split, recapitalize or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or any of its other securities or voting interests; (iii) purchase, redeem or otherwise acquire any shares of its capital stock or any other of its securities or any rights, warrants or options to acquire any such shares or other securities, except for certain exceptions; (iv) modify the terms of any shares or other equity or voting interest of the Company; or (v) enter into any agreement with respect to the voting or registration of shares or other equity or voting interest of the Company;

 

   

issue, deliver, sell, grant, pledge or otherwise dispose of or subject to any lien (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase, equity awards or otherwise) any shares of its capital stock, any other voting securities or any securities convertible into or exchangeable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible or exchangeable securities (or instruments for cash based on the value of any such securities), except for certain exceptions;

 

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amend the Company’s or any of its subsidiaries’ certificate of incorporation, bylaws or other comparable charter or organizational documents (whether by merger, consolidation or otherwise);

 

   

acquire (i) by merging, amalgamating or consolidating with, or by purchasing all or a substantial portion of the assets or any stock of, or by any other manner, directly or indirectly, any business or any corporation, partnership, joint venture, limited liability company, association or other business organization or division thereof or (ii) any assets, securities, properties or interests that are material, in the aggregate, to the Company and its subsidiaries, taken as a whole, except purchases of inventory and raw materials in the ordinary course of business;

 

   

sell, lease, license, pledge, or otherwise dispose of or subject to any lien any properties or assets of the Company or of any of its subsidiaries, tangible or intangible, in each case with a value in excess of $250,000 individually or $1,000,000 in the aggregate, other than certain exceptions;

 

   

adopt any stockholder rights plan or similar arrangement;

 

   

(i) incur or assume any indebtedness or assume or guarantee, endorse or otherwise become liable or responsible for any such indebtedness of another person (other than to the Company or one of its wholly-owned subsidiaries), (ii) issue, sell or amend any debt securities, instruments or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities or instruments of another person, enter into any “keep well” or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, or (iii) make any loans, advances (other than routine advances to employees of the Company and its Subsidiaries in the ordinary course of business) or capital contributions to, or investment in, any other person, except that the Company may incur indebtedness in the ordinary course of business in an amount not to exceed $2,000,000 in aggregate incremental outstanding principal (other than accrued but unpaid interest) pursuant to (A) letters of credit, bank guarantees, security or performance bonds or similar credit support instruments, overdraft facilities, supplier financing programs or cash management programs, (B) indebtedness under the credit facility or other existing arrangements (including in respect of letters of credit) or (C) pursuant to investments in short-term deposits in the ordinary course of business;

 

   

make any capital expenditures or other expenditures with respect to property, plant or equipment in excess of $11,000,000 in the aggregate for the Company and its subsidiaries, taken as a whole, other than as included in the Company’s budget for capital expenditures previously made available to Parent;

 

   

make any material changes in accounting methods, principles or practices, except insofar as may be required by a change in law or GAAP;

 

   

(i) prepare or file any federal income or other material income tax return inconsistent with past practice, (ii) make, change or revoke any material tax election, (iii) file any amended tax return with respect to a material amount of taxes, (iv) settle or compromise any claim related to a material amount of taxes, (v) enter into any closing agreement or similar agreement relating to taxes, (vi) otherwise settle any dispute relating to a material amount of taxes, (vii) surrender any right to claim a material tax refund, offset or other reduction in tax liability or (viii) request any ruling or similar guidance with respect to taxes;

 

   

(i) adopt, enter into, terminate or amend any employment, consulting, change in control, severance, termination, retention or similar agreement or material employee benefit plan for the benefit or welfare of any current or former director or executive officer (except in the ordinary course of business and only if such arrangement is terminable on 60 days’ or less notice without either a penalty or a termination payment or, for employment outside the United States, as required by applicable law) or any collective bargaining agreement, (ii) increase in any material respect the compensation or fringe benefits of, or pay any bonus to, any director or executive officer (except for annual increases of salaries in the ordinary course of business and bonuses consistent with arrangements set forth in the Company Disclosure Schedule), it being understood (for the avoidance of doubt) that the Company and

 

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its subsidiaries may promote employees in the ordinary course of business, (iii) accelerate the payment, right to payment or vesting of any compensation or benefits, including any outstanding options, restricted stock or restricted stock units, other than as contemplated by the merger agreement or (iv) grant any stock options, restricted stock units, stock appreciation rights, stock based or stock related awards, performance units or restricted stock;

 

   

hire any employee with an annualized base salary rate in excess of $200,000 other than in replacement for a departing employee with substantially similar compensation or terminate or transfer any employee with an annualized base salary rate in excess of $200,000 other than for cause as determined by the Company or one of its subsidiaries in its reasonable discretion in accordance with applicable law;

 

   

propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, conversion, amalgamation, restructuring, recapitalization or other reorganization;

 

   

(i) except as permitted by and in accordance with the merger agreement, settle, release, waive or compromise any pending or threatened material legal proceeding or other claim, except for the settlement of any legal proceedings or other claim that is (A) reflected or reserved against in the Company balance sheet; or (B) for solely monetary payments of no more than $250,000 individually and $1,000,000 in the aggregate (net of insurance proceeds received and indemnity, contribution, or similar payments actually received) or (ii) commence any material legal proceeding;

 

   

enter into any joint venture, strategic alliance or similar legal partnership;

 

   

enter into, modify, amend or terminate any (a) contract (other than any Company material contract) that if so entered into, modified, amended or terminated would have a Company Material Adverse Effect; or (b) Company material contract except (i) in the ordinary course of business (other than certain exceptions), (ii) terminations as a result of a material breach or a material default by the counterparty or the expiration of such contract in accordance with its terms or (iii) amendments that are not adverse to the Company in any material respect;

 

   

engage in any transaction with, or enter into any agreement, arrangement or understanding with, any affiliate of the Company or other person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404;

 

   

enter into any collective bargaining agreement or agreement to form a work council or other contract with any labor organization or works council (except to the extent required by applicable law); or

 

   

authorize any of, or commit or agree, in writing or otherwise, to take any of, the foregoing actions.

A “Company material contract” means Contract to which the Company or any of its Subsidiaries is a party or bound that:

 

   

is an agreement or contract pursuant to which the Company and its subsidiaries spent, in the aggregate, more than $3,000,000 with respect to such agreement or contract during fiscal year 2019;

 

   

is a non-competition or other agreement (including any exclusive license to, or covenant not to sue or assert claims based on, any Company intellectual property) that prohibits or otherwise restricts, in any material respect, the Company or any of its subsidiaries from freely engaging in any business material to the Company and its subsidiaries, taken as a whole, anywhere in the world;

 

   

relates to the material disposition of any business (whether by merger, sale of stock, sale of assets or otherwise) owned by the Company or its subsidiaries, which has not been fully performed (other than confidentiality obligations);

 

   

relates to the material acquisition of any business (whether by merger, sale of stock, sale of assets or otherwise) (i) entered into since January 1, 2018 or (ii) that contains any outstanding earn-out or other contingent payment obligations of the Company or its subsidiaries which has not been fully performed (other than confidentiality obligations);

 

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relates to bonds, debentures, notes or other indebtedness for borrowed money (excluding letters of credit and agreements between or among the Company or its subsidiaries) (whether incurred, assumed, guaranteed or secured by any asset), except any such agreement with an aggregate outstanding principal amount not exceeding $1,000,000;

 

   

is a joint venture, alliance or legal partnership agreement that is material to the operation of the Company and its subsidiaries, taken as whole;

 

   

constitutes a settlement, conciliation or similar agreement (A) pursuant to which the Company or any of its subsidiaries is obligated after the date of the merger to pay consideration to a governmental entity in excess of $1,000,000 or (B) that would otherwise limit or adversely affect the operation of the business conducted by the Company and its subsidiaries in any material respect after the closing;

 

   

includes material pricing or margin representations that provide “most favored nation” or similar material representations with respect to pricing;

 

   

restricts payment of dividends or distributions in respect of the Company common stock or other equity interests of the Company or any of its subsidiaries;

 

   

constitutes a “material contract” (as such term is defined in item 601(b)(10) of Regulation S-K under the Securities Act) with respect to the Company and its subsidiaries;

 

   

constitutes a “material contract” with a related person (as such term is defined in Item 404 of Regulation S-K of the Securities Act) that would be required to be disclosed in the Company SEC reports; or

 

   

any collective bargaining agreement with a labor union, works council, or other labor organization representing employees of the Company or any of the subsidiaries.

Covenants Relating to the Conduct of Parent’s and Merger Sub’s Business

Parent and Merger Sub have agreed that, during the pre-closing period:

 

   

they will not, directly or indirectly, without the prior consent of the Company, take or cause to be taken any action that would impair or prevent the consummation of the transactions contemplated by the merger agreement, and

 

   

Merger Sub will not engage in any activity of any nature except for activities related to or in furtherance of the merger and the other transactions contemplated by the merger agreement.

Restrictions on Solicitation of Other Offers

Under the merger agreement, during the period beginning on the date of the merger agreement until the earlier of the termination of the merger agreement and the receipt of the Company stockholder approval, the Company and its subsidiaries will not, and the Company will instruct its directors, managers, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives, which we refer to collectively as “representatives,” not to, and will not authorize or knowingly permit any of its representatives to, directly or indirectly:

 

   

solicit, initiate or propose the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that constitutes, or would reasonably be expected to lead to, any acquisition proposal;

 

   

terminate, waive, amend or modify any provision of any existing confidentiality or standstill agreement with respect to a potential acquisition proposal, except under the circumstances permitted under the merger agreement; or

 

   

other than informing persons of the existence of these provisions of the merger agreement, enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person

 

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any non-public information for the purpose of encouraging or facilitating, any acquisition proposal or any proposal or inquiry that is reasonably expected to lead to an acquisition proposal.

Notwithstanding the foregoing restrictions or anything to the contrary set forth in the merger agreement, subject to compliance with the merger agreement, at any time prior to receipt of the Company stockholder approval the Company may:

 

   

furnish non-public information with respect to the Company and its subsidiaries to any person who has made an acquisition proposal that did not result from a material breach of the merger agreement that the board of directors determines in good faith (after consultation with outside counsel and its financial advisor) is, or could reasonably be expected to lead to, a superior proposal, which we refer to as a “qualified person” (and the representatives of such qualified person), pursuant to a confidentiality agreement not materially less restrictive with respect to the confidentiality obligations of the qualified person than the confidentiality agreement between the Company and Clearlake, provided that such confidentiality agreement will not (x) grant any exclusive right to negotiate with such counterparty, (y) prohibit the Company from satisfying its obligations under the merger agreement or (z) require the Company or its subsidiaries to pay or reimburse the counterparty’s fees, costs or expenses;

 

   

engage in discussions or negotiations (including solicitation of revised acquisition proposals) with any qualified person (and the representatives of such qualified person) regarding any acquisition proposal; or

 

   

amend, or grant a waiver or release under, any standstill or similar agreement with respect to any Company common stock with any qualified person.

However, the Company may only furnish such non-public information and engage in such discussions or negotiations if: (x) the Company and its subsidiaries are not in material breach of their non-solicitation obligations pursuant to the terms of the merger agreement and (y) the board of directors of the Company has determined that the failure to take such actions would be reasonably likely to be inconsistent with its fiduciary obligations under applicable law. Further, the Company will promptly make available to Parent any non-public information concerning the Company and its subsidiaries that is provided to any such person or its representatives that was not previously made available to Parent.

An “acquisition proposal” means any proposal or offer for an acquisition transaction first made after the execution of the merger agreement.

An “acquisition transaction” means:

 

   

a merger, consolidation, dissolution, recapitalization, share exchange, tender offer or other business combination involving the Company and its subsidiaries (other than (i) mergers, consolidations, recapitalizations, share exchanges or other business combinations involving solely the Company and/or one or more subsidiaries of the Company and (ii) mergers, consolidations, recapitalizations, share exchanges, tender offers or other business combinations that if consummated would result in the holders of the outstanding shares of Company common stock immediately prior to such transaction owning more than 85% of the equity securities of the Company, or any successor or acquiring entity, immediately thereafter);

 

   

the issuance by the Company of 15% or more of its equity securities; or

 

   

an acquisition in any manner, directly or indirectly, 15% or more of the equity securities of the Company or consolidated total assets of the Company and its subsidiaries;

in each case other than the transactions contemplated by the merger agreement.

A “superior proposal” means any bona fide acquisition proposal (i) on terms which the board of directors determines in its good faith judgment to be more favorable to the holders of Company common stock than the

 

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transactions contemplated by the merger agreement (after consultation with its financial and legal advisors), taking into account all the terms and conditions of such proposal and the merger agreement (including any written, binding offer by Parent to amend the terms of the merger agreement, which offer is not revocable for at least five business days) that the board of directors determines to be relevant and (ii) which the board of directors determines to be reasonably capable of being completed on the terms proposed, taking into account all financial, regulatory, legal and other aspects of such proposal that the board of directors determines to be relevant. For purposes of reference to an acquisition transaction in the definition of superior proposal, all references to “15%” in the definition of acquisition transaction will be deemed to be references to 50%.

“Company stockholder approval” means the adoption of this Agreement by the holders of a majority of the outstanding shares of Company common stock entitled to vote on such matter at the Company stockholders meeting.

The Company will promptly (and in any event within one business day) advise Parent orally, with written confirmation to follow, of (i) the Company’s receipt of any written acquisition proposal, (ii) a summary of the material terms and conditions of any such acquisition proposal; (iii) all material written requests, proposals or offers (including any written documents containing material terms which relate to such requests, proposals or offers), including any proposed agreements and any material changes to the terms of the acquisition proposal, received by or made to the Company from any person making an acquisition proposal; and (iv) the identity of the person making any such acquisition proposal (unless, in the case of clause (iv), such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person that is in effect on the date of the merger agreement).

The Company must, and must direct its representatives to: (i) cease immediately all discussions and negotiations that commenced prior to the date of the merger agreement regarding any proposal that would constitute (if made after the date of the merger agreement), or could reasonably be expected to lead to, an acquisition proposal, (ii) request the prompt return or destruction of all non-public information concerning the Company or its subsidiaries theretofore furnished to any person with whom a confidentiality agreement in contemplation of an acquisition transaction was entered into at any time within the six month period immediately preceding the date hereof and (iii) terminate all access granted to any such persons or their respective representatives referenced in clauses (i) and (ii) to any physical or electronic data room.

Restrictions on Changes of Recommendation to Company Stockholders

Under the merger agreement, the board of directors must submit the merger agreement to the Company’s stockholders for adoption and must recommend that the Company’s stockholders vote in favor of adopting the merger agreement. Prior to the earlier of the termination of the merger agreement and the receipt of the Company stockholder approval:

 

   

the board of directors (or a committee thereof) (a) must not withhold, withdraw, qualify or modify, in a manner adverse to Parent, its recommendation to the Company’s stockholders that the Company’s stockholders adopt the merger agreement at the special meeting, (b) must publicly reaffirm its recommendation within ten business days of a request therefor in writing by Parent (it being understood that the Company will have no obligation to make such reaffirmation on more than three separate occasions), (c) must not make or fail to make any recommendation or public statement in connection with a tender or exchange offer, other than a recommendation against such offer or a “stop, look and listen” communication by the board of directors (or a committee thereof) to the stockholders of the Company pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication) (it being understood that the board of directors (or a committee thereof) may refrain from taking a position with respect to an acquisition proposal until the close of business on the tenth business day after the commencement of a tender or exchange offer in connection with such acquisition proposal), (d) must not fail to include its recommendation in this proxy statement, or

 

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(e) must not, except as contemplated by the terms of the merger agreement, adopt, approve, endorse or recommend any acquisition proposal or any proposal that is reasonably expected to lead to an acquisition proposal (we refer to the actions listed in the preceding clauses (a) through (e) as a “Company board recommendation change”); and

 

   

the Company may not enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement providing for the consummation of a transaction contemplated by any acquisition proposal (other than entering into a confidentiality agreement in the circumstances described above in the section entitled “— Restrictions on Solicitations of Other Offers”).

However, prior to receipt of the Company stockholder approval, the board of directors may effect a board recommendation change in response to a superior proposal or an intervening event if each of the following conditions is satisfied: (a) the board of directors has determined in good faith (after consultation with outside counsel and its outside financial advisor) that the failure to effect a Company board recommendation change would be reasonably likely to be inconsistent with its fiduciary obligations under applicable law; (b) the Company and its subsidiaries are not in material breach of their obligations pursuant to the merger agreement with respect to an acquisition proposal underlying such Company board recommendation change; (c) the Company has delivered to Parent a recommendation change notice; (d) if requested by Parent, the Company has made its representatives available to negotiate (to the extent that Parent desires to so negotiate) with Parent’s representatives any proposed modifications to the terms and conditions of the merger agreement during the three business day period following delivery by the Company to Parent of such recommendation change notice; and (e) if Parent has delivered to the Company a written, binding and irrevocable offer to alter the terms or conditions of the merger agreement during such three business day period, the board of directors has determined in good faith (after consultation with outside counsel), after considering the terms of such offer by Parent, that the failure to effect a Company board recommendation change would still be reasonably likely to be inconsistent with its fiduciary obligations under applicable law.

However, in the event of any material revisions to an acquisition proposal underlying a potential Company board recommendation change, the Company is required to notify Parent of such revisions and the applicable three business day period described above will be extended until two business days after the time Parent receives notification from the Company of such revisions.

Additional Agreements of the Parties to the Merger Agreement

Listing of Company Common Stock

The Company must use its commercially reasonable efforts to continue the listing of Company common stock on the Nasdaq Stock Market during the term of the merger agreement. Each of the parties has agreed to cooperate with the other parties and to use its reasonable best efforts to take or cause to be taken, all actions necessary to delist the Company common stock from the Nasdaq Stock Market as promptly as possible following the effective time of the merger and the deregistration of the Company common stock under the Exchange Act as promptly as practicable after such delisting.

Access to Information

During the pre-closing period, the Company must (and must cause each of its subsidiaries to) afford to Parent and Parent’s representatives, reasonable access, upon reasonable notice, during normal business hours and in a manner that does not disrupt or interfere with business operations, to all of its books, contracts and records as Parent may reasonably request, and, during such period, the Company must (and must cause each of its subsidiaries to) promptly make available to Parent (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal or state

 

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securities laws and (ii) all other information in the Company’s possession concerning its business, properties and assets as Parent may reasonably request. However, the Company will not be required to permit any inspection or other access, or to disclose any information, (A) in connection with an acquisition proposal, trigger event, recommendation change notice or superior proposal notice, (B) that in the reasonable judgment of the Company would: (1) result in the disclosure of any trade secrets of any third party, (2) violate any legal requirement or contract or any obligation of the Company with respect to confidentiality or privacy, including under any privacy policy, or (3) jeopardize protections afforded the Company under the attorney-client privilege or the attorney work product doctrine or (C) that the Company in good faith determines, in light of any COVID-19 responses, that such access would reasonably be expected to jeopardize the health and safety of any employee of the Company and its subsidiaries. However, the Company will use commercially reasonable efforts to provide the information in the preceding sentence to Parent in an alternative manner and limit the information it is otherwise unable to provide and any such information shall be subject to the confidentiality agreement between the Company and Clearlake. Prior to the closing of the merger, neither Parent nor Merger Sub will (and each will cause its affiliates and representatives not to) contact or communicate with any of the employees, customers, licensors or suppliers of the Company or any of its subsidiaries, without the prior written consent of the Company.

Legal Conditions to the Merger

Subject to certain terms of the merger agreement, Parent and the Company must each use its reasonable best efforts to:

 

   

take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties to the merger agreement in doing, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by the merger agreement as promptly as practicable;

 

   

as promptly as practicable, obtain any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained by such party (or any of its subsidiaries) from any governmental entity in connection with the authorization, execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, except that in no event will the Company or any of its subsidiaries be required to pay any monies or agree to any material undertaking in connection with any of the foregoing;

 

   

as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to the merger agreement and the merger required under (i) the exchange act, and any other applicable federal or state securities laws, (ii) the HSR Act and (iii) any other applicable law;

 

   

contest and resist any action, including any administrative or judicial action, and seek to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) which has the effect of making the merger illegal or otherwise prohibiting consummation of the merger or the other transactions contemplated by the merger agreement;

 

   

execute or deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the merger agreement; and

 

   

with the prior written consent of Parent, seek all consents, waivers and approvals and delivering all notifications pursuant to any Company material contracts, in connection with the merger agreement and the consummation of the merger; provided, however, that in no event will the Company or any of its subsidiaries be required to pay any monies or agree to any material undertaking in connection with any of the foregoing.

The parties to the merger agreement will, and will cause each of their respective subsidiaries to, cooperate and use their respective reasonable best efforts to obtain any government clearances or approvals required for the closing under any antitrust law, to respond to any government requests for information under any antitrust law, to

 

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cause any waiting periods under any applicable antitrust laws to expire or be terminated, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any restrictive order.

Parent will propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of such assets or businesses of the Parent or, effective as of the effective time, the surviving corporation, or their respective subsidiaries, or otherwise offer to take or offer to commit to take any action which it is capable of taking and if the offer is accepted, take or commit to take such action that limits its freedom of action with respect to, or its ability to retain, any of the businesses, services or assets of the Parent, the surviving corporation or their respective subsidiaries, in order to avoid the entry of, or to effect the dissolution of, any restrictive order, which would have the effect of preventing or delaying the closing beyond the outside date.

Public Disclosure

Except as may be required by law or stock market regulations, Parent and the Company will use their respective commercially reasonable efforts to consult with the other party before issuing any other press release or otherwise making any public statement with respect to the merger or the merger agreement. However, these restrictions will not apply to any Company communications permitted pursuant to the terms of the merger agreement in connection with an acquisition proposal, trigger event, recommendation change notice or superior proposal notice.

Indemnification

From and after the effective time of the merger, each of Parent and the surviving corporation will, jointly and severally, indemnify defend and hold harmless each indemnified party against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that the indemnified party is or was an officer, director, manager, employee or agent of the Company or any of its subsidiaries or, while a director, manager or officer of the Company or any of its subsidiaries, is or was serving at the request of the Company or one of its subsidiaries as an officer, director, manager, member, trustee, fiduciary, employee or agent of another person, whether asserted or claimed prior to, at or after the effective time of the merger, to the fullest extent permitted by law. Each indemnified party will be entitled to advancement of expenses (including attorneys’ fees) incurred in the defense of any such claim, action, suit, proceeding or investigation from each of Parent and the surviving corporation within ten business days of receipt by Parent or the surviving corporation from the indemnified party of a request therefor. However, any indemnified party to whom expenses are advanced provides an undertaking, to the extent required by the DGCL, the certificate of incorporation or by-laws (or comparable organizational documents) of the Company or any of its subsidiaries or in any indemnification agreement between such indemnified party and the Company or any of its subsidiaries, to repay such advances if it is determined by a final determination of a court of competent jurisdiction (which determination is not subject to appeal) that such indemnified party is not entitled to indemnification under applicable law. Parent and the Company have agreed that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger and rights to advancement of expenses relating thereto now existing in favor of any indemnified party, whether provided in the certificate of incorporation or by-laws (or comparable organizational documents) of the Company or any of its subsidiaries or in any indemnification agreement between such indemnified party and the Company or any of its subsidiaries, will survive the merger and continue in full force and effect, and will not be amended, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such indemnified party.

For six years following the effective time of the merger, Parent and the surviving corporation have agreed that the certificate of incorporation and bylaws or other organizational documents of the surviving corporation and its

 

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subsidiaries will contain (and Parent will cause the certificate of incorporation and bylaws or other organizational documents of the surviving corporation and its subsidiaries to so contain) provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of indemnified parties as contained in the Company’s certificate of incorporation and by-laws in effect on the date of the merger agreement.

Parent has also agreed to either (i) maintain in effect for six years after the effective time of the merger the Company’s existing directors’ and officers’ liability insurance policies with respect to events occurring at or prior to the effective time of the merger, so long as the annual premium would not exceed the Maximum Premium, or (ii) purchase a “tail” policy and maintain such endorsement for six years after the closing of the merger. If the Company’s or the surviving corporation’s existing insurance expires, is terminated or canceled during such six-year period or exceeds the Maximum Premium, the surviving corporation will obtain, and Parent will cause the surviving corporation to obtain, as much directors’ and officers’ liability insurance as can be obtained for the remainder of such period for an annualized premium not in excess of the Maximum Premium, on terms and conditions no less advantageous to the indemnified parties than the existing directors’ and officers’ liability insurance policies. The Company may, prior to the effective time of the merger, purchase a “tail” policy, so long as the company does not pay more than six times the Maximum Premium. If a “tail” policy has been purchased by the Company prior to the effective time of the merger, Parent will cause such “tail” policy to be maintained in full force and effect for its full term and cause all obligations thereunder to be honored by the surviving corporation.

In the event Parent or the surviving corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and will not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of Parent or the surviving corporation, as the case may be, will expressly assume and succeed to the obligations described above.

If any indemnified party makes any claim for indemnification or advancement of expenses under these provisions of the merger agreement that is denied by Parent and/or the Company or the surviving corporation, and a court of competent jurisdiction determines that the indemnified party is entitled to such indemnification or advancement of expenses, then Parent, the Company or the surviving corporation will pay the indemnified party’s costs and expenses, including reasonable legal fees and expenses, incurred by the indemnified party in connection with pursuing his or her claims to the fullest extent permitted by law.

These provisions of the merger agreement are intended to be in addition to the rights otherwise available to the indemnified parties by law, charter, statute, by-law or agreement, and will operate for the benefit of, and will be enforceable by, each of the indemnified parties, their heirs and their representatives.

Notification of Certain Matters

Prior to the effective time, Parent must give prompt notice to the Company, and the Company must give prompt notice to Parent, of (i) the occurrence, or failure to occur, of any event, which occurrence or failure to occur is reasonably likely to cause any representation or warranty of such person contained in the merger agreement to be untrue or inaccurate in any manner that would result in the failure of a closing condition or (ii) any material breach by such person of any covenant or agreement set forth in the merger agreement.

Employee Benefits Matters

Parent will assume sponsorship of the Company’s 2020 Management Incentive Plan, which we refer to as the “management incentive plan,” and related awards, in each case as in effect as of the date hereof, and will administer the management incentive plan and awards in accordance with their terms. All decisions under the management incentive plan will be made, subject to the terms of the management incentive plan and the

 

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immediately subsequent sentence, by Parent. On or around February 15, 2021, the Company will pay (or, if the effective time of the merger has already occurred Parent will, or will cause its subsidiaries to, pay), the bonuses provided by the management incentive plan, with such bonuses calculated as the greater of (a) 100% of the target bonus amounts determined under the management incentive plan or (b) the bonuses determined using actual achievement pursuant to the formula set forth in the management incentive plan, in each case using the terms in effect as of the date of the merger agreement (without any discretionary reduction of payments); and, for any Company employee whose employment ends on a termination without cause (as defined in the Company’s severance practices) after December 31, 2020, any requirement that the individual remain employed at the date of bonus payment will be waived.

If any Company employee (who is not otherwise a party to an employment agreement, offer letter or similar agreement or arrangement or any amendment or supplement of any of the foregoing, in each case that provides for a different treatment with respect to severance) whose employment is terminated on or prior to the first anniversary of the effective time of the merger under circumstances under which such Company employee would have been eligible to receive severance benefits under the Company severance practices, Parent will cause the surviving corporation or its subsidiaries to provide such Company employee severance benefits consistent with those that would have been paid under the Company severance practices as in existence on the date of the merger agreement, provided, however, that entitlement to any severance benefits may be conditioned on the Company employee’s timely signing, returning, and not revoking a release in the form customarily used by the Company as of the date of the merger agreement.

State Takeover Laws

If any “fair price,” “business combination” or “control share acquisition” statute or other similar statute or regulation is or may become applicable to any of the transactions contemplated by the merger agreement, the parties to the merger agreement must use their respective commercially reasonable efforts to (i) take such actions as are reasonably necessary so that the transactions contemplated under the merger agreement may be consummated as promptly as practicable on the terms contemplated under the merger agreement and (ii) otherwise take all such actions as are reasonably necessary to eliminate or minimize the effects of any such statute or regulation on such transactions.

Rule 16b-3

Prior to the effective time of the merger, the Company must take all reasonable steps as may be required to cause any dispositions of Company equity securities (including derivative securities) pursuant to the transactions contemplated by the merger agreement by each individual who is a director or officer of the Company and who would otherwise be subject to Rule 16b-3 under the Exchange Act to be exempt under such rule to the extent permitted by applicable law.

Financing

Each of Parent and Merger Sub must use, and must cause their respective affiliates 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, proper or advisable to consummate and obtain the financing pursuant to the debt commitment letter, which we refer to as the “debt financing,” and the financing pursuant to the equity funding letter, which we refer to as the “equity financing,” on the terms (including as related to the “market flex” provisions) and subject only to the conditions set forth in the debt commitment letter and the equity funding letter. We refer to the debt financing together with the equity financing as the financing. We refer to the debt commitment letter together with the equity funding letter as the “financing letters.” The reasonable best efforts of Parent and Merger Sub mentioned in the first sentence of this paragraph include reasonable best efforts to:

 

   

maintain in effect and comply with the financing letters and the definitive agreements relating to the financing,

 

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negotiate and enter into definitive agreements with respect to the debt financing on the terms (including as related to the “market flex” provisions) and subject only to the conditions set forth in the debt commitment letter,

 

   

satisfy (and cause its affiliates to satisfy) on a timely basis all conditions to funding applicable to Parent and its affiliates in the financing letters and the definitive agreements related thereto (or, if necessary or deemed advisable by Parent, seek the waiver of conditions applicable to Parent and Merger Sub contained in such financing letter or such definitive agreements related thereto),

 

   

upon the satisfaction of the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the fulfillment or waiver of such conditions), consummate the financing at or prior to the closing date, and

 

   

enforce its rights under the financing letters and the definitive agreements relating to the financing.

Parent must not, and must not permit any of its affiliates to, take any action not otherwise required under the merger agreement that is a breach of, or would result in termination of, any of the financing letters. Parent, Merger Sub and the guarantors must not, without the prior written consent of the Company, agree to or permit any termination of or amendment, supplement or modification to be made to, or grant any waiver of any provision under, the financing letters or the definitive agreements relating to the financing if such termination, amendment, supplement, modification or waiver would:

 

   

(i) reduce the aggregate amount of any portion of the financing (including by increasing the amount of fees to be paid or original issue discount except by operation of the “market flex” provisions as in effect on the date of the merger agreement) or (ii) reduce the amount of equity financing unless the debt financing or alternative financing is increased by a corresponding amount,

 

   

adversely impact the ability of Parent, Merger Sub or the Company, as applicable, to enforce its rights against other parties to the financing letters or the definitive agreements with respect to the financing, or

 

   

impose new or additional conditions precedent to the availability of the financing or otherwise expand, amend or modify in any manner adverse to the interests of the Company any of the conditions precedent to the financing, or otherwise expand, amend or modify any other provision of the financing letters in a manner that would reasonably be expected to delay or prevent or make less likely to occur the funding of the financing (or satisfaction of the conditions to the financing) or completion of the transactions on the closing date.

Parent must, upon request, keep the Company informed on a reasonably current basis and in reasonable detail of the status of its efforts to arrange the debt financing and provide to the Company drafts (reasonably in advance of execution) and thereafter complete, correct and executed copies of the material definitive documents for the debt financing. Parent and Merger Sub must give the Company prompt notice:

 

   

of any breach, default (or any event that, with or without notice, lapse of time or both, would reasonably be expected to give rise to any default or breach), termination, cancellation or repudiation by any party to any of the financing letters or definitive documents related to the financing of which Parent or Merger Sub becomes aware,

 

   

of the receipt of any written notice or other written communication from any financing source with respect to any (i) actual or potential breach, default, termination, cancellation or repudiation by any party to any of the financing letters or any definitive document related to the financing of any provisions of the financing letters or any definitive document related to the financing or (ii) material dispute or disagreement between or among any parties to any of the financing letters or any definitive document related to the financing with respect to the conditionality or amount of the financing or the obligation to fund the financing or the amount of the financing to be funded at the closing (but excluding ordinary course negotiations), and

 

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of the occurrence of an event or development that would reasonably be expected to adversely impact the ability of Parent or Merger Sub to obtain all or any portion of the financing contemplated by the financing letters in the manner and from the sources contemplated by the financing letters or the definitive documents related to the financing (or if at any time for any other reason Parent or Merger Sub believes that it will not be able to obtain all or any portion of the financing contemplated by the financing letters on the terms and conditions, in the manner and from the sources contemplated by any of the financing letters or the definitive documents related to the financing).

As soon as reasonably practicable, but in any event within two business days of the date the Company delivers to Parent or Merger Sub a written request, Parent and Merger Sub must provide any information reasonably requested by the Company relating to any circumstance referred to in the three bullet points immediately above. If any portion of the debt financing becomes unavailable on the terms (including any applicable “market flex” provisions) and conditions contemplated by the debt commitment letter, and such portion is reasonably required to fund the merger consideration and all fees, expenses and other amounts contemplated to be paid by Parent pursuant to the merger agreement, or Parent becomes aware of any event or circumstance that would reasonably be expected to make any such portion of the debt financing unavailable on the terms (including any applicable “market flex” provisions) and conditions contemplated by the debt commitment letter, Parent must promptly notify the Company in writing and Parent and Merger Sub must use their reasonable best efforts to arrange and obtain in replacement thereof, and negotiate and enter into definitive agreements with respect to, alternative financing from the same or alternative sources in an amount sufficient to pay the merger consideration and all fees, expenses and other amounts contemplated to be paid by Parent pursuant to the merger agreement with conditions not materially less favorable, taken as a whole, to Parent and Merger Sub (or their respective affiliates) than the terms and conditions set forth in the debt commitment letter, as promptly as practicable following the occurrence of such event. In no event will the reasonable best efforts of Parent or Merger Sub be deemed or construed to require Parent or Merger Sub to (i) pay any fees or any interest rates applicable to the debt financing in excess of those contemplated by the debt commitment letter (including the market flex provisions) or agree to “market flex” terms, less favorable to Parent and Merger Sub or Company than the corresponding market flex terms contained in or contemplated by the debt commitment letter or (ii) seek the equity financing from any source other than those counterparty to, or in any amount in excess of that contemplated by, the equity funding letter.

Prior to the closing date, the Company must use its reasonable best efforts to provide, and to cause its subsidiaries to provide, to Parent and Merger Sub, in each case at Parent’s sole cost and expense, such reasonable cooperation as is customary and reasonably requested by Parent in connection with the arrangement of the debt financing (and taking into account the timing of the marketing period), including using its reasonable best efforts to:

 

   

furnish Parent and Merger Sub and their debt financing sources all required financial information (as described above in the section entitled “— Marketing Period”),

 

   

assist in preparation for and participate (and cause senior management and representatives, with appropriate seniority and expertise, of the Company and its subsidiaries to participate) in a reasonable number of meetings and presentations with actual or prospective lenders, road shows and due diligence sessions, drafting sessions and sessions with rating agencies upon reasonable request, and otherwise cooperate with the marketing and due diligence efforts for any of the debt financing,

 

   

assist Parent, Merger Sub and the debt financing sources, upon reasonable request, with the timely preparation of reasonable and customary (i) rating agency presentations and offering documents customarily used to arrange transactions similar to the debt financing by companies of a comparable size in a comparable industry, and (ii) certain pro forma financial statements and forecasts of financial statements of the Company and its subsidiaries for one or more periods following the closing, in each case based solely on financial information and data derived from the Company’s and its subsidiaries’ historical books and records,

 

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reasonably cooperate with the pledging of collateral and the granting of security interests in respect of the debt financing, but in no event will any of the foregoing take effect until the closing,

 

   

provide customary authorization letters to the debt financing sources with respect to Company information included in a customary confidential information memorandum for a syndicated bank financing authorizing the distribution of information to prospective lenders,

 

   

facilitate and assist in the preparation, execution and delivery of one or more credit agreements, indentures, purchase agreements, guarantees, certificates and other definitive financing documents as may be reasonably requested by Parent or Merger Sub (including furnishing all information relating to the Company and its subsidiaries and their respective businesses to be included in any schedules thereto or in any perfection certificates),

 

   

promptly furnish Parent, Merger Sub and the debt financing sources with all documentation and other information about the Company and its subsidiaries as is reasonably requested by Parent, Merger Sub or the debt financing sources relating to applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act and the requirements of 31 C.F.R. § 1010.230, to the extent requested in writing,

 

   

in connection with any offering of high yield debt securities as part of the debt financing, cause the independent registered public accountants of the Company to confirm that they are prepared to issue a customary comfort letter upon the “pricing” and “closing” of such debt securities and to provide drafts thereof reasonably in advance of “pricing” and “closing” upon request of Parent, and

 

   

request customary payoff letters relating to the repayment of the existing indebtedness of the Company and its subsidiaries and the release of related liens and related guarantees.

The requested cooperation described above must not, in the Company’s reasonable judgment, unreasonably interfere with the ongoing business or operations of the Company and any of its subsidiaries. In no event must the Company or any of its subsidiaries be required to bear any cost or expense, pay any commitment or other fee, enter into any definitive agreement, incur any other liability or obligation, make any other payment or agree to provide any indemnity in connection with the financing or any of the foregoing effective prior to the closing. In addition, none of the requested cooperation described above will require any action that would conflict with or violate the Company’s or any of its subsidiaries’ organizational documents or any laws, rules or regulations or result in, prior to the effective time, the contravention of, or that would reasonably be expected to result in, prior to the effective time, a violation or breach of, or default under, any contract to which the Company or any of its subsidiaries is a party.

None of the Company or its subsidiaries or their respective officers, directors (with respect to any subsidiary of the Company) or employees will be required to execute or enter into or perform any agreement with respect to the financing contemplated by the financing letters (other than customary authorization letters) that is not contingent upon the closing or that would be effective prior to the closing and no directors of the Company that will not be continuing directors, acting in such capacity, will be required to execute or enter into or perform any agreement, or to pass any resolutions or consents, with respect to the financing. Parent must promptly, upon request by the Company, reimburse the Company for all reasonable and documented out-of-pocket costs and expenses (including reasonable and documented attorneys’ fees and fees and expenses of the Company’s accounting firms engaged to assist in connection with the financing) incurred by the Company or any of its subsidiaries or any of their respective representatives in connection with the financing, and must indemnify and hold harmless the Company, its subsidiaries and their respective representatives from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with the arrangement of the financing and any information used in connection therewith.

Parent must, and must cause its affiliates to, refrain from taking, directly or indirectly, any action that could reasonably be expected to result in the failure of any of the conditions contained in the financing letters or in any

 

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definitive agreement relating to the financing. Parent and Merger Sub acknowledge and have agreed under the merger agreement that, notwithstanding the Company’s obligations under the merger agreement, none of the obtaining of the financing or any permitted alternative financing, or the completion of any issuance of securities contemplated by the financing, is a condition to the closing, and reaffirm their obligation to consummate the transactions contemplated by the merger agreement irrespective and independently of the availability of the financing or any permitted alternative financing or the completion of any such issuance.

Control of Operations

Without in any way limiting any party’s rights or obligations under the merger agreement, the parties have agreed that (a) nothing contained in the merger agreement will give Parent or Merger Sub, directly or indirectly, the right to control or direct the Company’s operations prior to the effective time of the merger and (b) prior to the effective time of the merger, the Company must exercise, subject to the terms and conditions of the merger agreement, complete control and supervision over its and its subsidiaries’ operations.

Security Holder Litigation

In the event that any litigation related to the merger agreement, the merger or the other transactions contemplated thereby is brought by any stockholder of the Company or any holder of the Company’s other securities against the Company and/or its directors or officers, the Company will give Parent (i) prompt notice of all litigation related to the merger agreement, the merger or the other transactions contemplated by the merger agreement brought by any stockholder of the Company or any holder of the Company’s other securities against the Company and/or its directors or officers including by providing copies of all pleadings with respect thereto) and keep Parent reasonably informed at Parent’s request with respect to the status thereof; and (ii) the opportunity to participate, at Parent’s expense, in any negotiations and proceedings with respect to such litigation. The Company will not make any arrangement, compromise, payment or settlement offer or enter into any arrangement, compromise, payment or settlement prior to the effective time of the merger with respect to any such litigation unless Parent has given its written consent thereto, which consent will not be unreasonably withheld, conditioned or delayed.

Proxy Statement; Company Stockholders’ Meeting

As promptly as practicable following the Company’s receipt of notice from the SEC that the SEC has completed its review of this proxy statement (or, if the SEC does not inform the Company that it intends to review this proxy statement on or before the 10th calendar day following the filing of this proxy statement, as promptly as practicable following such 10th calendar day), the Company is obligated to call, give notice of, convene and hold a meeting of its stockholders to consider adoption of the merger agreement and the advisory vote required by Rule 14a-21(c) under the Exchange Act.

However, the board of directors is permitted to adjourn, delay or postpone the special meeting in accordance with applicable law (but not beyond the outside date, which is described below) (i) to the extent necessary to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the board of directors has determined in good faith after consultation with outside counsel is reasonably likely to be necessary or appropriate under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the special meeting, (ii) on no more than two occasions, if there are insufficient shares of Company common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the special meeting or (iii) if on the date on which the Company stockholder meeting is then-scheduled, the Company has not received proxies representing the Company stockholder approval. Except to the extent that the board of directors has effected a board recommendation change in accordance with the merger agreement, the Company, through the board of directors, must recommend to its stockholders that they adopt the merger agreement, include such recommendation in this proxy statement and use its reasonable best efforts to solicit and obtain the Company stockholder approval.

 

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Treatment of Certain Notes

A subsidiary of the Company has issued 10.875% Senior Notes Due 2024, which we refer to as the “Notes.”

At the request and expense of Parent, the Company has agreed to use its reasonable best efforts to promptly commence an offer to purchase any and all of the outstanding aggregate principal amount of the Notes on price terms that are acceptable to Parent and such other customary terms and conditions as are reasonably acceptable to the Company and Parent to be consummated substantially simultaneously with the closing of the merger using funds provided by Parent, which we refer to as a “debt tender offer.” Any debt tender offer will be conditioned on the closing of the merger.

If reasonably requested by Parent in writing, the Company will, in accordance with the applicable redemption provisions of the applicable series of Notes and the indenture governing such Notes, (i) issue a notice of optional redemption for all of the outstanding aggregate principal amount of the Notes, pursuant to the redemption provisions of the indenture and (ii) use reasonable best efforts to take any other actions reasonably requested by Parent to facilitate the satisfaction and discharge of the Notes pursuant to the satisfaction and discharge provisions of the indenture and the other provisions of the indenture applicable thereto.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable law to the extent such laws are applicable in connection with any debt tender offer and such compliance will not be deemed a breach of the merger agreement.

Parent will promptly, upon the Company’s request, reimburse the Company for certain reasonable and documented out-of-pocket costs, fees and expenses incurred by or on behalf of the Company at the request of Parent in connection with our compliance with our obligations described above, including reasonable and documented out-of-pocket costs, fees and expenses incurred by or on behalf of the Company in connection with any debt tender offer, or discharge made in respect of the Notes (including any out-of-pocket costs, fees and expenses incurred in connection with the preparation or distribution of any offer documents or other documents related thereto). Subject to certain exceptions, Parent will also indemnify and hold harmless the Company, its subsidiaries and their respective representatives for any liabilities incurred by any of them in connection with any such action.

Conditions to the Merger

The obligation of each of the Company, Parent and Merger Sub to consummate the merger is subject to the satisfaction of the following conditions:

 

   

the Company’s stockholders have adopted the merger agreement at the special meeting;

 

   

the waiting period (and any extension thereof) under the HSR Act has expired or early termination thereof has been granted; and

 

   

no governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (preliminary or permanent) or statute, rule or regulation which is in effect and which has the effect of making the merger illegal or otherwise prohibiting consummation of the merger.

The obligation of the Company to consummate the merger is subject to the satisfaction of the following additional conditions:

 

   

the representations and warranties of Parent and Merger Sub that (i) are not made as of a specific date are true and correct as of the closing date, as though made on and as of the closing date, and (ii) are made as of a specific date are true and correct as of such date, in each case, except where the failure of such representations or warranties to be true and correct is not reasonably likely to have a Parent Material Adverse Effect; and

 

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each of Parent and Merger Sub has performed in all material respects all covenants and obligations required to be performed by it under the merger agreement on or prior to the closing date.

The obligation of Parent and Merger Sub to consummate the merger is subject to the satisfaction of the following additional conditions:

 

   

(i) the Company’s representation regarding the absence of a Company Material Adverse Effect is true and correct in all respects as of the closing date as though made on and as of the closing date; (ii) certain representations and warranties of the Company regarding the Company’s capitalization are true and correct in all respects as of the closing date, as though made on and as of the closing date (other than any such representation or warranty that is made as of a specific date, which need only be true and correct in all respects as of such date), except for any de minimis exceptions; (iii) certain representations and warranties of the Company regarding organization, capitalization, authority, opinions of financial advisors and brokers are true and correct in all material respects as of the closing date, as though made on and as of the closing date (other than any such representation or warranty that is made as of a specific date, which need only be true and correct in all material respects as of such date) and (iv) all other representations and warranties of the Company contained in the merger agreement are true and correct as of the closing date, as though made on and as of the closing date (other than any such representation or warranty that is made as of a specific date, which need only be true and correct as of such date), except where the failure of such representations or warranties to be true and correct is not reasonably likely to have a Company Material Adverse Effect; and

 

   

the Company has performed in all material respects all covenants and obligations required to be performed by it under the merger agreement on or prior to the closing date.

Termination

The merger agreement may be terminated and the merger may be abandoned:

 

   

by mutual written consent of Parent and the Company at any time prior to the effective time of the merger;

 

   

by either Parent or the Company, if the effective time of the merger has not occurred on or before the outside date, except that (a) a party to the merger agreement will not be permitted to terminate the merger agreement under this provision of the merger agreement if the failure of such party to fulfill any obligation under the merger agreement has been a principal cause of or primarily resulted in the failure of the effective time to occur on or before the outside date, (b) if the marketing period has commenced but not have been completed by the date that is three business days prior to the outside date, but all other conditions to the closing (other than those conditions that by their terms are to be satisfied at the closing) have been satisfied or, to the extent permitted by law, waived, then the outside date will be extended to the third business day following the final day of the marketing period, and such date will become the outside date; and (c) no party is permitted to terminate the merger agreement within the three business day notice period referenced in the final bullet in this section entitled “— Termination”;

 

   

by either Parent or the Company at any time prior to the effective time if a governmental entity of competent jurisdiction has issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining, or otherwise prohibiting the consummation of the merger, except that a party to the merger agreement will not be permitted to terminate the merger agreement under this provision of the merger agreement if the failure of such party to fulfill any obligation under the merger agreement has been a principal cause of or primarily resulted in the issuance of any such order, decree, ruling or the taking of such other action;

 

   

by Parent or the Company if the Company stockholder approval is not obtained at the special meeting or at any adjournment or postponement thereof at which a vote on the adoption of the merger agreement was taken; provided, however, that a party is not permitted to terminate the merger

 

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agreement for such reason if such failure to obtain the Company stockholder approval is attributable to the failure of such party to perform in any material respect any covenant in the merger agreement required to be performed by such party at or prior to the effective time of the merger;

 

   

by Parent, prior to the effective time of the merger, if a trigger event occurs, except that, any such termination must occur within 10 business days after the occurrence of the trigger event;

 

   

by the Company, at any time prior to receipt of the Company stockholder approval, in the event that: (i) the Company has received a superior proposal; (ii) the board of directors has determined in good faith (after consultation with outside counsel) that the failure proceed with such superior proposal would be reasonably likely to be inconsistent with its fiduciary obligations under applicable law; (iii) the Company and its subsidiaries are not in material breach of their obligations under the merger agreement with respect to such superior proposal; (iv) the Company has delivered to Parent a superior proposal notice; (v) if requested by Parent, the Company has made its representatives available to negotiate with Parent’s representatives any proposed modifications to the terms and conditions of the merger agreement during the three business day period following delivery of such superior proposal notice (except that in the event of any material revisions to such superior proposal, the Company will be required to notify Parent of such revisions and the applicable three business day period described above will be extended until two business days after the time Parent receives notification from the Company of such revisions); (vi) if Parent has delivered to the Company a written, binding and irrevocable offer to alter the terms or conditions of the merger agreement during such three Business Day period, the board of directors has determined in good faith (after consultation with outside counsel), after considering the terms of such offer by Parent, that the superior proposal giving rise to such superior proposal notice continues to be a superior proposal and it would still be reasonably likely to be inconsistent with the fiduciary obligations of the board of directors under applicable law not to accept such superior proposal; and (vii) concurrently with the termination of the merger agreement, the Company pays Parent the termination fee and enters into the definitive agreement to consummate the transaction contemplated by such superior proposal;

 

   

by Parent, prior to the effective time of the merger, if there has been a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Company set forth in the merger agreement, which breach or failure to perform would cause one of certain conditions to the obligations of Parent to effect the closing set forth in the merger agreement not to be satisfied, and will not have been cured within 20 business days following receipt by the Company of written notice of such breach or failure to perform from Parent; except that neither Parent nor Merger Sub is then in material breach of any representation, warranty or covenant under the merger agreement;

 

   

by the Company, prior to the effective time of the merger, if there has been a breach of, or failure to perform any representation, warranty, covenant or agreement of Parent or Merger Sub set forth in the merger agreement, which breach or failure to perform would cause one of certain conditions to the obligations of the Company to effect the closing set forth in the merger agreement not to be satisfied, and will not have been cured within 20 business days following receipt by Parent of written notice of such breach or failure to perform from the Company; except that the Company is not then in material breach of any representation, warranty or covenant under the merger agreement; or

 

   

by the Company if (i) the mutual closing conditions and the closing conditions to the obligations of Parent (other than those conditions that by their nature are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) have been satisfied, (ii) the Company has confirmed by notice to Parent after the end of the marketing period that all closing conditions to the obligations of the Company have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing) or that it is willing to waive any unsatisfied conditions; and (iii) the merger has not been consummated within three business days after delivery of such notice.

 

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In the event of termination of the merger agreement as described above, the merger agreement will immediately become void and there will be no liability or obligation on the part of Parent, the Company, Merger Sub or their respective representatives, stockholders or affiliates; except that, subject to certain limitations, (i) any such termination will not relieve any party from liability for any willful breach and (ii) certain provisions, including those related to confidentiality, effect of termination, fees and expenses, defined terms and miscellaneous matters, expense reimbursement, indemnification and the confidentiality agreement between the Company and Clearlake, will remain in full force and effect and survive any termination of the merger agreement in accordance with their respective terms and conditions.

A “willful breach” means a material breach of any covenant or agreement set forth in the merger agreement that is a consequence of an act undertaken, or failure to act, by the breaching party with the actual knowledge that the taking of such act, or failure to act, would result, or would reasonably be expected to result, in such breach.

Termination Fees

Subject to certain limitations, the Company will pay Parent a termination fee equal to $37,393,000 in the event that the merger agreement is terminated:

 

   

by Parent if the board of directors has effected a Company board recommendation change;

 

   

by the Company in order to enter into a definitive agreement providing for a superior proposal; or

 

   

(i) by either Parent or the Company if the effective time of the merger has not occurred on or before the outside date and such termination occurs prior to obtaining the Company stockholder approval, (ii) by either Parent or the Company if the Company stockholder approval is not obtained or (iii) by Parent if there has been a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Company set forth in the merger agreement, which breach or failure to perform would cause a closing condition set forth in the merger agreement not to be satisfied, and will not have been cured within 20 business days following receipt by the Company of written notice of such breach or failure to perform from Parent, if (in each of the preceding clauses (i), (ii) and (iii)) (A) before the date of such termination, an acquisition proposal has been publicly announced and not withdrawn, (B) with respect to a termination for failure to obtain the stockholder approval, at the time of the stockholder vote, the financing letters will not have been terminated, withdrawn or rescinded without being replaced by alternative financing commitments sufficient to consummate the transactions contemplated by the merger agreement and (C) within 12 months after the date of termination, the Company has consummated any acquisition transaction or entered into a definitive agreement with respect to an acquisition transaction that is thereafter consummated.

Subject to certain limitations, Parent will pay the Company a termination fee equal to $119,656,000, which we refer to as the “Parent termination fee,” in the event that the merger agreement is terminated:

 

   

by the Company, prior to the effective time, if there has been a material breach of or failure to perform Parent’s financing covenants, which material breach or failure to perform would cause a closing condition set forth in the merger agreement not to be satisfied and will not have been cured within 20 business days following receipt by Parent of written notice of such breach or failure to perform from the Company; or

 

   

by the Company if (i) the closing conditions applicable to Parent (other than those conditions that by their nature are to be satisfied by actions taken at the closing each of which is capable of being satisfied at the closing) have been satisfied, (ii) the Company has confirmed by notice to Parent after the end of the marketing period that all closing conditions applicable to the Company have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing) or that it is willing to waive any unsatisfied conditions; and (iii) the merger will not have been consummated within three business days after delivery of such notice.

 

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In no event will the Company or Parent be required to pay a termination fee on more than one occasion.

If the Company or Parent fails to timely pay any amount described above and, in order to obtain the payment, the other party commences a suit, action or proceeding which results in a judgment against the other party for the payment set forth above, such paying party will pay the other party its reasonable and documented out-of-pocket costs and expenses (including reasonable and documented attorneys’ fees) in connection with such suit, action or proceeding, together with interest on such amount at the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made through the date such payment was actually received.

Payment of the Parent termination fee to the Company, together with any indemnification for or reimbursement of any applicable expenses pursuant to certain provisions of the merger agreement, will be the sole and exclusive monetary remedy for any and all losses or damages suffered or incurred by the Company or any other person arising out of or in connection with the merger agreement (and the termination thereof), the financing, the guarantee, the transactions contemplated by the merger agreement (and the abandonment or termination thereof), or any matter forming the basis for such termination, and, neither the Company, nor any other person will be entitled to bring or maintain any claim, action or proceeding against Parent, Merger Sub, any guarantor, the financing sources or any of their respective representatives or any of their respective affiliates arising out of or in connection with the merger agreement, the financing, the guarantee or any of the transactions contemplated by the merger agreement (or the abandonment or termination thereof) or any matters forming the basis for such termination.

Payment of the Company termination fee to Parent will, together with any reimbursement of applicable expenses, be the sole and exclusive monetary remedy for any and all losses or damages suffered or incurred by Parent, Merger Sub, or any of their respective affiliates or any other person arising out of or in connection with the merger agreement (and the termination thereof), the financing, the guarantee, the transactions contemplated by the merger agreement (and the abandonment or termination thereof), or any matter forming the basis for such termination, and, none of Parent, Merger Sub, any of their respective affiliates or any other person will be entitled to bring or maintain any claim, action or proceeding against the Company or any other person claiming by, through or for the benefit of the Company arising out of or in connection with the merger agreement, the financing, the guarantee or any of the transactions contemplated by the merger agreement (or the abandonment or termination thereof) or any matters forming the basis for such termination.

Amendment; Extension; Waiver; Procedures

Amendment

The merger agreement may be amended, modified or supplemented by the parties to the merger agreement by action taken or authorized by their respective boards of directors at any time prior to the effective time of the merger, except that after receipt of the Company stockholder approval, no amendment may be made that pursuant to applicable law or by rule or regulation of any stock exchange requires further approval or adoption by the stockholders of the Company without such further approval or adoption. The merger 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, modification or supplement to the merger agreement (as applicable), signed on behalf of each of the parties to the merger agreement. However, the amendment provision, the waiver provision, the third party beneficiaries provision, certain remedies provisions, the submission to jurisdiction provision and the waiver of jury trial provision may not be amended, modified or supplemented in a manner adverse to the debt financing sources without the prior written consent of the adversely affected debt financing sources.

Extension; Waiver

At any time prior to the effective time of the merger, the parties to the merger agreement, by action taken or authorized by their respective boards of directors, may, to the extent legally allowed, (i) extend the time for the

 

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performance of any of the obligations or other acts of the other parties to the merger agreement, (ii) waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant the merger agreement and (iii) waive compliance with any of the agreements or conditions contained in the merger agreement. Any agreement on the part of a party to the merger agreement to any such extension or waiver will be valid only if set forth in a written instrument signed on behalf of such party. Such extension or waiver will not apply to any time for performance, inaccuracy in any representation or warranty, or noncompliance with any agreement or condition, as the case may be, other than that which is specified in the extension or waiver. The failure of any party to the merger agreement to assert any of its rights under the merger agreement or otherwise will not constitute a waiver of such rights. However, the amendment provision, the waiver provision, the third party beneficiaries provision, certain remedies provisions, the submission to jurisdiction provision and the waiver of jury trial provision may not be waived, in whole or in part, in a manner adverse to the debt financing sources without the prior consent of the adversely affected debt financing sources.

Procedure for Termination, Amendment, Extension or Waiver

A termination, amendment, modification, supplement, extension or waiver of the merger agreement will, in order to be effective, require action by the respective board of directors of the applicable parties.

Remedies

Under the merger agreement, the parties thereto acknowledge and have agreed that the parties will be entitled to an injunction or injunctions to prevent or restrain breaches or threatened breaches of the merger agreement and to specifically enforce the terms and provisions of the merger agreement. The right of the Company to seek and obtain an injunction, specific performance or other equitable remedies in connection with enforcing Parent’s obligation to cause the equity financing to be funded in accordance with the terms and conditions of the applicable equity funding letter and to cause Parent to consummate the merger is subject in all events to the requirements that (i) the satisfaction of all conditions precedent to the obligations of Parent to consummate the transactions contemplated by the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to such conditions being satisfied at the closing) at the time when the closing would have been required to occur pursuant to the merger agreement, but for the failure of the equity financing to be funded, (ii) the debt financing has been funded or will be funded in accordance with the terms thereof at the closing if the equity financing is or were to be funded at the closing, and (iii) the Company has irrevocably confirmed in writing to Parent that if specific performance is granted and the equity financing and debt financing were funded, then it would take such actions required of it by the merger agreement to cause the closing to occur and it stands ready, willing and able to consummate the merger.

Governing Law; Submission to Jurisdiction

The merger agreement is governed by the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware. Each of the parties to the merger agreement consented to submit itself to the exclusive personal jurisdiction of the Delaware Court of Chancery or, if that court does not have jurisdiction, a federal court sitting in the State of Delaware in any action or proceeding arising out of or relating to the merger agreement or any of the transactions contemplated by the merger agreement.

 

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VOTING AGREEMENT

On November 1, 2020, concurrently with the execution of the merger agreement, Parent entered into a voting and support agreement, which we refer to as the “voting agreement,” with certain funds affiliated with Goldman Sachs and certain funds affiliated with Warburg Pincus, each a stockholder of the Company. As of the close of business on the record date, these stockholders beneficially owned approximately 48% of the issued and outstanding shares of Company common stock. In connection with the execution and delivery of the voting agreement, Parent did not pay these stockholders any consideration in addition to the consideration they may receive pursuant to the merger agreement in respect of their shares. A copy of the voting agreement is attached as Annex D to this proxy statement.

The voting agreement requires each of the stockholders, among other things, to vote shares of Company common stock aggregating to 36% of the outstanding shares of Company common stock in favor of:

 

   

the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger; and

 

   

any proposal to adjourn a meeting of the stockholders of the Company if there are not sufficient votes to adopt the merger agreement and approve the merger;

and against any acquisition proposal.

Each stockholder subject to the voting agreement has agreed that, except with Parent’s prior written consent, such stockholder will not transfer or consent to a transfer of any of the shares of common stock subject to the voting agreement or any beneficial ownership interest or any other interest therein, except for transfers to an affiliate of such stockholder if the transferee agrees in writing to be bound by and subject to the terms and provisions of the voting agreement.

Each stockholder subject to the voting agreement has also agreed:

 

   

to cease immediately all discussions and negotiations that commenced prior to the date of the voting agreement regarding any proposal that constitutes, or could reasonably be expected to lead to, an acquisition proposal and not to direct its affiliates or representatives to continue discussions or negotiations that commenced prior to the date of the voting agreement; and

 

   

to not, and to direct its affiliates or representatives not to, directly or indirectly (i) solicit or initiate any inquiries or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, any acquisition proposal, (ii) other than informing persons of the existence of these provisions of the voting agreement, enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any non-public information for the purpose of encouraging or facilitating, any acquisition proposal, (iii) enter into any alternative acquisition agreement or (iv) adopt, approve or recommend any acquisition proposal.

However, the voting agreement will not restrict the ability of any such stockholder to, directly or indirectly, take any action that the Company is permitted to take in accordance with the provisions described above in the sections entitled “The Merger Agreement (Proposal One) — Restrictions on Solicitation of Other Offers” and “The Merger Agreement (Proposal One) — Restrictions on Changes of Recommendation to Company Stockholders.”

The voting agreement will terminate upon the earliest to occur of: (i) the termination of the voting agreement by the mutual written consent of Parent and each stockholder party to the voting agreement, (ii) the termination of the merger agreement in accordance with its terms prior to the effective time, (iii) the date on which any amendment to the merger agreement is effected, or any waiver of the Company’s rights under the merger agreement is granted, in each case, without the prior written consent of the stockholders party to the voting

 

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agreement, that (A) diminishes the merger consideration, (B) changes the forms of merger consideration, (C) extends the outside date or imposes any additional conditions or obligations that would reasonably be expected to prevent or impede the consummation of the merger or (D) affects any of the material terms of certain specified provisions of the merger agreement in a manner that is materially adverse to any of the stockholders party to the voting agreement, (iv) the date of a Company board recommendation change and (v) the effective time of the merger.

 

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NONBINDING ADVISORY PROPOSAL REGARDING “GOLDEN PARACHUTE” COMPENSATION (PROPOSAL TWO)

In accordance with Section 14A of the Exchange Act and Rule 14a-21(c) under the Exchange Act, we are providing stockholders with the opportunity to cast a nonbinding advisory vote with respect to certain payments that may be made to our named executive officers in connection with the merger, or “golden parachute” compensation, as reported on the Golden Parachute Compensation table on page 76.

Accordingly we are seeking approval of the following resolution at the special meeting:

“RESOLVED, that the compensation that may be paid or become payable to the Company’s named executive

officers in connection with the merger, as disclosed in the table in the section of the proxy statement entitled ‘The

Merger — Interests of Certain Persons in the Merger — Golden Parachute Compensation’ including the

associated narrative discussion, is hereby approved.”

The vote on this proposal is a vote separate and apart from the vote on the proposal to adopt the merger agreement and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement. Accordingly, you may vote “FOR” either or both of the proposal to adopt the merger agreement and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement and vote “AGAINST” or “ABSTAIN” for this nonbinding advisory proposal regarding “golden parachute” compensation (and vice versa).

Because your vote is advisory, it will not be binding upon the Company, the board of directors, the board of directors’ compensation committee, Parent or any affiliate of Parent. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the merger agreement is adopted by the stockholders and the merger is completed, the “golden parachute” compensation will still be paid to our named executive officers to the extent payable in accordance with the terms of such compensation.

The approval of this proposal requires the affirmative vote of a majority of the votes cast by the holders of all of the shares present or represented at the special meeting and voting on such proposal.

The board of directors recommends that you vote “FOR” approval of the nonbinding advisory proposal regarding “golden parachute” compensation.

 

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AUTHORITY TO ADJOURN THE SPECIAL MEETING (PROPOSAL THREE)

If at the special meeting, the board of directors determines it is necessary or appropriate to adjourn the special meeting, to solicit additional proxies to approve the proposal to adopt the merger agreement, then we intend to move to vote on this proposal. If the board of directors determines that it is necessary or appropriate, we will ask our stockholders to vote only on this Proposal Three and not on the proposal to adopt the merger agreement or the nonbinding advisory proposal regarding “golden parachute” compensation.

In this proposal, we are asking our stockholders to approve a proposal to authorize the board of directors, in its discretion, to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement. If our stockholders approve the adjournment of the special meeting, we could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously returned properly executed proxies voting against adoption of the merger agreement. Among other things, approval of this proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the merger agreement such that the proposal to adopt the merger agreement would be defeated, we could adjourn the special meeting without a vote on the adoption of the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement.

The vote on this proposal is a vote separate and apart from the vote on the proposal to adopt the merger agreement and the nonbinding advisory proposal regarding “golden parachute” compensation. Accordingly, you may vote “FOR” either or both of the proposal to adopt the merger agreement and the nonbinding advisory proposal regarding “golden parachute” compensation and vote “AGAINST” or “ABSTAIN” for the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement (and vice versa).

The approval of this proposal requires the affirmative vote of a majority of the votes cast by the holders of all of the shares present or represented at the special meeting and voting on such proposal.

The board of directors recommends that you vote “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies to approve the proposal to adopt the merger agreement.

 

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MARKET PRICE OF COMPANY COMMON STOCK

The Company common stock is listed for trading on the Nasdaq Stock Market under the trading symbol “EIGI.” The following table sets forth the high and low sales prices of the Company common stock, as reported by the Nasdaq Stock Market, for each quarterly period indicated.

 

     High      Low  

Fiscal 2020

     

First Quarter

   $ 5.27      $ 1.49  

Second Quarter

     4.03        1.73  

Third Quarter

     6.54        3.94  

Fourth Quarter (through December 11, 2020)

     9.48        5.72  

Fiscal 2019

     

First Quarter

   $ 8.21      $ 6.46  

Second Quarter

     7.43        4.31  

Third Quarter

     6.06        3.71  

Fourth Quarter

     4.74        3.60  

Fiscal 2018

     

First Quarter

   $ 8.80      $ 7.23  

Second Quarter

     10.00        7.15  

Third Quarter

     10.85        8.05  

Fourth Quarter

     9.92        6.07  

On September 25, 2020, the last full trading day prior to media speculation about a potential acquisition of the Company, the closing price for Company common stock on the Nasdaq Stock Market was $5.30. On October 30, 2020, the last full trading day prior to the public announcement of the merger, the closing price for Company common stock on the Nasdaq Stock Market was $5.81 per share. On December 11, 2020, the latest practicable trading day before the printing of this proxy statement, the closing price for Company common stock on the Nasdaq Stock Market was $9.43 per share of Company common stock. You are encouraged to obtain current market quotations for Company common stock in connection with voting your shares of Company common stock.

We have not paid any cash dividends on our common stock during the periods presented. In the event that the merger is not consummated, our payment of any future dividends would be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock, as of December 11, 2020, by:

 

   

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

 

   

each of our directors;

 

   

each of our named executive officers; and

 

   

all of our executive officers and directors as a group.

The number of shares beneficially owned by each stockholder is determined under SEC rules and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days after December 11, 2020 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address of all listed stockholders is c/o Endurance International Group Holdings, Inc., 10 Corporate Drive, Burlington, Massachusetts 01803. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

 

Name of Beneficial Owner

   Number of
Shares
Beneficially
Owned
     Percentage of
Shares
Beneficially
Owned
 

5% Stockholders

     

Investment funds and entities affiliated with Warburg Pincus(1)

     52,562,956        37.1

Investment funds and entities affiliated with Goldman Sachs(2)

     15,378,522        10.9

Capital Research Global Investors(3)

     11,304,955        8.0

Okumus Fund Management Ltd.(4)

     9,582,719        6.8

The Vanguard Group(5)

     7,420,294        5.2

Named Executive Officers and Directors

     

Jeffrey H. Fox(6)

     3,177,341        2.2

Marc Montagner(7)

     1,631,922        1.1

Christine Barry(8)

     296,568        *  

David C. Bryson(9)

     907,717        *  

John Orlando(10)

     481,491        *  

James C. Neary(11)

     52,562,956        37.1

Andrea J. Ayers

     31,897        *  

Dale Crandall(12)

     188,206        *  

Joseph P. DiSabato(13)

     15,378,522        10.9

Tomas Gorny(14)

     2,508,210        1.8

Peter J. Perrone(12)

     203,206        *  

Chandler J. Reedy(11)

     52,562,956        37.1

Justin L. Sadrian(11)

     52,562,956        37.1

Alexi A. Wellman

     31,897        *  

All executive officers and directors as a group (15 persons)

     77,688,275        53.2

 

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(1)

Consists of (i) 38,748,221 shares of our common stock owned by Warburg Pincus Private Equity X, L.P., (ii) 1,239,623 shares of our common stock owned by Warburg Pincus X Partners, L.P., both Delaware limited partnerships (together, the “WP X Funds”) and (iii) 12,575,112 shares of our common stock owned by WP Expedition Co-Invest L.P., a Delaware limited partnership (“WP Co-Invest” and together with the WP X Funds, the “Warburg Pincus entities”). Warburg Pincus X, L.P., a Delaware limited partnership (“WP X LP”), is the general partner of the WP X Funds. Warburg Pincus X GP L.P., a Delaware limited partnership (“WP X GP”), is the general partner of WP X LP. WPP GP LLC, a Delaware limited liability company (“WPP GP”), is the general partner of WP X GP. Warburg Pincus Partners, L.P., a Delaware limited partnership (“WP Partners”), is the managing member of WPP GP and the general partner of WP Co-Invest. Warburg Pincus Partners GP LLC, a Delaware limited liability company (“WP Partners GP”), is the general partner of WP Partners. Warburg Pincus & Co., a New York general partnership (“WP”), is the managing member of WP Partners GP. Warburg Pincus LLC, a New York limited liability company (“WP LLC”), is the manager of the WP X Funds. The Warburg Pincus entities, WP X LP, WP X GP, WPP GP, WP Partners, WP Partners GP, WP, and WP LLC have shared voting and dispositive power over the shares owned by the Warburg Pincus entities. The business address of the Warburg Pincus entities is c/o Warburg Pincus LLC, 450 Lexington Avenue, New York, New York 10017.

(2)

Consists of (i) 6,656,301 shares of our common stock owned by GS Capital Partners VI Fund, L.P., a Delaware limited partnership; (ii) 5,536,478 shares of our common stock owned by GS Capital Partners VI Offshore Fund L.P., a Cayman Islands exempted limited partnership; (iii) 1,830,369 shares of our common stock owned by GS Capital Partners VI Parallel, L.P., a Delaware limited partnership; (iv) 236,565 shares of our common stock owned by GS Capital Partners VI GmbH & Co. KG, a German limited partnership; (v) 534,373 shares of our common stock owned by Bridge Street 2011, L.P., a Delaware limited partnership; (vi) 234,533 shares of our common stock owned by Bridge Street 2011 Offshore, L.P., a Cayman Islands exempted limited partnership; (vii) 349,502 shares of our common stock owned by MBD 2011 Holdings, L.P., a Cayman exempted limited partnership (collectively, the “GS Entities”) and (viii) 401 shares of our common stock owned by Goldman Sachs & Co. LLC (“GS”). GS is a direct and indirect wholly-owned subsidiary of The Goldman Sachs Group, Inc. (“GSG”). The GS Entities, of which affiliates of GSG are the general partner, managing general partner or investment manager, share voting and investment power with certain of its respective affiliates. All voting and investment decisions for the GS Entities are made by the Merchant Banking Division Corporate Investment Committee of GS, which is currently comprised of Richard A. Friedman, Nicole Agnew, Anthony Arnold, Thomas G. Connolly, Chris Crampton, Charlie Gailliot, Bradley J. Gross, Adrian M. Jones, Michael E. Koester, Scott Lebovitz, Julian Salisbury, Joseph P. DiSabato, Jo Natauri, Michael Bruun, Matthias Hieber, Martin A. Hintze, James H. Reynolds, Michele Titi-Cappelli, Sean Fan, Stephanie Hui, Tom McAndrew, Harvey Shapiro, Danielle Natoli, Carmine Venezia, and David Thomas, through voting by the committee members. The business address of GS and the GS Entities is c/o Goldman Sachs & Co. LLC, 200 West Street, 28th Floor, New York, New York 10282.

(3)

Based on the Amendment No. 2 to Schedule 13G filed on February 14, 2020 by Capital Research Global Investors, a division of Capital Research and Management Company. In such filing, Capital Research Global Investors reports that it has sole voting and dispositive power over 11,304,955 shares of our common stock. The address of Capital Research Global Investors is 333 South Hope Street, Los Angeles, California 90071.

(4)

Based on the Amendment No. 4 to Schedule 13G filed on February 14, 2020 by Okumus Fund Management Ltd. (“Okumus”), Okumus Opportunistic Value Fund, Ltd. (“Okumus Value”) and Ahmet H. Okumus. In such filing, Okumus, Okumus Value and Mr. Okumus report that they each have shared voting and dispositive power over 14,573,400 shares of our common stock. The amount reported in the table above also reflects information from a Form 4 filed on March 20, 2020 by Okumus, Okumus Value and Mr. Okumus. The address of Okumus and Mr. Okumus is 767 Third Avenue, 35th Floor, New York, New York 10017. The address of Okumus Value is Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, VG 1110, British Virgin Islands.

(5)

Based on the Schedule 13G filed on February 11, 2020 by The Vanguard Group. In such filing, The Vanguard Group reports that it has sole voting power over 153,937 shares, shared voting power over 32,225 shares, sole dispositive power over 7,242,345 and shared dispositive power over 177,949 shares of our

 

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  common stock. The address of The Vanguard Group is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
(6)

Includes 856,442 shares subject to restricted stock units that will vest within 60 days after December 11, 2020 and 946,168 shares of our common stock subject to stock options that are exercisable or will become exercisable within 60 days after December 11, 2020.

(7)

Includes 277,619 shares subject to restricted stock units that will vest within 60 days after December 11, 2020 and 805,698 shares of our common stock subject to stock options that are exercisable or will become exercisable within 60 days after December 11, 2020.

(8)

Includes 110,091 shares subject to restricted stock units that will vest within 60 days after December 11, 2020 and 95,352 shares of our common stock subject to stock options that are exercisable or will become exercisable within 60 days after December 11, 2020.

(9)

Includes 50,653 shares subject to restricted stock units that will vest within 60 days after December 11, 2020 and 401,825 shares of our common stock subject to stock options that are exercisable or will become exercisable within 60 days after December 11, 2020.

(10)

Includes 126,633 shares subject to restricted stock units that will vest within 60 days after December 11, 2020 and 165,948 shares of our common stock subject to stock options that are exercisable or will become exercisable within 60 days after December 11, 2020.

(11)

Messrs. Neary, Reedy and Sadrian are partners of WP and managing directors and members of WP LLC. All shares indicated as owned by Messrs. Neary, Reedy and Sadrian are included because of their affiliation with the Warburg Pincus entities.

(12)

Includes 78,250 shares of our common stock subject to stock options that are exercisable within 60 days after December 11, 2020.

(13)

GS is a direct and indirect wholly owned subsidiary of GSG. The shares are owned by GS and the GS Entities. The GS Entities, of which affiliates of GSG are the general partner, managing general partner or investment manager, share voting and investment power with certain of its respective affiliates. Mr. DiSabato is a managing director of GS.

(14)

Mr. Gorny is the grantor and trustee of The Tomas and Aviva Gorny Family Trust and the grantor of each of The Tomas and Aviva Gorny Irrevocable Trust and The Gorny 2013 Irrevocable Trust (collectively, the “Gorny Trusts”). As a result, Mr. Gorny may have voting and investment control over, and may be deemed to be the beneficial owner of, an aggregate of 2,302,782 shares of our common stock owned by the Gorny Trusts. The number of shares beneficially owned by Mr. Gorny also includes 78,250 shares of our common stock subject to stock options that are exercisable within 60 days after December 11, 2020.

 

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APPRAISAL RIGHTS

If the merger is completed, under Section 262 of the DGCL, holders of record of Company common stock who do not vote in favor of the proposal to adopt the merger agreement, who properly demand appraisal of their shares, who do not fail to perfect or validly withdraw such demand or otherwise lose their right to appraisal and who otherwise comply with the requirements for seeking appraisal under Section 262 of the DGCL will be entitled to receive payment in cash for the fair value of their shares of Company common stock (as of the effective time of the merger exclusive of any element of value arising from the accomplishment or expectation of the merger) as determined by the Delaware Court of Chancery in an appraisal proceeding, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court, in lieu of the consideration they would otherwise be entitled to receive pursuant to the merger agreement. These rights are known as appraisal rights. Our stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. The Company will require strict compliance with the statutory procedures.

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a stockholder in order to dissent from the merger and perfect appraisal rights.

This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex E to this proxy statement.

Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL will result in a termination or waiver of appraisal rights.

Section 262 of the DGCL requires that stockholders be notified that appraisal rights will be available not less than 20 days before the stockholders’ meeting to vote on the adoption of the merger agreement. A copy of Section 262 of the DGCL must be included with such notice. This proxy statement constitutes the Company’s notice to its stockholders of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262 of the DGCL and a copy of the full text of Section 262 of the DGCL is attached as Annex E to this proxy statement.

Our stockholders who may wish to exercise their appraisal rights or may wish to preserve their right to do so should review Annex E carefully and in its entirety and should consult with their legal advisor, since failure to timely comply with the procedures set forth therein will result in the loss of such rights.

If you elect to demand appraisal of your shares, you must satisfy each of the following conditions:

 

   

You must deliver to the Company a written demand for appraisal of your shares before the vote to adopt the merger agreement is taken. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. Voting “AGAINST” or failing to vote “FOR” the adoption of the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL.

 

   

You must either vote against the adoption of the merger agreement or abstain from voting on the adoption of the merger agreement. A vote in favor of the adoption of the merger agreement, whether by proxy, over the Internet, by telephone or by mail, or online while virtually attending the special meeting, will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously submitted written demands for appraisal. Because a properly executed proxy that does not contain voting instructions will, unless revoked, be voted in favor of adoption of the merger agreement, a stockholder who wishes to exercise appraisal rights must provide instructions in any such proxy to vote against the adoption of the merger agreement or otherwise attend the special meeting and vote against adoption of the merger agreement, or abstain from voting.

 

   

You must continuously hold the shares of record from the date of making the demand through the effective time of the merger.

 

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You, another stockholder, a beneficial owner on whose behalf appraisal has been demanded (or the surviving corporation in the merger) must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of their shares of Company common stock within 120 days after the effective time of the merger. The surviving corporation of the merger is under no obligation to file any petition and has no present intention of doing so. Accordingly, it is the obligation of all stockholders to initiate all necessary action to properly demand and perfect their appraisal rights within the time prescribed by Section 262 of the DGCL.

If you fail to comply with any of these conditions and the merger is completed, you will be entitled to receive the $9.50 per share cash merger consideration for your shares of Company common stock as provided for in the merger agreement, but you will have no appraisal rights with respect to your shares of Company common stock.

All demands for appraisal should be addressed to our Secretary at Endurance International Group Holdings, Inc., Attention: Legal Department, 10 Corporate Drive, Burlington, Massachusetts 01803, and must be delivered before the vote on the merger agreement is taken at the special meeting, and should be executed by, or on behalf of, the record holder of the shares of our common stock for which appraisal is demanded.

The demand must reasonably inform the Company of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares in connection with the merger. To be effective, a demand for appraisal by a holder of our common stock must be made by, or in the name of, such registered stockholder, fully and correctly, as the stockholder’s name appears on the stock ledger of the Company and on his, her or its stock certificate(s), if any.

Only a holder of record of shares of our common stock is entitled to demand appraisal rights for such shares of our common stock registered in that holder’s name. In addition, the stockholder must continuously hold the shares of record from the date of making the demand through the effective time of the merger.

Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to the Company. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares.

If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by or for the fiduciary.

If the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners.

An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owners.

A record owner, such as a bank, brokerage firm or other nominee, who holds shares as a nominee for others, may exercise his, her or its right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the record owner.

If you hold your shares of Company common stock in a bank, a brokerage account or other nominee form and wish to exercise appraisal rights, you should consult with your bank or broker or the other nominee to determine the appropriate procedures for the nominee to make a demand for appraisal. A person having a beneficial interest in shares of Company common stock held of record in the name of another person, such as a bank, brokerage firm or other nominee, must act promptly to cause the record holder to properly follow the steps summarized below and perfect appraisal rights in a timely manner.

 

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Within 10 days after the effective time of the merger, the surviving corporation in the merger will provide notice of the date the merger has become effective to each former stockholder of the Company who has properly demanded an appraisal of their shares of Company common stock under Section 262 of the DGCL, has not voted in favor of the adoption of the merger agreement and has not withdrawn or otherwise lost the right to appraisal. At any time within 60 days after the effective time of the merger, any stockholder who has demanded an appraisal, but who has not commenced an appraisal proceeding or joined that proceeding as a named party, has the right to withdraw the demand and to accept the merger consideration, without interest, specified by the merger agreement for his, her or its shares of Company common stock. Any attempt to withdraw made more than 60 days after the effective time of the merger will require the written approval of the surviving corporation and no appraisal proceeding before the Delaware Court of Chancery as to any stockholder will be dismissed without the approval of the Delaware Court of Chancery. Such approval may be conditioned upon any terms the Delaware Court of Chancery deems just; provided, however, that this provision will not affect the right of any stockholder that has made an appraisal demand but who has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the merger within 60 days after the effective time of the merger. If the surviving corporation does not approve a stockholder’s request to withdraw a demand for appraisal when the approval is required or if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder would be entitled to receive only the appraised value determined in any such appraisal proceeding. This value could be higher or lower than, or the same as, the value of the per share merger consideration.

Within 120 days after the effective time of the merger, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 of the DGCL may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation has no obligation or present intention to file such a petition in the event there are dissenting stockholders. Accordingly, the failure of a stockholder to file such a petition within the period specified could nullify the stockholder’s previously submitted written demand for appraisal. If you are the beneficial owner of shares of Company common stock held in a voting trust or by a nominee on your behalf you may, in your own name, file an appraisal petition.

Within 120 days after the effective time of the merger, any stockholder who has complied with Section 262 of the DGCL, or a beneficial owner of shares held either in a voting trust or by a nominee on behalf of such beneficial owner, shall, upon written request to the surviving corporation, be entitled to receive a written statement setting forth the aggregate number of shares not voted in favor of the merger agreement and with respect to which demands for appraisal rights have been received and the aggregate number of holders of such shares. Such written statement must be mailed to the requesting stockholder within 10 days after such written request is received by the surviving corporation or within 10 days after expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Register in Chancery with a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. After providing notice to dissenting stockholders who demanded appraisal of their shares as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing upon the petition, and to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided thereby. The Delaware Court of Chancery may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings. In addition, the Delaware Court of Chancery will dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (i) the total number of shares of Company

 

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common stock entitled to appraisal exceeds 1% of the outstanding shares of Company common stock, or (ii) the value of the consideration provided in the merger for such total number of shares of Company common stock exceeds $1.0 million.

After determination of the stockholders entitled to appraisal of their shares of our common stock, the Delaware Court of Chancery will appraise the shares, determining their fair value as of the effective time of the merger exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest, if the Delaware Court of Chancery so determines, to the stockholders entitled to receive that value upon the surrender of their shares. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment. Upon application by the surviving corporation or by any stockholder entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving corporation and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

In determining fair value, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other factors which were known or which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative eleme