UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14C

Information Statement Pursuant to Section 14(c) of the

Securities Exchange Act of 1934

 

 

Check the appropriate box:

 

☒		Preliminary Information Statement
☐		Confidential, for Use of the Commission Only (as Permitted by Rule 14C-5(d)(2))
☐		Definitive Information Statement

FORTERRA, INC.

(Name of Registrant as Specified In Its Charter)

 

☐		No fee required
☒		Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
		(1)		Title of each class of securities to which transaction applies:   Common stock, par value $0.001 per share
		(2)		Aggregate number of securities to which transaction applies:   70,814,374 shares of common stock in the aggregate, consisting of (a) 66,340,787 shares of common stock outstanding, (b) 979,134 shares of common stock subject to issuance pursuant to vested and unvested restricted stock units, (c) 2,950,441 shares of common stock vested and unvested underlying stock options and (d) 544,012 shares of common stock underlying vested and unvested performance restricted stock units (“PRSUs”) assuming achievement of the applicable performance goals as set forth in the Merger Agreement.
		(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):   Solely for the purposes of calculating the filing fee, the aggregate value of the transaction was determined based upon the sum of (a) 66,340,787 shares of common stock outstanding multiplied by $24.00 per share, (b) 979,134 shares of common stock subject to issuance pursuant to vested and unvested restricted stock units multiplied by $24.00 per share, (c) 2,950,441 shares of common stock underlying options multiplied by $17.67, which is the difference between $24.00 and the weighted average exercise price of such options of $6.33 per share and (d) 544,012 shares of common stock underlying vested and unvested PRSUs multiplied by $24.00 per share.
		(4)		Proposed maximum aggregate value of transaction:   $1,680,868,684.47
		(5)		Total fee paid:   $183,382.77 (as computed in accordance with Exchange Act Rule 0-11(c)(1) by multiplying the maximum aggregate value reflected in (4) above by .0001091)
☐		Fees 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)		From Schedule or Registration Statement No:
		(3)		Filing Party:
		(4)		Date Filed:

 

 

 

FORTERRA, INC.

511 East John Carpenter Freeway, Suite 600

Irving, TX 75062

NOTICE OF ACTION BY WRITTEN CONSENT AND APPRAISAL RIGHTS AND

INFORMATION STATEMENT

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

[], 2021

Dear Stockholders:

This notice of action by written consent and appraisal rights and the accompanying information statement are being furnished to the holders of common stock of Forterra, Inc., a Delaware corporation (the “Company,” “Forterra,” “we,” “our” or “us”), in connection with the Agreement and Plan of Merger, dated as of February 19, 2021 (the “Merger Agreement”), by and among the Company, Quikrete Holdings, Inc., a Delaware corporation (“Parent”), and Jordan Merger Sub, Inc., a Delaware corporation (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent (the “Merger”). A copy of the Merger Agreement is attached as Annex A to the accompanying information statement.

Upon completion of the Merger, each share of common stock, par value $0.001 per share, of the Company (“Company Common Stock”) issued and outstanding immediately prior to the effective time of the Merger (except for shares (i) held in the treasury of the Company or owned, directly or indirectly, by Parent, Merger Sub or any wholly-owned subsidiary of the Company, (ii) that are subject to any vesting restrictions granted under the Company Stock Plans (as defined in the Information Statement) or (iii) owned by stockholders who have properly exercised and perfected appraisal rights under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) for such shares) will be canceled and converted automatically into the right to receive $24.00 in cash, without interest (the “Merger Consideration”), subject to deduction for any required withholding taxes. All shares of Company Common Stock so canceled and converted will cease to have any rights with respect to such Company Common Stock, except for the right to receive the Merger Consideration.

On February 19, 2021, the Company’s board of directors unanimously (a) determined that the terms of the Merger Agreement and the other transactions contemplated thereby, including the Merger, are fair to and in the best interests of the Company and its stockholders generally, (b) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger, (c) resolved to recommend that the Company’s stockholders approve and adopt the Merger Agreement and (d) approved, in accordance with Article VI of the Company’s Amended and Restated Certificate of Incorporation, the approval and adoption of the Merger Agreement by the Company’s stockholders by written consent without a meeting, without prior notice and without a vote in accordance with Section 228 of the DGCL.

Under Section 251 of the DGCL and the applicable provisions of the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the adoption of the Merger Agreement by the Company’s stockholders required the affirmative vote or written consent of the holders of a majority of the outstanding shares of Company Common Stock. On February 19, 2021, following the execution of the Merger Agreement, Forterra US Holdings, LLC (the “Principal Stockholder”), which as of such date, owned 34,907,250 shares of Company Common Stock, constituting approximately 52.7% of the voting power of the issued and outstanding shares of Company Common Stock, executed and delivered an irrevocable written consent pursuant to Section 228 of the DGCL (such written consent in the form attached as Annex B to this information statement, the “Stockholder Written Consent”) adopting the Merger Agreement and approving the transactions contemplated thereby, including the Merger.

Accordingly, the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, by the Company’s stockholders became effective in accordance with the DGCL on February 19, 2021. No further approval of the stockholders of the Company is required under applicable law or the Merger Agreement to adopt or approve the Merger Agreement or the transactions contemplated thereby, including the Merger. As a result, the Company has not solicited and will not be soliciting your vote for the adoption or approval of the Merger Agreement or the transactions contemplated thereby, including the Merger, and does not intend to call a meeting of stockholders for the purpose of voting on the adoption of the Merger Agreement or the transactions contemplated thereby, including the Merger.

This notice of action by written consent and appraisal rights and the accompanying information statement constitute notice to you from the Company of the Principal Stockholder’s action by written consent to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger, in lieu of a meeting.

Under Section 262 of the DGCL, holders of shares of Company Common Stock (other than the Principal Stockholder) will have the right to demand an appraisal for, and be paid the “fair value” of, their shares of Company Common Stock (as determined by the Court of Chancery of the State of Delaware), together with interest, if any, on the amount determined to be the fair value, instead of receiving the per share Merger Consideration if the Merger is completed, but only if they comply with the procedures and requirements set forth under Section 262 of the DGCL. In order to exercise your appraisal rights, you must submit a written demand for an appraisal of your shares no later than 20 days after the date of mailing of this notice and the accompanying information statement, or [], 2021, and precisely comply with other procedures set forth under Section 262 of the DGCL, which are summarized in the accompanying information statement. A copy of Section 262 of the DGCL is also attached as Annex D to the accompanying information statement.

This notice and the accompanying information statement constitute notice to you from the Company of the availability of appraisal rights under Section 262 of the DGCL and of action by written consent of stockholders in lieu of a meeting pursuant to Section 228(e) of the DGCL.

The information statement accompanying this notice provides you with more specific information concerning the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. We urge you to read the entire accompanying information statement carefully. Please do not send in the certificate(s) representing your shares of the Company Common Stock at this time. If the Merger is completed, you will receive instructions regarding the surrender of and payment for your shares of Company Common Stock.

By order of the Board of Directors,

Lori M. Browne

Executive Vice President and General Counsel

Neither the Securities and Exchange Commission nor any state securities or other regulatory agency has approved or disapproved of the transactions described in this document, including the Merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

The information statement is dated [], 2021, and is first being mailed to stockholders on or about [], 2021.

FORTERRA, INC.

511 East John Carpenter Freeway, Suite 600

Irving, TX 75062

INFORMATION STATEMENT

Table of Contents

 

SUMMARY			1
QUESTIONS AND ANSWERS ABOUT THE MERGER			12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			16
PARTIES INVOLVED IN THE MERGER			17
Forterra, Inc.			17
Jordan Merger Sub, Inc.			18
THE MERGER			18
Overview			18
Background of the Merger			18
Recommendation of the Board of Directors and Reasons for Recommendation			25
Opinion of Financial Advisor to the Company			29
Unaudited Projected Financial Information of the Company			36
Financing of the Merger			39
Interests of Directors and Executive Officers in the Merger			39
Material U.S. Federal Income Tax Consequences of the Merger			44
Regulatory Approvals			48
De-listing and De-registration of Company Common Stock			48
Anticipated Accounting Treatment of the Merger			48
THE MERGER AGREEMENT			49
Explanatory Note Regarding the Merger Agreement			49
The Merger			49
Merger Consideration			49
Treatment of the Company’s Equity Awards			50
Certificate of Incorporation; Bylaws; Directors and Officers			50
Closing and Effective Time of the Merger			50
Payment Procedures			51
Dissenting Shares			51
Representations and Warranties; Material Adverse Effect			52
Conduct of Business by the Company Pending the Merger			54
Further Action; Efforts			57
Stockholder Written Consent			59
No Solicitation			59
Change of Recommendation			60
Financing Cooperation			61
Employees			63
Access to Information			63
Indemnification and Insurance			64
Other Covenants and Agreements			65
Conditions to Consummation of the Merger			66
Termination of the Merger Agreement			66
Company-Paid Termination Fee			68
Parent-Paid Termination Fee			68
Specific Performance			68
Amendment; Extension; Waivers			69
Expenses			69
Governing Law			69

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS			70
RESTRICTIVE COVENANT AGREEMENT			72
APPRAISAL RIGHTS			73
HOUSEHOLDING			77
FUTURE STOCKHOLDER PROPOSALS			77
WHERE YOU CAN FIND ADDITIONAL INFORMATION			79
ANNEX A AGREEMENT AND PLAN OF MERGER			A-1
ANNEX B WRITTEN CONSENT			B-1
ANNEX C OPINION OF FINANCIAL ADVISOR TO THE COMPANY			C-1
ANNEX D SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE			D-1

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the Merger Agreement and the Merger. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the additional information contained elsewhere in this Information Statement, the annexes to this Information Statement and the documents referred to in this Information Statement.

 

Q.	WHY DID I RECEIVE THIS INFORMATION STATEMENT?

 

A.

On February 19, 2021, the Company, Parent and Merger Sub entered into the Merger Agreement, and promptly thereafter the Principal Stockholder adopted the Merger Agreement and approved the Merger and the other transactions contemplated by the Merger Agreement. Applicable provisions of the DGCL and certain securities regulations require us to provide you with information regarding the Merger, even though your vote or consent is neither required nor requested to adopt the Merger Agreement or complete the Merger. We are not asking you for a proxy relating to a vote or consent, and you are requested not to send us a proxy.

 

Q.	WHAT IS THE PROPOSED TRANSACTION?

 

A.

The proposed transaction is the acquisition by Parent of all shares of Company Common Stock not owned by the Company as treasury stock, by any subsidiary of the Company or by Parent or Merger Sub. The proposed transaction will be effected through a merger of Merger Sub, a wholly-owned subsidiary of Parent, with and into the Company, with the Company continuing as the Surviving Corporation. If the Merger is completed, the Company will become wholly-owned by Parent, and Company Common Stock will cease to be listed on Nasdaq, will be de-registered with the SEC and will no longer be publicly traded.

 

Q.	IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE FOR MY SHARES OF COMPANY COMMON STOCK?

 

A.

If the Merger is completed, each share of Company Common Stock that is issued and outstanding (except for Canceled Shares, Company Restricted Shares and Dissenting Shares, which will be treated as set forth in the Merger Agreement) will be converted into the right to receive the Merger Consideration, consisting of $24.00 in cash per share, without interest and subject to any applicable tax withholding. As a result of the Merger, upon the surrender of your shares of Company Common Stock, you will receive a total amount of cash equal to the product obtained by multiplying the Merger Consideration by the number of shares of Company Common Stock that you own, unless you properly demand and do not validly withdraw, lose or fail to perfect appraisal rights as provided under Section 262.

 

Q.	IS THE MERGER CONSIDERATION SUBJECT TO AN INCREASE?

 

A.

No. The Merger Consideration is fixed. The Merger Consideration will not increase even if the Company’s results of operations improve or if the price of Company Common Stock increases above the current per share Merger Consideration. See the section entitled “The Merger Agreement—Merger Consideration” beginning on page 49 of this Information Statement.

 

Q.	DID THE BOARD APPROVE THE MERGER AND THE MERGER AGREEMENT?

 

A.

Yes. After careful consideration and evaluation of the Merger, and in consideration of, among other things, the opinion of Citi rendered to the Board that, based upon and subject to the factors and assumptions set forth in such opinion, the Merger Consideration to be paid to holders of Company Common Stock pursuant to the Merger Agreement is fair, from a financial point of view, to the holders of shares of Company Common Stock (other than certain shares as specified in such opinion), our Board unanimously approved and declared advisable the Merger Agreement and the Merger. To review our Board’s reasons for

 

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recommending and approving the Merger and the Merger Agreement, see the sections entitled “The Merger—Recommendation of the Board and Reasons for Recommendation” beginning on page 25 of this Information Statement.

 

Q.	IS THE APPROVAL OF STOCKHOLDERS NECESSARY TO ADOPT OR APPROVE THE MERGER AGREEMENT OR THE MERGER? WHY AM I NOT BEING ASKED TO VOTE ON OR CONSENT TO THE MERGER AGREEMENT OR THE MERGER?

 

A.

Under Section 251 of the DGCL, the Merger requires the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon. The requisite stockholder approval was obtained on February 19, 2021, the date on which the Principal Stockholder caused to be delivered to the Company an irrevocable written consent, in respect of approximately 52.7% of outstanding Company Common Stock entitled to vote thereon, adopting and approving the Merger Agreement and the transactions contemplated thereby, including the Merger. No further approval of the stockholders of the Company is required or will be sought to adopt the Merger Agreement or to approve the Merger or the other transactions contemplated by the Merger Agreement. Therefore, your vote or consent is not required and is not being sought. We are not asking you for a proxy relating to a vote or consent, and you are requested not to send us a proxy.

 

Q.	IS THE MERGER SUBJECT TO THE FULFILLMENT OF CERTAIN CONDITIONS?

 

A.

Yes. Before completion of the Merger, the Company, Parent and Merger Sub must fulfill or waive several closing conditions. If these conditions are not satisfied or waived, the Merger will not be completed. See the section entitled “The Merger Agreement—Conditions to Consummation of the Merger” beginning on page 66 of this Information Statement.

 

Q.	WHAT IS THE MARKET PRICE OF THE COMPANY COMMON STOCK?

 

A.	The closing sale price of Company Common Stock on [    ], 2021, the most recent practicable date before the date of this Information Statement, was $[    ] per share. You are encouraged to obtain current market quotations for Company Common Stock.

 

Q.	AM I ENTITLED TO APPRAISAL RIGHTS?

 

A.

Yes. Under Section 262, stockholders who did not provide a consent to the adoption of the Merger Agreement (i.e., stockholders other than the Principal Stockholder) are entitled to appraisal rights in connection with the Merger with respect to their shares, so long as they meet certain conditions and comply with the applicable statutory procedures for demanding and perfecting appraisal rights and do not subsequently validly withdraw or lose such rights. See the section entitled “Appraisal Rights” beginning on page 73 of this Information Statement.

 

Q.	WHEN IS THE MERGER EXPECTED TO BE COMPLETED?

 

A.

We expect the Merger to be completed in fourth quarter of 2021, subject to satisfaction of the closing conditions set forth in the Merger Agreement and described in the section entitled “The Merger Agreement—Conditions to Consummation of the Merger” beginning on page 66 of this Information Statement; however, there can be no assurance that the Merger will be completed at that time, or at all.

 

Q.	WHAT EFFECT WILL THE MERGER HAVE ON THE COMPANY?

 

A.

If the Merger is consummated, Merger Sub will be merged with and into the Company, and the Company will continue to exist immediately following the Merger as a wholly-owned subsidiary of Parent. Following the consummation of the Merger, shares of Company Common Stock will no longer be traded on Nasdaq or

 

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any other public market, and the registration of shares of Company Common Stock under the Exchange Act will be terminated, as described in the section entitled “The Merger—De-listing and De-registration of Company Common Stock” beginning on page 48 of this Information Statement.

 

Q.	WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?

 

A.	If the Merger is not completed for any reason, stockholders will not receive any payment for their shares of Company Common Stock in connection with the Merger. Instead, the Company will remain a publicly traded company, and shares of Company Common Stock will continue to trade on Nasdaq.

 

Q.	SHOULD I SURRENDER MY SHARES OF COMPANY COMMON STOCK NOW?

 

A.

No. After the Merger is completed, you will be sent instructions for exchanging your shares of Company Common Stock for the Merger Consideration. If you are the beneficial owner of shares of Company Common Stock held in street name, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of such shares.

 

Q.	WILL I OWE TAXES AS A RESULT OF THE MERGER?

 

A.

The Merger will be a taxable transaction for U.S. holders of Company Common Stock. As a result, assuming you are a U.S. holder, any gain you recognize as a result of the Merger will be subject to U.S. federal income tax and also may be taxed under applicable state, local or other tax laws. In general, you will recognize gain or loss equal to the difference between (1) the Merger Consideration you receive and (2) the adjusted tax basis of the shares of Company Common Stock you surrender in the Merger. Assuming you are a non-U.S. holder, your exchange of shares of Company Common Stock for the Merger Consideration generally will not result in U.S. federal income tax unless you have certain connections with the United States. See the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 44 of this Information Statement for a more detailed explanation of the tax consequences of the Merger. You should consult your tax advisor on how specific tax consequences of the Merger apply to you.

 

Q.	WHAT HAPPENS IF I SELL MY SHARES BEFORE COMPLETION OF THE MERGER?

 

A.

If you transfer or sell your shares of Company Common Stock prior to the completion of the Merger, you will have transferred or sold the right to receive the Merger Consideration to be received by the Company’s stockholders in the Merger and lose your appraisal rights. In order to receive the Merger Consideration or exercise appraisal rights, you must hold your shares through completion of the Merger.

 

Q.	WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANY?

 

A.

We file periodic reports and other information with the SEC. Some of these reports are incorporated by reference into this Information Statement. You may read and copy this information at the SEC’s public reference facilities. Please call the SEC at 1-800-SEC-0330 for information about these facilities. This information is also available on the internet site maintained by the SEC at www.sec.gov. For a more detailed description of the information available, please refer to the section entitled “Where You Can Find Additional Information” beginning on page 79 of this Information Statement.

 

Q.	WHAT IS HOUSEHOLDING AND HOW DOES IT AFFECT ME?

 

A.

The SEC permits companies to send a single set of certain disclosure documents to stockholders who share the same address and have the same last name, unless contrary instructions have been received, but only if the applicable company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate set of disclosure documents. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.

 

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If you received a householded mailing and you would like to have additional copies of this Information Statement mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to the Company by mail at 511 East John Carpenter Freeway, Suite 600, Irving, TX 75062, Attention: General Counsel or by telephone at (469) 458-7973. We will promptly send additional copies of this Information Statement upon receipt of such request.

 

Q.	WHO CAN HELP ANSWER MY QUESTIONS?

 

A.	If you have questions about the Merger after reading this Information Statement, please contact our general counsel, Lori M. Browne, by mail at 511 East John Carpenter Freeway, Suite 600, Irving, TX 75062, Attention: General Counsel or by telephone at (469) 284-8678.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Information Statement, and certain of the documents to which we refer you in this Information Statement, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are typically identified by words such as “approximately,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases. All of our forward-looking statements contained in this Information Statement are based upon information available to us as of the filing date of this Information Statement, and, except to the extent required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason. You should not place undue reliance on forward-looking statements. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including:

 

•

risks related to the consummation of the Merger, including the risks that (i) the Merger may not be consummated within the anticipated time period, or at all, (ii) the parties may fail to secure the termination or expiration of any waiting period applicable under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and (iii) other conditions to the consummation of the Merger under the Merger Agreement may not be satisfied;

 

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the effects that any termination of the Merger Agreement may have on the Company or its business, including the risks that the Company’s stock price may decline significantly if the Merger is not completed, which may have a chilling effect on alternatives to the Merger;

 

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the effects that the announcement or pendency of the Merger may have on the Company and its business, including the risks that as a result (i) the Company’s business, operating results or stock price may suffer, (ii) the Company’s current plans and operations may be disrupted, (iii) the Company’s ability to retain or recruit key employees may be adversely affected, (iv) the Company’s business relationships (including customers and suppliers) may be adversely affected, or (v) the Company’s management’s or employees’ attention may be diverted from other important matters;

 

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the effect of limitations that the Merger Agreement places on the Company’s ability to operate its business, return capital to stockholders or engage in alternative transactions;

 

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the nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the Merger and instituted against the Company, its directors and others;

 

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the failure to satisfy any of the conditions to the consummation of the Merger;

 

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the risk that the Merger may not be completed in a timely manner or at all;

 

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the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;

 

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the risk that the Merger and related transactions may involve unexpected costs, liabilities or delays; and

 

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other economic, business, competitive, legal, regulatory, and/or tax factors.

The forward-looking statements contained in this Information Statement are based on management’s current plans, estimates and expectations in light of information currently available to the Company and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, as well as the other factors described in Item 1A, “Risk Factors” in the Company’s 2020 10-K filed with the SEC on February 25, 2021. The COVID-19 pandemic may also precipitate or exacerbate these and other unknown risks and uncertainties. Additional factors

 

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or events that could cause our actual results to differ may also emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. Any forward-looking statement made by the Company speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

Additionally, the unaudited prospective financial information prepared by management of the Company included in this Information Statement reflects assumptions and estimates by management of the Company as of the date specified in the unaudited prospective financial information or the date of any document incorporated by reference in this Information Statement. Many of these assumptions and estimates are driven by factors beyond the control of the Company, and it can be expected that one or more of them will not materialize as expected or will vary significantly from actual results. No independent accountants have reviewed or provided any assurance with respect to the unaudited prospective financial information. Moreover, the Company does not undertake any obligation to update the unaudited prospective financial information and does not intend to do so. For the foregoing reasons, as well as the bases and assumptions on which the unaudited prospective financial information was compiled, the inclusion of the Company’s unaudited prospective financial information in this Information Statement should not be regarded as an indication that such information will be predictive of future results or events nor construed as financial guidance, and it should not be relied on as such or for any other purpose whatsoever.

PARTIES INVOLVED IN THE MERGER

Forterra, Inc.

The Company is a manufacturer of ductile iron pipe and concrete pipe and precast products in the United States and Eastern Canada for a variety of essential water-related infrastructure applications. The Company provides critical infrastructure components for a broad spectrum of construction projects across the infrastructure, residential and non-residential markets. The Company’s suite of products ranges from large diameter pipe that transports water to and from treatment centers and manages drainage along major transportation corridors, to smaller diameter pipe that delivers potable water to, and removes wastewater from, end users in residential and commercial settings.

The Company’s principal executive offices are located at 511 East John Carpenter Freeway, Suite 600, Irving, TX 75062, and its telephone number is (469) 458-7973. The Company’s website is www.forterrabp.com. Shares of Company Common Stock are listed with, and trade on, Nasdaq under the symbol “FRTA”.

For more information about the Company, please visit our website at www.forterrabp.com. Our website address is provided as an inactive textual reference only. The information on our website is not incorporated into, and does not form a part of, this Information Statement. Detailed descriptions about the Company’s business and financial results are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC on February 25, 2021, which is incorporated by reference in this Information Statement. See the section entitled “Where You Can Find Additional Information” beginning on page 79 of this Information Statement.

Quikrete Holdings, Inc.

Parent is a Delaware corporation and a privately owned family business founded in 1940. It is a building materials company based in Atlanta, Georgia. Its portfolio ranges from its iconic Quikrete branded concrete and mortar mixes to precast and steel pedestrian and vehicular bridges. This includes brands such as Quikrete, Spec

 

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Mix, QPR, Pavestone, Custom Building Products, Rinker Materials, and Contech Engineered Solutions. Parent’s products include packaged cementitious products, pavers, retaining wall systems, masonry units, tile grouts and thin sets, concrete pipe and box culverts, corrugated metal pipe, engineered storm water systems, and structural precast and steel pedestrian and vehicular bridges. Parent services the U.S. and Canadian new construction and repair and remodeling residential, commercial, and infrastructure markets. Parent’s principal executive offices are located at Five Concourse Parkway, Suite 1900, Atlanta, Georgia 30328, and its telephone number is (404) 634-9100.

Jordan Merger Sub, Inc.

Merger Sub is a Delaware corporation formed for the purpose of entering into the Merger Agreement and completing the Merger. Merger Sub is a wholly-owned subsidiary of Parent. Merger Sub has not engaged in any business to date except for activities incidental to its incorporation and activities undertaken in furtherance of the transactions contemplated by the Merger Agreement. Upon completion of the Merger, Merger Sub will merge with and into the Company and Merger Sub will cease to exist. Merger Sub’s principal executive offices are located at Five Concourse Parkway, Suite 1900, Atlanta, Georgia 30328, and its telephone number is (404) 634-9100.

THE MERGER

The following section, together with the sections entitled “Summary”, “Questions and Answers about the Merger”, “Cautionary Statement Regarding Forward-Looking Statements”, “Parties Involved in the Merger”, “The Merger Agreement”, “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers”, “Appraisal Rights”, “Householding”, “Future Stockholder Proposals” and “Where You Can Find Additional Information”, constitutes a description of certain aspects of the Merger as required by applicable SEC regulations. Such description, however, may not contain all of the information that is important to you. We encourage you to read carefully this entire Information Statement, including the Merger Agreement attached as Annex A, for a more complete understanding of the Merger. You may obtain additional information without charge by following the instructions in the section entitled “Where You Can Find Additional Information” beginning on page 79 of this Information Statement.

Overview

Under the terms of the Merger Agreement, subject to the satisfaction or waiver (if permissible) of specified conditions, Merger Sub will be merged with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent. The Board unanimously approved the Merger Agreement and recommended that the Company’s stockholders vote to adopt the Merger Agreement on February 19, 2021. Promptly following the execution of the Merger Agreement, the requisite stockholder approval was obtained pursuant to the delivery to the Company of the Stockholder Written Consent by the Principal Stockholder in accordance with the DGCL, the Company Charter and Company Bylaws.

Upon completion of the Merger, each share of Company Common Stock issued and outstanding immediately prior to the effective time of the Merger (except for Canceled Shares, the Company Restricted Shares and Dissenting Shares, which will be treated as set forth in the Merger Agreement) will be canceled and converted automatically into the right to receive the Merger Consideration of $24.00 in cash, without interest and subject to deduction for any required withholding tax. All shares of Company Common Stock so canceled and converted will cease to have any rights with respect to such Company Common Stock, except for the right to receive the Merger Consideration. Any payment of the Merger Consideration will be subject to any required withholding taxes.

Background of the Merger

From time to time, prior to and since the Company’s initial public offering of shares of Company Common Stock in October 2016, in an effort to strengthen the Company’s business and maximize stockholder value, the

 

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Board, the Principal Stockholder and Company management have regularly discussed and analyzed possible acquisitions of, or other strategic transactions involving, the Company, with industry participants. Such discussions and analysis included periodic discussions with Parent regarding various transaction structures involving the Company’s and/or Parent’s assets and businesses. Beginning in the third quarter of 2020, certain factors, including the Company’s improved results of operations and the Company’s announcement of a favorable decision in its earnout arbitration involving HeidelbergCement, A.G. in September 2020, caused members of the Board and Company management to conclude that there may be increased interest from market participants regarding a potential acquisition of the Company that would be in the best interests of the Company’s stockholders. In November 2020 Chris Meyer, Chairman of the Board, in consultation with John McPherson, Lead Director and non-executive Vice Chairman of the Board, requested that Citi engage in an outreach process to gauge interest among a broad group of financial sponsors regarding a potential acquisition of the Company.

On December 3, 2020, as part of a discussion initiated outside of the Citi outreach process, representatives of Goldman Sachs & Co. LLC (“Goldman”), financial advisor to Parent, arranged a meeting with Mr. Meyer, other representatives of the Board, William R. Magill, who is the Chief Executive Officer of Parent, other representatives for Parent and King & Spalding LLP, who served as antitrust counsel to Parent. During the meeting, representatives of Parent expressed an interest in exploring a business combination with the Company, and the parties discussed, among other things, the regulatory approvals that would be required to complete a transaction.

On December 10, 2020, the Company and Parent entered into a mutual confidentiality agreement to facilitate the exchange of confidential information. On December 10, 2020, the Company and Parent also entered into a clean team confidentiality agreement to facilitate the exchange of certain highly confidential information.

On December 22, 2020, Parent submitted to the Company a non-binding indication of interest to acquire all outstanding shares of Company Common Stock for between $19.50 and $20.50 per share in cash, to be financed with a combination of cash on hand and incremental debt financing. The indication of interest stated, among other things, that Parent’s proposed transaction would not be subject to any financing contingency and that its valuation assumed that no divestitures of any of the assets of either Parent or the Company or any of their respective affiliates would be required in order to consummate the proposed transaction.

On December 24, 2020, the Board held a meeting via teleconference, attended by members of Company management and representatives of Gibson, Dunn & Crutcher, LLC (“Gibson Dunn”), legal counsel to the Company, and representatives of Citi. The Board and its advisors discussed the terms of Parent’s indication of interest and potential responses to Parent. The Board also discussed with Gibson Dunn the need to evaluate Parent’s indication of interest in the context of the Board’s fiduciary duties, and Gibson Dunn provided a summary of such fiduciary duties. Representatives of Citi then provided an update on the outreach process to potential buyers, noting that Citi, on the Company’s behalf, had contacted 18 financial sponsors and one family office. Representatives of Citi informed the Board that Citi, on the Company’s behalf, had made presentations to 11 of such financial sponsors based on publicly available information, and that members of the Company’s management had made presentations to five of such financial sponsors based on publicly available information. Representatives of Citi noted to the Board that following such outreach and the completion of such presentations, only three of the financial sponsors, which we refer to as “Party A,” “Party B” and “Party C,” indicated that they had interest in pursuing an acquisition of the Company. Representatives of Citi then provided the Board with its analysis of potential strategic buyers, including various precast manufacturers, pipe and accessory manufacturers and building material manufacturers, and explained that, of these potential strategic buyers, only one such strategic buyer, which we refer to as “Party D” was likely to have both the interest and financial ability to acquire the Company. The Board directed Citi to reach out to Party D to determine if Party D would be interested in discussing a potential acquisition of the Company. The Board also formally approved the Company’s engagement of Citi as the Company’s financial advisor in connection with the evaluation of a potential sale of the Company.

On December 28, 2020, the Company formally engaged Citi as the Company’s financial advisor in connection with the evaluation of a potential sale of the Company.

 

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On December 30, 2020, the Board held a meeting via teleconference, attended initially by representatives of Gibson Dunn and later by representatives of Citi and members of Company management. Representatives of Gibson Dunn discussed with the Board, among other things, the Board’s fiduciary duties in connection with its consideration of a potential sale of the Company, and further discussed the evaluation of any potential conflicts of interest of each of the directors arising from any relationships with any of the potential bidders or otherwise. Following that discussion, Company management presented to the Board five-year management projections for the Company’s forecasted performance (the “Initial Projections”). The Board discussed, with Company management and its advisors, the process undertaken to prepare the Initial Projections and the assumptions that would be appropriate to use in projections for each of the Company’s business units. The Board directed management to update the Initial Projections to reflect the Board’s feedback and to present such updated projections for further analysis by the Board at a subsequent meeting. Following that discussion, the Board discussed the parties that had expressed interest in potentially pursuing an acquisition of the Company, including Parent, Party D, Party A, and Party B. Citi noted that, in addition to the foregoing parties, it had engaged, on behalf of the Company, in preliminary discussions with another potential strategic buyer, a pipe and accessory manufacturer, which we refer to as “Party E”. Representatives of Gibson Dunn and Citi also discussed with the Board potential transaction structures for an acquisition of the Company, including the timing and necessary regulatory approvals that would be required to consummate a transaction with Parent. After discussion, the Board directed Citi to communicate to representatives of each of Parent and Goldman that the valuation presented in Parent’s initial indication of interest was inadequate. The Board also directed Citi to continue to evaluate whether there were any other potential strategic buyers that would be financially able and willing to acquire the Company.

On December 31, 2020, Party A submitted to the Company a non-binding indication of interest to acquire all outstanding shares of Company Common Stock for between $17.50 and $20.00 per share in cash, to be financed with a combination of cash, equity and third-party debt financing. The indication of interest explained, among other things, that Party A’s proposed transaction would not be subject to any financing contingency and that the proposed transaction valuation was subject to certain assumptions regarding the Company’s outstanding liabilities. The letter outlined a summary of the areas where Party A would expect to focus its diligence efforts and noted that the proposal was subject to the completion of such diligence.

On January 4, 2021, Mr. Meyer contacted a representative of Party D and invited Party D to explore a potential transaction with the Company.

On January 4, 2021, Party B submitted to the Company a non-binding indication of interest to acquire all outstanding shares of Company Common Stock for $19.50 per share in cash, to be financed with a combination of third-party equity and debt. The indication of interest explained that execution of a definitive agreement between Party B and the Company would be subject to, among other things, completion of Party B’s diligence and execution of definitive debt financing commitments in favor of Party B. The proposal also stated that it was conditioned upon the Principal Stockholder delivering a written consent to approve the transaction in connection with the execution of the definitive transaction agreement.

On January 4, 2021, Party C notified Citi that it no longer had interest in a potential acquisition of the Company.

On January 5, 2021, the Board held a meeting via teleconference, attended by members of Company management and representatives of Gibson Dunn and representatives of Citi, to, among other things, discuss management’s updated five-year projections for the Company’s forecasted performance, and to receive a process update regarding the interest by third parties to acquire the Company and the indications of interest recently submitted by Party A and Party B and the Parent proposal. The Board reviewed management’s updated five-year projections for the Company’s forecasted performance, which reflected the feedback previously provided by the Board. Company management reviewed with the Board the key changes to the assumptions used in the projections as compared to the Initial Projections. The Board, along with management and the Company’s advisors, discussed and considered pricing, volume and other sensitivities that could impact the assumptions used

 

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in the projections and overall fair value of the Company. Representatives of Citi then provided an update regarding the status of discussions with the various parties that had expressed interest in acquiring the Company, and the Board and its advisors discussed the indications of interest recently submitted by Party A and Party B. Representatives of Citi also provided an update regarding the status of Parent’s due diligence process.

On January 8, 2021, the Company and Party B entered into a confidentiality agreement to facilitate the exchange of confidential information of the Company. The confidentiality agreement contained customary standstill restrictions and a provision known as a “don’t ask, don’t waive” provision, prohibiting Party B from requesting that the Company agree to waive or amend the standstill restrictions so as to allow Party B to make another bid during the standstill period. The confidentiality agreement also included a “fall-away” allowing Party B to make a confidential proposal to the Board regarding any of the matters covered by the standstill provision upon the Company’s entry into a definitive agreement that would, if consummated, result in a third party acquiring 50% or more of the consolidated assets of the Company and its subsidiaries or 50% or more of the Company’s outstanding voting securities.

On January 12, 2021, the Company and Parent entered into an amended and restated clean team confidentiality agreement to facilitate the exchange of highly confidential information on an outside counsel- and advisor-only basis.

On January 13, 2021, the Company and Party A entered into a confidentiality agreement to facilitate the exchange of confidential information of the Company. The confidentiality agreement contained customary standstill restrictions and a “don’t ask, don’t waive” provision with an exception allowing Party A to make a private inquiry to the Board requesting a waiver of the standstill provisions, as well as the same “fall-away” included in the confidentiality agreement with Party B described above. On the same day, representatives of Citi, on behalf of the Company, contacted Parent, Party A and Party B and requested that they each submit updated proposals by January 28, 2021.

On January 15, 2021, the Company and Party D entered into a confidentiality agreement to facilitate the exchange of confidential information of the Company. The confidentiality agreement contained a customary standstill provision and a “don’t ask, don’t” waive provision, as well as the same “fall-away” included in the confidentiality agreement with Party B described above.

On the same day, representatives of Citi notified Party D that other parties that had expressed interest in acquiring the Company were expected to submit revised proposals on January 28, 2021.

On January 18, 2021, the Board held a meeting via teleconference, attended by members of Company management and representatives of Gibson Dunn and representatives of Citi. Upon the Board’s request, representatives of Citi provided an update regarding the status of discussions with the various parties that had expressed interest in acquiring the Company and reminded the Board of the terms of the indications of interest that had been previously provided by each of Parent, Party A and Party B. Gibson Dunn summarized the typical transaction structures for the acquisition of a public company and discussed the necessary steps of each. Gibson Dunn also discussed the Board’s fiduciary duties in connection with certain potential transaction structures that were possible given the Principal Stockholder’s majority ownership of the Company. Representatives of Gibson Dunn also discussed with the Board its fiduciary duties in connection with potential conflicts of interest arising in connection with a transaction, including any potential conflicts resulting from past relationships between any of the bidders and any members of the Board or Company management, any current or former engagements of the Company’s advisors by any of the bidders or the Principal Stockholder and, with respect to the Principal Stockholder, the tax receivable agreement (the “Tax Receivable Agreement”) between the Company and LSF9 Stardust Holdings, L.P., which is an affiliate of the Principal Stockholder. The Board concluded that none of these issues gave rise to a material conflict of interest with respect to any director, advisor, or stockholder. The Board further determined that the Tax Receivable Agreement did not give rise to a material conflict of interest because, among other reasons, the amounts payable under the Tax Receivable Agreement were immaterial

 

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relative to the context of a sale of the Company and such payments, per the terms of the Tax Receivable Agreement, would not accelerate in connection with a sale of the Company and therefore would be immaterial to the Principal Stockholder’s consideration of the timing or execution of a potential sale of the Company.

On January 21, 2021, Mr. Meyer contacted a representative of Party D to inquire on the status of Party D’s proposal to acquire the Company.

On January 28, 2021, Party A delivered a revised indication of interest proposing to acquire all outstanding shares of Company Common Stock for between $18.50 and $20.00 per share in cash on substantially the same terms described in its December 31, 2020 indication of interest. The revised indication of interest described a number of Party A’s diligence workstreams that remained incomplete.

On the same day, Parent delivered a revised indication of interest proposing to acquire all outstanding shares of Company Common Stock for $22.50 per share in cash on substantially the same terms described in its December 22, 2020 indication of interest. The proposal was accompanied by a draft definitive merger agreement that contemplated a transaction structure whereby, promptly after execution of the definitive merger agreement, the Principal Stockholder would deliver an immediately effective Stockholder Written Consent approving the transaction, which consent would constitute the requisite stockholder approval from the Company’s stockholders. In this Information Statement we refer to this transaction structure as a “sign-and-consent” transaction. This structure would allow either the Company or Parent to terminate the merger agreement if the Stockholder Written Consent was not received by Parent before 9:00 a.m. New York City, New York time on the day following execution of the definitive merger agreement and would require the Company to pay a fee to Parent equal to a specified percentage of the aggregate merger consideration in connection with such termination. In addition, the draft definitive merger agreement included an “inside date” that would allow Parent to defer the closing of the transaction until a date to be specified and provided that signing of the definitive merger agreement would be conditioned on the simultaneous signing of a restrictive covenant agreement between Parent and the Principal Stockholder. The draft definitive merger agreement also included terms that would require Parent to use reasonable best efforts to obtain the requisite regulatory approvals, including agreeing to divest certain assets of Parent or the Company, as the antitrust authorities may require, subject to several exceptions, including the exception that Parent would not be required to take any action that would materially impair the economic benefits Parent and its affiliates expected to derive from the transaction. Parent’s revised indication of interest was also accompanied by a draft debt commitment letter regarding proposed incremental debt financing to be provided to Parent to fund a portion of the transaction consideration. Parent’s indication of interest requested that the Company grant Parent a fifteen-day exclusive negotiating period to allow Parent to complete its diligence.

On February 1, 2021, as instructed by the Company, representatives of Citi and members of Company management held a call with representatives of Party D to discuss the status of Party D’s proposal to acquire the Company. Thereafter Party D notified representatives of Citi that Party D was continuing to perform diligence on the Company and evaluating whether to submit an indication of interest, and that if Party D decided to submit an indication of interest, it would not do so later than February 8, 2021.

On the same day, the Board held a meeting via teleconference, attended by members of Company management and representatives of each of Gibson Dunn, Citi and Kirkland and Ellis LLP (“Kirkland”), antitrust counsel to the Company. The Board discussed, with Company management and its advisors, the price and other terms of each of Parent’s and Party A’s most-recent indication of interest, the ability of each party to consummate its proposed transaction and the impact of the necessary regulatory approvals, including approvals from antitrust authorities, that would be required. The Board noted that Party B had not submitted an updated indication of interest by the January 28, 2021 deadline and that Party D and Party A were still engaged in due diligence. Representatives of Kirkland and Gibson Dunn discussed with the Board the regulatory approval framework proposed by Parent, including the proposed exceptions to Parent’s obligations to obtain regulatory approvals and the lack of a reverse termination fee in the event regulatory approvals were not obtained. Following such discussions, the Board concluded that Parent’s proposed regulatory approval framework did not

 

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provide the Company with adequate closing certainty. The Board directed Citi to seek a higher purchase price from Parent and to inform Parent that its proposed regulatory approval framework did not provide the Company with sufficient closing certainty. The Board also directed Citi to inform Parent that the Board would not grant Parent the exclusive negotiating rights it had requested. The Board then engaged in further discussion regarding the Party A indication of interest and concluded that, although a transaction with Party A would likely involve low regulatory approval risk, any such advantages with respect to closing certainty were outweighed by the significantly higher valuation in Parent’s proposal. The Board therefore instructed Citi to notify Party A that its proposed valuation was inadequate.

On the same day and following the conclusion of the above-mentioned Board meeting, representatives of Citi, on behalf of the Company, informed representatives of Goldman that the Company would require a higher valuation than Parent had proposed and that Parent’s proposed regulatory approval framework did not provide the Company with adequate closing certainty.

On February 2, 2021, representatives of Goldman, on behalf of Parent, spoke with representatives of Citi and requested that the Company propose a valuation and a regulatory approval framework that would be acceptable to the Board.

On February 5, 2021, representatives from Party D informed representatives of Citi that Party D was unlikely to pursue an acquisition of the Company.

On February 9, 2021, the Board held a meeting via teleconference, attended by members of Company management and representatives of each of Gibson Dunn, Citi and Kirkland, to discuss Parent’s latest proposal. The Board reviewed and evaluated, with Company management and its advisors, various aspects of a potential transaction with Parent, including the appropriate price per share, taking into consideration data presented by representatives of Citi regarding the Company’s share price over time and various valuation assumptions, as well as the components of a regulatory approval framework that would provide the Company with sufficient closing certainty and reduce execution risk. After those discussions, the Board instructed Citi to propose to Parent a per share price of $24.50 and a regulatory approval framework pursuant to which Parent would be obligated (i) to use reasonable best efforts to obtain regulatory approvals, including agreeing to divest certain assets of Parent or the Company, as the antitrust authorities may require, subject only to the qualification that Parent will not be required to divest Parent’s or the Company’s assets that generated aggregate EBITDA for the 12 months ended December 31, 2020 of more than $80 million measured in accordance with the Merger Agreement, and (ii) to pay a reverse termination fee equal to 8% of the transaction’s equity value in the event the transaction did not close due to failure to obtain regulatory approvals. The Board also instructed Citi to propose to Parent a transaction structure that would permit the Company to terminate the merger agreement in order to accept an unsolicited superior offer from a third party for a specified period of time after signing of the merger agreement in exchange for the payment of a termination fee.

On the same day, representatives of Citi communicated these proposals on behalf of the Company, as directed by the Board, to representatives of Goldman. Parent indicated that the Company’s proposal of a bright-line $80 million EBITDA divestiture threshold would be acceptable, but that it would only be willing to pay a price of $23.75 per share and a reverse termination fee equal to $70 million.

On February 10, 2021, the Board held a meeting via teleconference, attended by members of Company management and representatives of Gibson Dunn and representatives of Citi, to discuss Parent’s counterproposal. After the Board consulted with Citi regarding the appropriate price per share, the amount of the reverse termination fee and other aspects of a potential transaction with Parent, the Board determined to propose to Parent a price per share of $24.00 and a reverse termination fee of $85 million, representing 5% of the transaction’s equity value. On the same day, Mr. Meyer and representatives of Citi communicated these proposals on behalf of the Company, as directed by the Board, to representatives of Goldman.

On February 11, 2021, representatives of Gibson Dunn delivered to Troutman Pepper Hamilton Sanders LLP (“Troutman”), counsel to Parent, a revised draft of the merger agreement consistent with the most recent

 

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terms proposed by the Company to Parent. The draft removed the “inside date” concept that would, if included, allow Parent to defer the closing of the transaction until a date to be specified. The draft merger agreement also included a transaction structure that would permit the Company to terminate the merger agreement in order to accept an unsolicited superior offer from other bidders for 30 days after signing of the merger agreement in exchange for the payment of a termination fee.

On February 12, 2021, representatives of Citi, as instructed by the Board, communicated to representatives of Party A that its latest proposal was unacceptable to the Company because the proposed price per share included in Party A’s indication of interest was inadequate.

On February 13, 2021, representatives of Troutman delivered to representatives of Gibson Dunn a revised draft of the merger agreement, which, among other things, reverted to the sign-and-consent transaction originally proposed by Parent and reintroduced the “inside date” concept. The revised draft provided that if the Company failed to deliver the Stockholder Written Consent by 9:00 a.m. New York City, New York time on the day following execution of the definitive merger agreement, Parent could terminate the merger agreement and the Company would be required to pay Parent a termination fee equal to 3.0% of the aggregate merger consideration.

From February 13, 2021 through February 19, 2021, the parties negotiated the final terms of the merger agreement, the Company’s disclosure letter relating to the merger agreement, the debt commitment letter relating to Parent’s financing of the transaction and the restrictive covenant agreement between Parent and the Principal Stockholder, among other ancillary documentation. The Company and its representatives continued to provide Parent and its representatives with due diligence information and conference calls during this period.

On the morning of February 19, 2021, the Board held a meeting via teleconference, attended by members of Company management and representatives of Gibson Dunn, Citi and Kirkland, to further consider the terms of Parent’s proposal. Representatives of Gibson Dunn again reviewed the fiduciary duties of the members of the Board. Representatives of Gibson Dunn also reviewed with the Board the terms and transaction structure contemplated by the Merger Agreement, including Parent’s insistence on a sign-and-consent transaction structure that would not allow the Board to negotiate superior offers from other bidders after delivery of the Stockholder Written Consent. The Board reviewed the material terms of the draft merger agreement. Following that discussion, representatives of Citi reviewed with the Board the outreach process that had been conducted to date to identify potential transactions available to the Company, provided a detailed presentation to the Board regarding the financial terms of the proposed transaction with Parent, which included among others a description of Citi’s valuation analysis, and discussed with the Board the information included in the presentation and other matters relating to the fairness of the Merger Consideration.

On the afternoon of February 19, 2021, the Board held a meeting via teleconference, attended by members of Company management and representatives of each of Gibson Dunn and Kirkland and later by representatives of Citi to receive an update on the status of negotiations with Parent. Representatives of Gibson Dunn confirmed that the material terms of the draft merger agreement did not vary from the terms reviewed by the Board earlier that day. Representatives of Citi then rendered an oral opinion to the Board, which was subsequently confirmed by delivery of a written opinion to the Board dated February 19, 2021, that, as of the date thereof and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi as set forth in the opinion, the Merger Consideration to be received by holders of Company Common Stock (other than certain shares as specified in such opinion) in connection with the proposed merger was fair, from a financial point of view, to such holders. After consideration and discussion of the terms and conditions of the Merger Agreement, Citi’s opinion, as described above, presentations by Company management, the advice of representatives of Gibson Dunn and of Citi concerning various aspects of the transaction and other factors, the Board unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were fair to and in the best interests of the Company and its stockholders generally, approved the form, terms and provision of the Merger Agreement, authorized the Company to enter into the Merger Agreement and ancillary agreements and to perform each of its obligations thereunder and recommended that the stockholders of the Company adopt the Merger Agreement.

 

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Following the Board meeting, the parties executed the Merger Agreement and finalized the disclosure letter and exchanged executed copies of the debt commitment letter, and Parent and the Principal Stockholder executed the restrictive covenant agreement. Following the execution of the Merger Agreement, the Principal Stockholder, holding approximately 52.7% of the outstanding shares of Company Common Stock, delivered the Stockholder Written Consent, dated February 19, 2021, adopting and approving the Merger Agreement and the transactions contemplated thereby, including the Merger, which was delivered to the Company and Parent promptly following the signing of the Merger Agreement, as contemplated by the Merger Agreement and the transactions contemplated thereby.

On the morning of February 22, 2021, prior to the opening of trading of the Company Common Stock on Nasdaq, the Company and Parent issued a joint press release announcing the execution of the Merger Agreement.

Recommendation of the Board of Directors and Reasons for Recommendation

Recommendation of the Board of Directors

At a meeting of the Board duly called and held on February 19, 2021, the Board unanimously (i) determined that the terms of the Merger Agreement and the other transactions contemplated thereby, including the Merger, are fair to and in the best interests of the Company and its stockholders generally, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger, (iii) resolved to recommend that the Company’s stockholders approve and adopt the Merger Agreement and (iv) approved, in accordance with Article VI of the Company Charter, the approval and adoption of the Merger Agreement by the Company’s stockholders by written consent without a meeting, without prior notice and without a vote in accordance with Section 228 of the DGCL.

Reasons for Recommendation

In evaluating the Merger Agreement and the Merger, the Board consulted with the Company’s senior management and the Board’s financial advisor and outside legal counsel and, in reaching its determination to adopt the resolutions approving and declaring advisable the Merger Agreement and the transactions contemplated thereby and recommending that the Merger Agreement be adopted by the stockholders of the Company, the Board relied upon and considered numerous factors, including the material factors set forth below (which are not intended to be exhaustive and are not presented in any order of relative importance or significance):

Process and Consideration of Potential Alternatives

 

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The belief of the Board, based on its knowledge of the Company’s long-term strategic goals and opportunities, industry trends, the competitive environment and performance under the Company’s standalone plan, including the potential impact of those factors on the trading price of Company Common Stock (which cannot be precisely quantified numerically), indications of interest regarding the value of the Company it had received from other parties, and discussions with the Company’s senior management and the Board’s financial advisor, that the value offered to Company stockholders pursuant to the Merger Agreement is more favorable to Company stockholders than the potential value that might reasonably be expected to result from remaining an independent company.

 

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The low likelihood that any potential acquiror would engage in a transaction with the Company with a value superior to those contained in the Merger Agreement, including in light of the other counterparties with which the Company had discussions prior to the Company’s entry into the Merger Agreement.

Financial Terms; Certainty of Value

 

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The belief that the Merger Consideration of $24.00 per share in cash of Company Common Stock represents fair value for shares of Company Common Stock, taking into account the Company’s

 

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current and historical financial condition, results of operations, business, the COVID-19 pandemic, competitive position and prospects, as well as the Company’s standalone plan in the event the Company were to remain an independent public company.

 

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The future prospects and risks associated with remaining an independent public company and the risks and uncertainties associated with the execution of the Company’s standalone plan.

 

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The belief that the Merger Consideration to be paid by Parent was the highest price per share of Company Common Stock that Parent was willing to pay, that the terms and conditions of the Merger Agreement were the most favorable to the Company and its stockholders to which Parent was willing to agree, and that continued efforts to obtain a higher price from Parent, or soliciting interest from unaffiliated third parties, would be unlikely to lead to a higher price from Parent or a more favorable transaction with an unaffiliated third party, and could lead to the loss of the proposed transaction with Parent.

 

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The opportunity for the Company’s stockholders to realize substantial value based on the receipt of the Merger Consideration representing a premium of approximately 14% to the closing price of $21.07 on February 18, 2021, the last full trading day prior to the Board’s meeting to consider whether to approve the Merger Agreement, and a 38.5% premium to the Company’s 90-day volume-weighted average share price on February 19, 2021.

 

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The fact that the Merger Consideration consists solely of cash, which provides certainty of value and liquidity to the Company’s unaffiliated stockholders and does not expose them to any future risks related to the business or the financial markets generally, as compared to a transaction in which stockholders receive equity or other securities, or as compared to remaining an independent, standalone company.

 

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The oral opinion of Citi, rendered to the Board on February 19, 2021, which was subsequently confirmed by delivery of a written opinion dated February 19, 2021, 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 Merger Consideration is fair, from a financial point of view, to the holders of Company Common Stock (other than certain shares as specified in the written opinion of the financial advisor to the Company)as further described below in the section entitled “Opinion of Financial Advisor to the Company” beginning on page 29 of this Information Statement. A copy of the Opinion of Financial Advisor to the Company is attached to this Information Statement as Annex C.

 

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The fact that appraisal rights will be available to the unaffiliated holders of Company Common Stock who properly exercise their rights under the DGCL, which would give these stockholders the ability to seek and be paid a judicially determined appraisal of the “fair value” of their shares of Company Common Stock if they do not wish to accept the Merger Consideration.

Prospects of the Company

 

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The Company’s current and historical business, financial condition, results of operations, competitive position, strategic options and prospects (including uncertainties in connection with the COVID-19 pandemic), as well as the Company’s standalone plan in the event the Company were to remain an independent public company, the risks and challenges associated with remaining an independent public company and the risks and uncertainties associated with the execution of the standalone plan, and the potential impact of those factors on the future trading price of Company Common Stock, including risks related to:

 

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the general business environment for, and impact of general economic conditions on, infrastructure and related construction activities, including a failure of the economy to sustain its recovery, a renewed decline in infrastructure and related construction activity and other

 

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conditions, which could lead to reduced revenues and gross margins, and negatively impact the Company’s results of operations;

 

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the competitive landscape, competing products such as plastics and raw material inputs such as scrap, the business, financial and execution risks and the Company’s relationships with customers, vendors and suppliers, including in respect of uncertainty being experienced by the Company and the infrastructure and related construction industry as a whole, and the potential impact of those factors on the trading price of shares of Company Common Stock and the Company’s ability to execute its standalone plan in the event the Company were to remain an independent public company;

 

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the additional costs and burdens involved with being a public company;

 

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the other risks and uncertainties identified in the Company’s filings with the SEC, including in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020; and

 

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the Board’s belief, after consideration of the factors described in this section, that the consummation of the transactions contemplated by the Merger Agreement represent the Company’s best reasonably available alternative for maximizing stockholder value.

Likelihood of Consummation

 

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The fact that Parent’s obligation to complete the transactions is not conditioned on Parent or Merger Sub obtaining financing.

 

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The support of the Principal Stockholder, which held approximately 52.7% of the outstanding shares of Company Common Stock as of February 19, 2021 and had agreed to deliver the Stockholder Written Consent adopting the Merger Agreement, which would result in the adoption of the Merger Agreement becoming effective promptly following execution of the Merger Agreement and no further approval of the stockholders of the Company being required to adopt the Merger Agreement.

 

•

The fact that the Merger Agreement requires Parent to take, or cause to be taken, all things necessary, property or advisable under antitrust laws to consummate the Merger, including among other actions agreeing divest assets of Parent and its affiliates or of the Company and its affiliates, subject to the qualification that Parent will not be required to divest Parent’s or the Company’s assets that generate aggregate EBITDA for the 12 months ended December 31, 2020 of more than $80 million measured in accordance with the Merger Agreement, and includes a commitment by Parent to not acquire any rights, assets, business, person or division thereof if such acquisition would reasonably be expected to materially increase the risk of not obtaining, or materially delay receipt of, any applicable clearance, consent, approval or waiver under the HSR Act with respect to the Merger Agreement, as more fully described in the section entitled “The Merger Agreement—Further Action; Efforts” beginning on page 57 of this Information Statement.

 

•

The fact that the Merger Agreement requires Parent pay the Company a reverse termination fee of $85 million under certain circumstances if the Merger Agreement is terminated due to the failure of the parties to obtain required approvals under antitrust laws prior to the Outside Date specified in the Merger Agreement or as a result of legal prohibitions arising under antitrust laws.

 

•

The fact that Parent has represented that the debt commitment in favor of Parent, together with cash on hand of Parent, will provide sufficient funds to consummate the transactions contemplated by the Merger Agreement, as described in “The Merger—Financing of the Merger” beginning on page 39 of this Information Statement.

 

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Terms of the Merger Agreement

 

•

The Board considered all of the terms and conditions of the Merger Agreement, including the representations, warranties, covenants and agreements of the parties, the conditions to closing, the form of the Merger Consideration and the termination rights, including:

 

•

that the terms of the Merger Agreement were the products of arm’s-length negotiations among sophisticated parties and their respective legal and financial advisors, as more fully described in “The Merger—Background of the Merger” beginning on page 18 of this Information Statement;

 

•

the limited number and nature of the conditions to Parent’s obligation to consummate the Merger;

 

•

the fact that the definition of “Material Adverse Effect” has a number of customary exceptions and is generally a very high standard applied by courts;

 

•

the likelihood that, subject to certain customary limitations, the Company will have sufficient operating flexibility to conduct its business in the ordinary course consistent with past practice during the pre-closing period;

 

•

the likelihood that the Outside Date under the Merger Agreement will allow for sufficient time to complete the Merger; and

 

•

that the remedies of specific performance and any other remedy to which the Company is entitled at law or in equity are available to the Company under the Merger Agreement for breaches of the Merger Agreement, as more fully described in the section entitled “The Merger Agreement—Specific Performance” beginning on page 68 of this Information Statement.

In addition to the factors above, the Board identified and considered a variety of risks and potentially negative factors concerning the Merger, including:

 

•

the possibility that the Merger might not be consummated, and the risks and costs to the Company in such event, including the diversion of management and employee attention and the potential disruptive effect on business and customer relationships, vendor relationships, stock price and ability to attract and retain key management personnel and employees;

 

•

the fact that under the terms of the Merger Agreement, following receipt of the requisite stockholder approval for the Merger, the Company is unable to terminate the Merger Agreement to enter into an Alternative Acquisition Agreement with a third party with respect to a Superior Proposal.

 

•

the fact that, as a condition to entering into the Merger Agreement, Parent required that the Merger Agreement include a provision permitting Parent to terminate the Merger Agreement if the Principal Stockholder failed to execute and deliver the Written Consent by the Stockholder Approval Deadline (as defined in “The Merger Agreement—Stockholder Written Consent”);

 

•

the $50,000,000 termination fee payable to Parent if the Merger Agreement is terminated due to certain circumstances, as described in “The Merger Agreement—Company-Paid Termination Fee”;

 

•

the fact that following completion of the Merger, the Company will no longer exist as an independent public company and that the Company’s existing stockholders will not be able to participate in any future earnings or growth of the Company, or in any future appreciation in value of shares of Company Common Stock;

 

•

the possibility that completion of the Merger might be delayed or subject to adverse conditions that may be imposed by governmental authorities that are not within the Company’s control that such regulatory approvals may not be obtained, that governmental authorities may require divestitures of the Company’s or Parent’s assets that generated aggregate EBITDA for the 12 months ended December 31, 2020 in excess of the $80 million divestiture threshold measured in accordance with the

 

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Merger Agreement, and the period of time the Company may be subject to the Merger Agreement without assurance that the Merger will be completed;

 

•

the fact that the Company’s obligations to cooperate with Parent’s efforts to obtain debt financing and to cooperate with Parent in seeking all approvals required under antitrust laws to consummate the Merger are significant;

 

•

the fact that the Merger Agreement prohibits the Company from taking a number of actions relating to the conduct of its business prior to the closing without the prior written consent of Parent, which may delay or prevent the Company from undertaking business opportunities that may arise during the pendency of the Merger, whether or not the Merger is completed;

 

•

the significant costs involved in connection with completing the Merger, the substantial management time and effort required to complete the Merger, and the related disruption to the Company’s operations;

 

•

the risks related to potential lawsuits that may be filed in connection with the Merger;

 

•

the interests that certain of the Company’s directors and executive officers may have with respect to the Merger in addition to their interests as the Company’s stockholders as described in “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 39 of this Information Statement; and

 

•

that any gain to be realized by the Company’s stockholders as a result of the Merger generally will be taxable to such stockholders for U.S. federal income tax purposes if they are not otherwise exempt from the payment of such taxes (as more fully described in “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 44 of this Information Statement).

The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive, but rather includes the principal material information, factors and analyses considered by the Board in reaching its conclusions and recommendation in relation to the Merger Agreement, the Merger and the other transactions contemplated thereby. The Board evaluated the various factors listed above in light of its knowledge of the business, financial condition and prospects of the Company, in consultation with the Company’s senior management and the Board’s financial advisor and outside legal counsel. The Board did not provide a specific assessment of, quantify or otherwise assign any relative weights to, the factors considered in determining its recommendation. Instead, the Board conducted an overall analysis of the factors and reasons described above and determined in its business judgment that, in the aggregate, the potential benefits of the Merger to the stockholders of the Company outweighed the risks or potential negative consequences. Individual members of the Board may have given different weight to different factors. In addition, in arriving at its recommendation, the Board was aware of the interests of certain officers and directors of the Company as described in “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 39 of this Information Statement.

Opinion of Financial Advisor to the Company

The Company retained Citi as its financial advisor in connection with the Merger. In connection with Citi’s engagement, the Company requested that Citi evaluate the fairness, from a financial point of view, to the holders of Company Common Stock (other than the holders of (i) the Canceled Shares, (ii) the Company Restricted Shares and (iii) the Dissenting Shares, in each case as defined in “Summary—Merger Consideration”) of the Merger Consideration to be received by such holders pursuant to the terms and subject to the conditions set forth in the Merger Agreement. On February 19, 2021, at a meeting of the Board held to evaluate the proposed Merger and at which the Merger Agreement was approved, Citi delivered to the Board an oral opinion, confirmed by delivery of a written opinion dated February 19, 2021, to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi as set forth in its written opinion, the Merger Consideration was fair, from a financial point of view, to the holders of Company Common Stock (other than the holders of (i) the Canceled Shares, (ii) the Company Restricted Shares and (iii) the Dissenting Shares, in each case as defined in “Summary—Merger Consideration”). The terms and conditions of the Merger are more fully set forth in the Merger Agreement.

 

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The full text of Citi’s written opinion, dated February 19, 2021, to the Company Board, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi in rendering its opinion, is attached as Annex C to this Information Statement and is incorporated herein by reference in its entirety. The summary of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided to the Board (in its capacity as such) in connection with its evaluation of the Merger and was limited to the fairness, from a financial point of view, as of the date of the opinion, to the holders of Company Common Stock (other than the holders of (i) the Cancelled Shares, (ii) the Company Restricted Shares and (iii) the Dissenting Shares) of the Merger Consideration. Citi’s opinion did not address any other aspects or implications of the Merger or the Merger Agreement. Citi’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger or otherwise.

In arriving at its opinion, Citi:

 

•

reviewed an execution version of the Merger Agreement, dated February 19, 2021;

 

•

held discussions with certain senior officers, directors and other representatives and advisors of the Company concerning the business, operations and prospects of the Company;

 

•

examined certain publicly available business and financial information relating to the Company as well as certain financial forecasts and other information and data relating to the Company which were provided to or discussed with Citi by the management of the Company;

 

•

reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things, current and historical market prices and trading volumes of the Company Common Stock, the historical and projected earnings and other operating data of the Company and the capitalization and financial condition of the Company;

 

•

considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the Merger;

 

•

analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citi considered relevant in evaluating those of the Company;

 

•

conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion.

The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the management of the Company that they were not aware of any relevant information that was omitted or that remained undisclosed to Citi. With respect to financial forecasts and other information and data relating to the Company provided to or otherwise reviewed by or discussed with Citi, Citi was advised by the management of the Company and Citi assumed, with the Company’s consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to, and were a reasonable basis upon which to evaluate, the future financial performance of the Company and the other matters covered thereby, including as to the impact of the COVID-19 novel coronavirus pandemic on the future financial performance of the Company directly, as well as the impact of such pandemic on the Company through its effects on general market and economic conditions. Citi expressed no view or opinion as to any financial forecasts and other information or data (or underlying assumptions on which any such financial forecasts and other information or data were based) provided to or otherwise reviewed by or discussed with Citi.

 

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Citi assumed, with the Company’s consent, that the Merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company or the Merger that would be in any way meaningful to Citi’s analysis. Representatives of the Company advised Citi, and Citi further assumed, that the final terms of the Merger Agreement would not vary materially from those set forth in the execution version reviewed by Citi. Citi did not make and was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent, accrued, derivative, off-balance sheet or otherwise) of the Company nor did Citi make any physical inspection of the properties or assets of the Company. Citi did not evaluate the solvency or fair value of the Company or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Citi’s opinion does not address any terms (other than the Merger Consideration to the extent expressly specified herein), aspects or implications of the Merger, including, without limitation, the form or structure of the Merger or any terms, aspects or implications of any agreement to be entered into in connection with or contemplated by the Merger or otherwise.

In connection with Citi’s engagement and at the direction of the Company, Citi held discussions with selected third parties to solicit indications of interest in the possible acquisition of the Company; Citi’s opinion did not address the underlying business decision of the Company to effect the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage. Citi did not express any view or opinion as to the potential impact on the Company or any other entity of any actual, pending or potential litigation, claims or governmental, regulatory or other proceedings enforcement, actions, consent decrees or other orders, audits or investigations.

Citi expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Merger Consideration. Citi did not express any view or opinion with respect to accounting, tax, regulatory, legal or similar matters, and Citi relied, with the Company’s consent, upon the assessments of representatives of the Company as to such matters. Citi expressed no view as to, and its opinion did not address, the prices at which Company Common Stock or any other securities will trade or otherwise be transferable at any time, including following the announcement of the Merger. Citi’s opinion was necessarily based upon information available to Citi, and financial, stock market and other conditions and circumstances existing, as of the date of its opinion. Although subsequent developments may affect Citi’s opinion, Citi has no obligation to update, revise or reaffirm its opinion. Citi’s opinion addressed only the fairness, from a financial point of view and as of the opinion’s date, of the per share of Company Common Stock Merger Consideration (to the extent expressly specified in such opinion), without regard to individual circumstances of holders of Company Common Stock that may distinguish such holders or held by such holders. As the Company was aware, the credit, financial and stock markets, the industries in which the Company operates, and the securities of the Company have experienced and may continue to experience volatility and Citi expressed no view or opinion as to any potential effects of such volatility on the Company or the Merger.

In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below is not a complete description of Citi’s opinion or the underlying analyses, or of the factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Citi arrived at its opinion based on the results of all analyses undertaken by it and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Citi believes that the analyses must be considered as a whole and that selecting portions of such analyses and factors or focusing on information presented in tabular format, without considering all

 

31

analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and Citi’s opinion.

In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of the Company. No company, business or transaction used in Citi’s analyses as a comparison is identical or directly comparable to the Company or the Merger. An evaluation of these analyses is not entirely mathematical; rather the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, businesses or transactions reviewed or the results of any particular analysis.

The estimates contained in Citi’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

Citi was not requested to, and it did not, recommend or determine the specific Merger Consideration payable in the Merger. The type and amount of Merger Consideration payable in the Merger was determined through negotiations between the Company and Parent, and the Company’s decision to enter into the Merger Agreement was solely that of the Company Board. Citi’s opinion was only one of many factors considered by the Company Board in its evaluation of the Merger and should not be viewed as determinative of the views of the Company Board or the management of the Company with respect to the Merger, Merger Consideration or any other aspect of the transactions contemplated by the Merger Agreement.

Financial Analyses

The following is a summary of the material financial analyses prepared and reviewed with the Company Board in connection with Citi’s opinion, dated February 19, 2021, to the Company Board. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Future results may be different from those described and such differences may be material. Financial data utilized for the Company in the financial analyses described below, to the extent based on internal financial forecasts and estimates of management of the Company, were based on certain financial forecasts and other information and data relating to the Company provided to or discussed with Citi by the management of the Company and as further described in the section entitled “—Unaudited Projected Financial Information of the Company” beginning on page 36 of this Information Statement. Citi performed its financial analyses using (i) historical and projected financial and operating results for the Company for the calendar year 2020 and (ii) projected financial and operating results for the Company for the calendar year 2021 through calendar year 2025 based on the Company forecasts, as defined and further described in the section entitled “—Unaudited Projected Financial Information of the Company” beginning on page 36 of this Information Statement. Approximate implied equity value per share reference ranges reflected in the summaries of the financial analyses described below were rounded to the nearest $0.05.

 

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Comparable Companies Analysis

Citi performed a comparable companies analysis, which is an analysis designed to estimate an implied value of a company through an analysis of the public valuation of similar publicly traded companies. Citi reviewed financial and stock market information of the Company and the comparable publicly traded companies described below, which are collectively referred to as the comparable companies. No publicly traded company is identical to the Company, but these companies were selected because, among other reasons, they possessed certain financial, operational or business characteristics that, in Citi’s view, were sufficiently comparable to those of the Company or otherwise relevant for purposes of comparison.

 

•

Pipe & Drainage Business:

 

•

Advanced Drainage Systems, Inc.

 

•

Mueller Water Products, Inc.

 

•

Northwest Pipe Company

 

•

Downstream Infrastructure:

 

•

Arcosa, Inc.

 

•

Eagle Materials Inc.

 

•

Summit Materials, Inc.

 

•

U.S. Concrete, Inc.

 

•

Other Building Products Manufacture:

 

•

Mohawk Industries, Inc.

 

•

Masonite International Corporation

 

•

Jeld-Wen Holding, Inc.

 

•

Owens Corning

 

•

Cornerstone Building Brands, Inc.

Citi reviewed, among other information, firm values of the comparable companies, calculated as fully diluted equity values (based on closing stock prices of the comparable companies on February 19, 2021, the last trading date prior to the announcement of the Merger) plus net debt and non-controlling interests, less investments in unconsolidated affiliates (as applicable) and other adjustments, as a multiple of calendar year 2021 estimated EBITDA. The observed multiples of firm value to calendar year 2021 estimated EBITDA for the Company and the comparable companies ranged from a low of 6.7x to a high of 16.7x, with such multiple for the Company being 9.3x. Based on its professional judgment and experience, and taking into consideration the observed multiples for the comparable companies, Citi then applied a selected range of multiples of firm value to calendar year 2021 estimated EBITDA of 8.4x to 9.4x (representing the median multiple of 8.4x to plus 1.0x ), to calendar year estimated 2021 adjusted EBITDA of the Company to calculate an implied equity value reference range for the Company and on a per share basis based on fully diluted shares outstanding. Financial data of the comparable companies were based on publicly available research analysts’ estimates and other publicly available information and calendarized to December year end when necessary. The calendar year 2021 estimated adjusted EBITDA of the Company of $306 million (after subtracting the Company’s stock based compensation (“SBC”)), and other business and financial information of the Company as well as certain financial forecasts and other information and data relating to the Company were provided to or discussed with Citi by the management of the Company.

 

33

The analysis indicated an implied firm value reference range for the Company of approximately $2,564 million to $2,870 million, from which, after taking into account, the Company’s fully diluted share count, an assumed net debt and financial leases position of approximately $1,048 million and based on the Company’s December 31, 2020 balance sheet as provided by management of the Company, the following approximate equity value per share of the Company Common Stock reference range was derived, as compared to the Merger Consideration to be received in the Merger.

 

Equity Value Per Share of Company Common Stock		Merger Consideration
$21.85 - $26.15		$24.00

Precedent Transactions Analysis

Citi performed a precedent transactions analysis, which is an analysis designed to estimate an implied value of a company through an analysis of the EBITDA multiples paid in acquisitions of similar companies and businesses. Citi reviewed, to the extent publicly available, financial information for selected precedent transactions in the building products industry announced between June 2005 and August 2019, which are collectively referred to as the precedent transactions.

The precedent transactions were chosen because they involved companies with financial, operational or business characteristics that, in Citi’s view, made them sufficiently comparable to the Company and/or the transactions contemplated by the Merger Agreement or otherwise relevant for purposes of comparison. For each of the precedent transactions, Citi calculated the firm value of each target as a multiple of the target’s last twelve months (or LTM) EBITDA as of the time of the announcement of the transaction. The observed multiples for the precedent transactions are set forth in the table below and ranged from 7.5x to 10.7x (with a median of 8.7x).

 

Announced		Target		Acquiror		Firm Value / LTM EBITDA
June 21, 2005		Mueller Water Products Inc.		Walter Industries Inc.		8.6x
December 24, 2014		Hanson Building Products business		Lone Star Fund IX		9.6x
April 18, 2016		USP Holdings Inc.		Forterra Building Products		8.7x
January 9, 2017		Anvil International business		One Equity Partners		7.5x
August 1, 2019		Infiltrator Water Technologies Ultimate Holdings, Inc.		Advanced Drainage Systems, Inc.		10.7x

Based on its professional judgment and experience, and taking into consideration the observed multiples for the precedent transactions, Citi then applied a selected range of firm value / LTM adjusted EBITDA multiples of 8.7x to 9.6x, (representing the range from the median multiple for the selected precedent transactions of 8.7x to the multiple for the acquisition of the Hanson Building Products business of 9.6x) to derive an implied equity value per share of the Company Common Stock. Business and financial information of the Company as well as certain financial forecasts and other information and data relating to the Company were provided to or discussed with Citi by the management of the Company.

Citi applied the 8.7x to 9.6x range of firm value / LTM adjusted EBITDA multiples to the Company’s LTM adjusted EBITDA for the calendar year 2020 of $270 million (after subtracting the SBC), which was provided to or discussed with Citi by the management of the Company, which indicated an implied firm value reference range for the Company of approximately $2,339 million to $2,595 million, from which, after taking into account the Company’s fully diluted share count, an assumed net debt and financial leases position of approximately $1,048 million, based on the Company’s December 31, 2020 balance sheet as provided by management of the Company, the following approximate implied equity value per share reference range for the Company was

 

34

derived, as compared to the Merger Consideration to be received in the Merger:

 

Equity Value Per Share of Company Common Stock Reference Range		Merger Consideration
$18.70 - $22.30		$24.00

Discounted Cash Flow Analysis

Citi performed a discounted cash flow analysis of the Company, which is an analysis designed to estimate an implied value of a company by calculating the present value of the estimated future unlevered after-tax cash flows of that company over the projection period and the terminal value of that company at the end of the projection period. Citi performed this analysis using a mid-year discounting convention, as described below.

Citi performed a discounted cash flow analysis of the Company in which Citi calculated the estimated present value (as of December 31, 2020) of the standalone unlevered after-tax free cash flows that the Company was forecasted to generate during the fiscal year 2021 through fiscal year 2025, and provided to or discussed with Citi by the management of the Company and as further described in the section entitled “—Unaudited Projected Financial Information of the Company” beginning on page 36 of this Information Statement. Based on its professional judgment and experience, Citi calculated terminal values for the Company at the end of the projection period by applying a selected range of perpetuity growth rates of 1.0% to 2.0% (which Citi derived by utilizing its professional judgment and experience and taking into consideration, among other factors, Company management’s views regarding future growth, as well as long-term growth expectations for the industry and trend in the overall economy generally) to the standalone unlevered after-tax fee cash flows of the Company in a mid-cycle terminal year as directed by the Company. Citi then discounted to present value (as of December 31, 2020) the standalone unlevered after-tax free cash flows and implied estimated terminal value using discount rates ranging from 9.7% to 11.00%, derived from a calculation of the weighted average cost of capital of the Company, which Citi performed utilizing the capital asset pricing model with inputs that Citi determined were relevant based on publicly available data and Citi’s professional judgment, including target capital structure, after-tax cost of debt, unlevered beta for the Company, tax rates, the equity market risk premium and risk-free rate. This analysis indicated an implied firm value reference range for the Company of approximately $2,373 million to $2,975 million, from which, after taking into account the Company’s fully diluted share count, an assumed net debt and financial leases position of approximately $1,048 million, based on the Company’s December 31, 2020 balance sheet as provided by management of the Company, the following approximate implied equity value per share of the Company Common Stock reference range for the Company was derived, as compared to the Merger Consideration to be received in the Merger:

 

Equity Value Per Share of Company Common Stock Reference Range		Merger Consideration
$19.15 - $27.60		$24.00

Other Information

Citi observed certain additional factors that were not considered part of Citi’s financial analysis with respect to its opinion but were noted for reference purposes for the Board, including the following:

 

•

historical trading prices of the Company Common Stock during the 52-week period ended February 19, 2021, which reflected prices of $3.55 to $22.16 per share of the Company Common Stock;

 

•

share price targets (as of various dates) for the Company Common Stock in research analyst reports prepared by seven equity analysts, which indicated low and high share price targets of $18.00 and $23.00 per share which, when discounted one year at a mid-point cost of equity of 14.9% indicated low and high share price targets of $15.65 and $20.00 per share;

 

•

implied premiums paid in selected transactions involving all-cash consideration announced between January 1, 2010 and December 31, 2020 with transaction values of greater than $1 billion involving

 

35

U.S. publicly traded companies (excluding financial institutions and real estate transactions), which indicated, after applying (i) to the closing price of the Company Common Stock of $21.04 per share on January 22, 2021 (the closing price of the Company Common Stock 30 days prior to February 19, 2021, the last day of trading prior to announcement of the Merger, a selected range of premiums of 28.9% to 48.9% (representing a range of 10% above and 10% below the 38.9% 4-week median premium in the selected transactions) and (ii) to the 52-week trading high for the Company Common Stock of $22.16 per share, a selected range of premiums of 5.5% to 25.5% (representing a range of 10% above and below the 15.5% 52 week median premium for the selected transactions), approximate implied per share equity value reference ranges for the Company of $27.10 to $31.35 per share and $23.40 to $27.80 per share, respectively.

Miscellaneous

The Company has agreed to pay Citi for its services in connection with the Merger an aggregate fee of approximately $25 million, $1.5 million of which became payable upon delivery of Citi’s opinion, and the remainder of which is contingent upon the consummation of the Merger. In addition, the Company agreed to reimburse Citi for certain expenses incurred by Citi in performing its services, and to indemnify Citi and related parties against certain liabilities arising out of Citi’s engagement.

Citi and its affiliates in the past have provided, and currently provide, services to the Company and LSF9 and its affiliates (other than the Company) unrelated to the Merger, for which services Citi and its affiliates have received and expect to receive compensation, including, without limitation, during the two year period prior to the date of Citi’s opinion, (a) for the Company: (i) having acted as a joint bookrunner for an equity offering and (ii) having provided or providing services including corporate portfolio management services, and (b) for LSF9 and its affiliates (other than the Company): (i) having acted as a financial advisor in connection with certain merger and acquisition transaction, (ii) having acted as a bookrunner, joint bookrunner, lead manager or lead arranger for certain debt and equity offerings, (iii) having acted or acting as a lender under certain credit facilities and (iv) having provided or providing services, including treasury and trade solutions services, markets and securities services, and corporate portfolio management services. Citi and its affiliates have not provided investment banking, commercial banking or other similar financial services to Parent during the past two years for which Citi and its affiliates received compensation. Citi and its affiliates in the future may provide such services to LSF9 or its affiliates or Parent or its affiliates, for which services Citi and its affiliates would expect to receive compensation. For the services described above for the Company, Citi and its affiliates received aggregate fees of approximately $1.6 million during the two-year period prior to the date of Citi’s opinion. For the services described above for LSF9, Citi and its affiliates received aggregate fees of approximately $9.9 million during the two-year period prior to the date of Citi’s opinion.

In the ordinary course of Citi’s business, Citi and its affiliates may actively trade or hold the securities of the Company or its affiliates for its own account or for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with the Company, SLF9 and Parent and their respective affiliates.

The Company selected Citi as a financial advisor in connection with the Merger based on Citi’s reputation, experience and familiarity with the Company and its business. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions and other purposes.

Unaudited Projected Financial Information of the Company

The Company does not, on a routine basis, publicly disclose long-term projections as to future financial performance due to, among other reasons, the unpredictability of the underlying assumptions and estimates.

 

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However, the Company’s senior management provided certain non-public, unaudited prospective financial information prepared by it to Parent in connection with Parent’s evaluation of potential transactions with the Company and to Citi in connection with Citi’s financial analyses. The projections provided to Citi are the financial forecasts discussed above. The financial forecasts included in this Information Statement have been prepared by, and are the responsibility of, the Company’s senior management.

The financial forecasts were not prepared with a view to public disclosure and are included in this Information Statement only because such information was made available to Parent and Citi as described above. The financial forecasts were not prepared with a view to compliance with generally accepted accounting principles as applied in the United States (which we refer to as “GAAP”), the published guidelines of the SEC regarding financial forecasts and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information included in this Information Statement has been prepared by, and is the responsibility of, the Company’s senior management, and is subjective in many respects. The financial forecasts were, in the view of the Company’s senior management, prepared on a reasonable basis, reflected the best available estimates and judgments at the time of preparation, and presented as of the time of preparation, to the best of senior management’s knowledge and belief, the expected course of action and the expected future financial performance of the Company on a standalone basis, subject to the assumptions and limitations described in this section. Furthermore, neither the Company’s independent auditors nor any other independent accountants have audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, assume no responsibility for, and express no opinion or other form of assurance on, such information or its achievability.

The financial forecasts are forward-looking statements. Although summaries of the financial forecasts are presented with numerical specificity, the financial forecasts reflect numerous assumptions and estimates as to future events made by the Company’s senior management, which they believe were reasonable at the time the financial forecasts were prepared, taking into account the relevant information available to management at such time. However, this information is not fact and should not be relied upon as being necessarily predictive of actual future results. Important factors may affect actual results and cause the financial forecasts not to be achieved. These factors include general economic conditions, accuracy of certain accounting assumptions, timing of business investments by the Company, changes in actual or projected cash flows, competitive pressures, changes in tax or other laws or regulations, and the other factors described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 16 of this Information Statement, the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the information referenced in the section entitled “Where You Can Find Additional Information” beginning on page 79 of this Information Statement.

Generally, the further out the period to which the financial forecasts relate, the less predictable and more unreliable the information becomes. In addition, the financial forecasts do not take into account any circumstances or events occurring after the date that the financial forecasts were prepared. The financial forecasts were prepared on a standalone basis without giving effect to the Merger, including the impact of negotiating or executing the Merger Agreement, the expenses that may be incurred in connection with consummating the Merger, including the expenses payable pursuant to the Merger Agreement, or the effect of any business or strategic decision or action that has been or will be taken as a result of the Merger Agreement. As a result, there can be no assurance that the financial forecasts will be realized, and actual results may be materially better or worse than those contained in the financial forecasts. The inclusion of this information in this Information Statement should not be regarded as an indication that the Company’s senior management, the Board, Citi, Parent, the Principal Stockholder or any other recipient of this information considered, or now considers, the financial forecasts to be material information of the Company, or necessarily predictive of actual future results, nor should it be construed as financial guidance, and it should not be relied upon as such. The summary of the financial forecasts is not included in this Information Statement in order to influence any stockholder to make

 

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any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to the shares of Company Common Stock.

The financial forecasts should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Company’s public filings with the SEC. The financial forecasts were reviewed by the Company’s senior management with, and considered by, the Board in connection with its evaluation and approval of the Merger and were relied upon by Citi for purposes of its financial analyses and opinion, as described more fully in the sections entitled “The Merger-Recommendation of the Board and Reasons for Recommendation” beginning on page 25 of this Information Statement, “The Merger-Recommendation of the Board of Directors and Reasons for Recommendation” beginning on page 25 of this Information Statement and “The Merger-Opinion of Financial advisor to the Company” beginning on page 29 of this Information Statement.

Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility to update or otherwise revise the financial forecasts to reflect circumstances existing after the date when we prepared the financial forecasts or to reflect the occurrence of future events or changes in general economic or industry conditions, even in the event that any of the assumptions underlying the financial forecasts are shown to be in error. We can give no assurance that, had our financial forecasts been prepared either as of the date of the Merger Agreement or as of the date of this Information Statement, similar estimates and assumptions would be used. Neither the Company nor any of its affiliates, directors, officers, advisors or other representatives has made or makes any representation to any of our stockholders or any other person regarding the ultimate performance of the Company compared to the information contained in our financial forecasts or that our financial forecasts will be achieved.

In light of the foregoing factors and the uncertainties inherent in the financial forecasts, stockholders are cautioned not to rely on the financial forecasts included in this Information Statement.

Certain of the measures included in the financial forecasts may be considered non-GAAP financial measures. These non-GAAP financial measures are useful to investors and management in understanding current profitability levels and liquidity that may serve as a basis for evaluating future performance and facilitating comparability of results. 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 non-GAAP financial measures used in the financial forecasts were relied upon by Citi for purposes of its financial analyses and its opinion. Reconciliations of non-GAAP financial measures were not provided to Citi for use in connection with its financial analysis and its fairness opinion.

The table below represents the financial forecasts prepared by senior management of the Company and provided to Citi:

 

($ in mm)		2021E				2022E				2023E				2024E				2025E
Revenue		$	1,658			$	1,738			$	1,804			$	1,860			$	1,919
Adj. EBITDA1		$	315			$	355			$	393			$	408			$	423
Adj. EBITDA (ex. SBC)2		$	306			$	346			$	384			$	399			$	414
Unlevered Free Cash Flow3		$	175			$	203			$	232			$	244			$	255

 

1

Adjusted EBITDA is calculated as the sum of net income (loss), before interest expense (including (gains) losses from extinguishment of debt), depreciation and amortization, income tax benefit (expense) and before (gains) losses on the sale of property, plant and equipment, impairment and exit charges and certain other non-recurring income and expenses, such as transaction costs, inventory step-up impacting margin, non-cash compensation expense and pro-rata share of Adjusted EBITDA from equity method investee, minus earnings from equity method investee.

 

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2	Adjusted EBITDA (ex. SBC) is calculated as Adjusted EBITDA minus non-cash compensation expense.

3	“Unlevered Free Cash Flow” is calculated as Adjusted EBITDA less tax expenses, adjusted for capital expenditures, less change in working capital.

Financing of the Merger

Parent anticipates that the total amount of funds necessary to consummate the Merger and the related transactions will be approximately $2.74 billion. Parent has represented to the Company that the aggregate proceeds contemplated by the Debt Commitment Letter or other debt financing as permitted by the Merger Agreement, when taken together with internally generated cash on hand of Parent, will be sufficient to enable Parent and Merger Sub to (A) satisfy all of their obligations required to be satisfied by them under the Merger Agreement at the closing, (B) consummate the transactions contemplated by the Merger Agreement, including the payment of the Merger Consideration and all other amounts required to be paid at the closing pursuant to the Merger Agreement, (C) repay, prepay or discharge (after giving effect to the Merger) the principal of, and interest on, outstanding indebtedness for borrowed money of the Company and its subsidiaries (other than any such indebtedness as is permitted to remain outstanding pursuant to the terms of such Debt Financing) and (D) pay all fees and expenses in connection therewith required to be paid by it at the closing.

Concurrently with the execution of the Merger Agreement, Parent entered into the Debt Commitment Letter with the Commitment Parties, pursuant to which and subject to the terms and conditions thereof, the financing sources identified therein agreed to provide commitments under certain term loan facilities on the terms set forth therein for an aggregate commitment of $2,390,000,000. The consummation of the Merger is not conditioned upon Parent’s or Merger Sub’s receipt of financing.

Interests of Directors and Executive Officers in the Merger

You should be aware that the directors and executive officers of the Company have certain interests in the Merger and the other transactions contemplated by the Merger Agreement that may be different from, or in addition to, the interests of Company stockholders generally. The members of the Board were aware of these interests in evaluating the Merger Agreement and the transactions contemplated thereby and in recommending that Company stockholders adopt the Merger Agreement. These interests may present such directors and executive officers with actual or potential conflicts of interest and these interests are described below.

For the numerical disclosure in this section of this Information Statement, we have assumed a closing date of March 8, 2021. This is an illustrative date used solely for purposes of this specified disclosure. As noted above, we expect the Merger to be completed in the fourth quarter of 2021, subject to satisfaction of the closing conditions set forth in the Merger Agreement. This description and the tables below further assume that the Company’s directors and executive officers acquire no additional shares of Company Common Stock and that the Company grants no new Company Stock Options, Company Restricted Shares, Company RSUs, Company PSUs or other equity awards prior to the closing of the Merger to the Company’s directors or executive officers.

Treatment of Director and Executive Officer Company Common Stock

As is the case for any stockholder of the Company, the Company’s directors and executive officers will each receive $24.00 in cash, without interest, for each share of Company Common Stock that they own at the Effective Time. The table below provides the number of shares of Company Common Stock held by each director and executive officer of the Company as of March 8, 2021 and the consideration to be received in exchange for such shares as a result of the Merger. For information regarding beneficial ownership of the Company Common Stock by each of the Company’s current directors, named executive officers and all directors

 

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and executive officers as a group, see the section entitled “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” beginning on page 70 of this Information Statement.

 

Name		Number of Shares of Company Common Stock				Total Expected Value of Company Common Stock ($)
Executive Officers
Karl H. Watson Jr.			1,048,835			$	25,172,040
Charlie Brown			178,108			$	4,274,592
Richard Hunter(1)			35,422			$	850,128
Vikrant Bhatia			95,295			$	2,287,080
Lori Browne			68,141			$	1,635,384
Directors
Richard “Chip” Cammerer, Jr.			—			$	—
Rafael Colorado			—			$	—
Maureen Harrell			—			$	—
Chad Lewis			—			$	—
Clint McDonnough			59,629			$	1,431,096
John McPherson			61,078			$	1,465,872
Chris Meyer			62,500			$	1,500,000
Jacques Sarrazin			16,339			$	392,136

 

(1)	Based on the latest information available to the Company. Mr. Hunter terminated employment with the Company on December 31, 2020.

Treatment of Company Equity Awards

At the Effective Time, each Company Stock Option granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the product of (x) the remainder, if positive, of the Merger Consideration minus the exercise price per share of such Company Stock Option, multiplied by (y) the number of shares of Company Common Stock subject to such Company Stock Option. If the exercise price per share of a Company Stock Option equals or exceeds the Merger Consideration, such Company Stock Option will be canceled at the Effective Time for no consideration.

At the Effective Time, each Company RSU granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the product of (a) the Merger Consideration, multiplied by (b) the number of shares of Company Common Stock subject to such vested Company RSU.

At the Effective Time, each Company PSU Award granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will immediately vest (based on the level of achievement of the applicable performance goals described below) and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the product of (a) the Merger Consideration, multiplied by (b) the number of shares of Company Common Stock subject to such vested Company PSU Award immediately prior to the Effective Time. The number of shares subject to outstanding Company PSU Awards that will vest will be determined based on the greater of (x) the level of actual performance achieved prior to the Effective Time as reasonably determined by a duly authorized committee of the Board using the information available through the latest practicable date prior to the Effective Time and otherwise consistent with past practice and (y) the target level of performance set forth in each applicable restricted stock unit award agreement.

 

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At the Effective Time, each Company Restricted Share granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the Merger Consideration.

The following table provides, with respect to each director and executive officer of the Company: (i) the number of shares of Company Common Stock underlying vested and unvested Company Stock Options, unvested Company RSUs, PSUs and Company Restricted Shares as of March 8, 2021; and (ii) the total expected value of such Company Stock Options, Company RSUs, PSUs and Company Restricted Shares based on the Merger Consideration of $24.00 per share. Directors affiliated with the Principal Stockholder (i.e., Mr. Meyer, Mr. Cammerer, Mr. Colorado, Ms. Harrell and Mr. Lewis) do not hold Company RSUs, PSUs, Company Restricted Shares or Company Stock Options. None of our officers or directors hold any Company Restricted Shares.

 

Name		Number of Shares Subject to Vested Company Stock Options				Total Expected Value of Vested Company Stock Options ($)(1)				Number of Shares Subject to Unvested Options				Total Expected Value of Unvested Options ($)(1)				Number of Shares Subject to Unvested Company RSUs				Total Expected Value of Unvested Company RSUs ($)(2)				Number of Shares Subject to Unvested Company PSUs				Total Expected Value of Unvested Company PSUs ($)(3)				Total Expected Value of Company Stock Options and Company RSUs and PSUs ($)(1)(2)(3)
Executive Officers
Karl H. Watson Jr.			—				—				—				—				250,310				6,007,440				384,634				9,231,216				15,238,656
Charlie Brown			513,547				9,611,526				131,568				2,599,784				129,802				3,115,248				51,692				1,240,608				16,567,166
Richard Hunter			—				—				—				—				—				—				—				—				—
Vikrant Bhatia			217,060				3,633,263				81,236				1,605,223				88,968				2,135,232				38,370				920,880				8,294,598
Lori Browne			188,741				2,886,513				89,184				1,762,276				89,505				2,148,120				36,150				867,600				7,664,509
Directors
Clint McDonnough			2,810				16,860				—				—				11,990				287,760				—				—				304,620
John McPherson			114,951				2,192,395				112,141				2,175,535				15,869				380,856				—				—				4,748,786
Jacques Sarrazin			2,810				16,860				—				—				11,990				287,760				—				—				304,620

 

(1)

The expected value of the Company Stock Options shown in these columns is equal to the product of (i) the number of shares of Company Common Stock subject to such Company Stock Option and (ii) the excess, if any, of the amount of the Merger Consideration over the exercise price per share of Company Common Stock subject to such Company Stock Option.

(2)	The expected value of Company RSUs shown in these columns is the product obtained by multiplying the corresponding number of shares subject to such Company RSU by the Merger Consideration.

(3)	The expected value of Company PSUs shown in these columns is the product obtained by multiplying the corresponding number of shares subject to such Company PSU (assuming maximum level of performance) by the Merger Consideration.

Long Term Incentive Plan

Certain of our directors and Ms. Browne participate in the LTIP. None of our other executive officers or any directors affiliated with our Principal Stockholder participate in the LTIP. Under the LTIP, participants were granted pool units entitling them, subject to the terms of the LTIP, to a cash payout upon a monetization event that results in our Principal Stockholder realizing an internal rate of return of at least 15%. The Merger is expected to result in such a monetization event. The value of a participant’s pool units will be determined as of the closing date of the Merger relative to that participant’s interest in the incentive pool, calculated as the number of outstanding pool units (whether or not vested) then held by the individual participant, divided by 1,000,000 (the total number of pool units authorized under the LTIP). The amount of proceeds received by the Principal Stockholder in connection with a monetization event that is to be credited to the incentive pool under the LTIP in

 

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connection with the Merger will be based upon the cumulative internal rate of return realized upon the Merger by the Principal Stockholder. Payments under the LTIP will be funded by the Principal Stockholder and will be made in cash (less applicable taxes and withholdings) on the first regularly scheduled payroll date that is at least five business days following the closing date of the Merger. The following table provides, with respect to Ms. Browne and the independent directors of the Company, the number of pool units granted under the LTIP and the total estimated expected value of the LTIP payments assuming a closing date for the Merger of March 8, 2021. Actual payments under the LTIP will differ depending on the actual closing date of the Merger and returns realized by our Principal Stockholder through such date.

 

Name		Number of LTIP Pool Units				Total Expected Value of LTIP Pool Units
Lori Browne			17,500			$	699,000
Clint McDonnough			1,000			$	40,000
John McPherson			1,000			$	40,000
Jacques Sarrazin			1,000			$	40,000

Employment Agreements

The Company is party to employment agreements with each of the Company’s executive officers. Each of these agreements provides for severance payable to the executive officer upon a qualifying termination of employment, which is a termination without “cause” or resignation for “good reason”, as defined in the applicable employment agreement, without regard to whether or not that termination follows or is otherwise in connection with a change in control.

Generally, in the event of a qualifying termination, each of the executive officers would be entitled under his or her employment agreement to an amount equal to one multiplied by the executive’s annual base salary payable over 12 months (24 months for Mr. Watson) following such termination. Each executive officer would also be entitled to a pro-rated annual bonus equal to the amount such executive officer would have earned under the Company’s annual incentive plan based on actual performance for the year in which the termination occurred, prorated through the date of termination, and the payment of any earned but unpaid annual bonus for the year preceding the termination. Each executive officer will also be entitled to payment or reimbursement for the cost of up to one year of COBRA continuation coverage for the executive and his or her covered dependents under the Company’s group health plans. The employment agreements do not provide these payments and benefits to the executive officers upon a change in control (i.e., on a “single trigger” basis). Instead, the employment agreements provide these payments and benefits upon a qualifying termination of employment, whether or not that termination follows or is otherwise in connection with a change in control. Payment of these amounts is subject to the execution and non-revocation of a waiver and general release of claims in a form provided by the Company and the executive officer’s compliance with the confidentiality, non-solicitation and non-disparagement restrictive covenants contained in the employment agreements.

Mr. Hunter terminated employment with the Company effective December 31, 2021, and would not be entitled to any further severance payments or benefits in connection with the Merger.

Annual Incentive Plan Bonus Banks

Pursuant to the terms of the Company’s 2020 Annual Incentive Plan (the “AIP”), AIP participants, including each of the executive officers, has accrued a bonus bank balance comprised of prior year bonus payments that exceeded the maximum bonus opportunity payable to the executive officer under the AIP. The accrued bonus bank balances roll forward from year-to-year and may generally be paid in future years when earned bonuses under the AIP are less than the maximum bonus opportunity or used to offset any future earned bonus amounts that would otherwise be negative. Under the terms of the AIP, accrued bonus bank balances are paid out to all participants, including our executive officers, immediately upon the occurrence of a change in control. The

 

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Merger will give rise to a change in control for this purpose. The below table sets forth the AIP bonus bank balances of each of the Company’s executive officers as of March 8, 2021.

 

Name		Bonus Bank Value ($)
Karl H. Watson Jr.		$	700,960
Charlie Brown		$	412,960
Vikrant Bhatia		$	298,340
Lori Browne		$	183,043

Golden Parachute Compensation

This section sets forth the information required by Item 402(t) of the SEC’s Regulation S-K regarding certain compensation that will or may be paid to the Company’s Named Executive Officers (as defined below) that is based on or otherwise relates to the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules. Such compensation consists of:

 

•

payments in respect of the any unvested Company Stock Options, and Company RSU awards, and Company PSU Awards, the treatment of which is described in the section entitled “The Merger—Interests of Directors and Executive Officers—Treatment of Company Equity Awards” beginning on page 40 of this Information Statement;

 

•

payments in connection with the LTIP awards, the treatment of which is described in the section entitled “The Merger—Interests of Directors and Executive Officers—LSF9 Concrete Holdings Ltd. Long Term Incentive Plan” beginning on page 41 of this Information Statement;

 

•

potential severance payments in the event of a Named Executive Officer’s qualifying termination of employment in connection with the Merger, as described in the section entitled “The Merger—Interests of Directors and Executive Officers—Employment Agreements” beginning on page 42 of this Information Statement; and

 

•

payments of accrued bonus bank balances under the Company’s AIP, as described in “The Merger—Interests of Directors and Executive Officers—Annual Incentive Plan Bonus Banks.”

Further details on these potential payments are provided in the footnotes to the table below and in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 39 of this Information Statement. The golden parachute compensation does not include amounts that are already vested as of March 8, 2021, the illustrative closing date for the Merger used solely for purposes of this table.

For purposes of quantifying these potential payments for the table below, it is assumed that the closing date was the latest practicable date of March 8, 2021, which, solely for purposes of this golden parachute compensation disclosure, is the assumed date of the closing of the Merger and to be used only for illustrative purposes. The below also assumes that each Named Executive Officer also experienced a qualifying termination of employment on March 8, 2021, and thus, was entitled to severance under the terms of his or her employment agreement.

The amounts shown are estimates based on multiple assumptions and do not reflect compensation actions that could occur after the date of this Information Statement and before the Effective Time. As a result, the actual amounts received by Karl H. Watson, Jr., Charlie Brown, Richard Hunter, Vikrant Bhatia and Lori Browne (each, a “Named Executive Officer”) may differ materially from the amounts shown in the following table. In addition, the amounts shown include payments and benefits to the Named Executive Officer following a qualifying termination under his employment agreement, even though the employment agreements (described in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger—Employment Agreements” beginning on page 42 of this Information Statement) do not provide payments and benefits upon a

 

43

change in control but instead provide payments and benefits upon any qualifying termination, whether or not such termination follows or is otherwise in connection with a change in control. March 8, 2021 is an illustrative date used solely for purposes of this golden parachute compensation disclosure and is not intended to indicate that the closing will or will not occur on that date. For purposes of this discussion, “single-trigger” refers to payments that are payable solely as a result of the closing and “double-trigger” refers to benefits that require a qualifying termination to have occurred in order to become payable.

 

Name		Cash(2)				Equity(3)				Perquisites/ Benefits(4)				Total
Karl H. Watson, Jr.		$	4,200,960			$	15,238,656			$	15,896			$	19,455,512
Charlie Brown		$	1,442,960			$	16,567,166			$	15,896			$	18,026,022
Vikrant Bhatia		$	1,298,340			$	8,294,598			$	15,536			$	9,608,834
Lori Browne		$	1,591,778			$	7,664,509			$	—			$	9,256,287
Richard Hunter(1)		$	—			$	—			$	—			$	—

 

(1)	Mr. Hunter’s employment with the Company terminated on December 31, 2020. He will not be entitled to any compensatory payments in connection with the Merger.

(2)

Except for Mr. Hunter, the amounts shown in this column reflect the sum of (A) “double-trigger” cash severance payments pursuant to the Named Executive Officer’s employment agreement in the event that his or her employment is terminated by the Company “without cause” or he resigns for “good reason” (in each case, as defined in such employment agreement) equal to two multiplied by base salary for Mr. Watson and one multiplied by base salary for Messrs. Brown, and Bhatia and Ms. Browne; (B) a “double-trigger” pro-rata annual bonus for 2020 assuming the Named Executive Officer’s employment were terminated by the Company “without cause” or he or she resigns for “good reason” on March 8, 2021 and based on the executive’s target annual bonus for 2020 for purposes of this table; (C) “single-trigger” cash payments to be made to each Named Executive Officer under the LTIP; and (D) the “single-trigger” payment of each Named Executive Officer’s accrued bonus bank under the AIP.

(3)

The amounts shown in this column reflect the sum of (1) the “single-trigger” cash payments made in respect of Company Stock Options held by each Named Executive Officer; (2) the “single-trigger” value of the cash payments made in respect of the Company RSUs held by each Named Executive Officer; and (3) the “single-trigger” value of the cash payments made in respect of the Company PSUs held by each Named Executive Officer (assuming maximum level of performance), in each case based upon the Merger Consideration of $24.00 per share of Company Common Stock.

(4)

The amounts shown in this column reflect the “double trigger” COBRA premium reimbursements in the event that each Named Executive Officer’s employment is terminated by the Company “without cause” or the executive resigns for “good reason” (in each case, as defined in such employment agreement). This amount is based on applicable COBRA rates currently in effect under the Company’s group health and dental plans for 2021.

Insurance and Indemnification of Directors and Executive Officers

See the section entitled “The Merger Agreement—Indemnification and Insurance” beginning on page 64 of this Information Statement, for a summary of the obligations of the surviving company with respect to insurance indemnification of directors and executive officers after the Effective Time.

Material U.S. Federal Income Tax Consequences of the Merger

General

The following summary discusses certain material U.S. federal income tax consequences of the Merger to holders of shares of Company Common Stock. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury regulations promulgated under the Code, administrative interpretations, judicial decisions and administrative rulings as in effect as of the date of this Information

 

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Statement, all of which are subject to change at any time, possibly with retroactive effect. This summary is for the general information of the holders of shares of Company Common Stock only and does not purport to be a complete analysis of all potential tax effects of the Merger. This summary is not binding on the Internal Revenue Service (the “IRS”) or a court and there can be no assurance that the tax consequences described in this summary will not be successfully challenged by the IRS. 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.

This discussion addresses only the consequences of the exchange of shares of Company Common Stock held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). It does not address all aspects of U.S. federal income taxation that may be important to a Company stockholder in light of the Company stockholder’s particular circumstances, or to a Company stockholder that is subject to special rules, such as:

 

•

a bank, insurance company, or other financial institution;

 

•

a tax-exempt organization;

 

•

a government or agency or instrumentality thereof;

 

•

a dealer or broker in securities or non-U.S. currencies;

 

•

a trader in securities who elects the mark-to-market method of accounting;

 

•

an individual subject to the alternative minimum tax provisions of the Code;

 

•

a mutual fund;

 

•

a U.S. expatriate or former citizen or long-term resident of the United States;

 

•

a foreign pension fund and its affiliates;

 

•

a person whose functional currency is not the U.S. dollar;

 

•

a former citizen or former long-term resident of the United States;

 

•

a real estate investment trust or regulated investment company;

 

•

an S corporation;

 

•

a controlled foreign corporation or a passive foreign investment company;

 

•

a Company stockholder that holds its shares of Company Common Stock through individual retirement or other tax-deferred accounts;

 

•

a Company stockholder that exercises appraisal rights;

 

•

a Company stockholder that holds shares of Company Common Stock as part of a hedge, appreciated financial position, straddle, or conversion or integrated transaction;

 

•

a Company stockholder that uses the mark-to-market method of accounting;

 

•

a Company stockholder that acquired shares of Company Common Stock pursuant to a non-taxable distribution of such stock under Section 305(a) of the Code;

 

•

a Company stockholder that acquired shares of Company Common Stock by gift, inheritance or other tax-free transaction;

 

•

a Company stockholder that acquired shares of Company Common Stock through the exercise of compensatory options or stock purchase plans or otherwise as compensation; or

 

•

a Company stockholder that is required to accelerate the recognition of any item of gross income with respect to the Merger as a result of such income being recognized on an applicable financial statement.

 

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For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares of Company 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, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state therein or the District of Columbia;

 

•

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

•

a trust (i) that is subject to the primary supervision of a court within the United States and all the substantial decisions of which are controlled by one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) or (ii) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

A “non-U.S. holder” is a beneficial owner of shares of Company Common Stock that is neither a U.S. holder nor a partnership (nor an entity treated as a partnership) for U.S. federal income tax purposes.

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Company Common Stock, the U.S. federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner, the activities of the partnership, and certain determinations made at the partner level. A partner in a partnership holding shares of Company Common Stock should consult its tax advisors.

This discussion of certain material U.S. federal income tax consequences of the Merger is not a complete description of all potential U.S. federal income tax consequences of the Merger and does not address any U.S. federal non-income tax consequences of the Merger (including, for example, under federal estate or gift tax laws). This discussion also does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any U.S. state or local or any non-U.S. tax consequences of the Merger or the potential application of the Medicare contribution tax on net investment income, any alternative minimum tax or of the Foreign Account Tax Compliance Act of 2010 (commonly referred to as “FATCA”). Each Company stockholder is strongly urged to consult its tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences to it of the Merger.

U.S. Federal Income Tax Consequences to U.S. Holders

The receipt of the Merger Consideration by U.S. holders pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder will recognize taxable capital gain or loss in an amount equal to the difference, if any, between (i) the Merger Consideration received in the Merger and (ii) such U.S. holder’s adjusted tax basis in its shares of Company Common Stock exchanged therefor. A U.S. holder’s adjusted tax basis in a particular share of Company Common Stock generally will equal the price the U.S. holder paid for such share of Company Common Stock.

If a U.S. holder’s holding period in the shares of Company Common Stock surrendered in the Merger is greater than one year as of the date of the Merger, the capital gain or loss generally will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, generally are subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized in connection with the Merger is subject to limitations under the Code. If a U.S. holder acquired different blocks of shares of Company Common Stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of shares of Company Common Stock that it holds.

 

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U.S. Federal Income Tax Consequences to Non-U.S. Holders

The receipt of the Merger Consideration by a non-U.S. holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

•

the gain, if any, recognized by the non-U.S. holder is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to the non-U.S. holder’s permanent establishment in the United States);

 

•

the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the Merger and certain other conditions are met; or

 

•

the non-U.S. holder owned, directly or under certain constructive ownership rules of the Code, more than 5% of the Company Common Stock at any time during the five-year period preceding the Merger, and the Company is or has been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code for U.S. federal income tax purposes at any time during the shorter of the five year period preceding the Merger or the period that the non-U.S. holder held the shares of Company Common Stock.

Gain described in the first bullet point above will be subject to tax on a net income basis in the same manner as if the non-U.S. holder were a U.S. holder (unless an applicable income tax treaty provides otherwise). Additionally, any gain described in the first bullet point above of a non-U.S. holder that is a corporation also may be subject to an additional “branch profits tax” at a 30% rate (or lower rate provided by an applicable income tax treaty). A non-U.S. holder described in the second bullet point above will be subject to tax at a rate of 30% (or a lower rate provided by an applicable income tax treaty) on any capital gain realized, which may be offset by U.S.-source capital losses recognized in the same taxable year. If the third bullet point above applies to a non-U.S. holder, capital gain recognized by such holder will be subject to tax at generally applicable U.S. federal income tax rates. We believe that we are not, and we do not anticipate becoming, a “United States real property holding corporation”. However, because the determination of whether we are a “United States real property holding corporation” depends on the fair market value of our United States real property interests relative to the fair market value of our global real property interests and other business assets, there can be no assurance that we do not currently constitute or will not become a “United States real property holding corporation”. Non-U.S. holders owning (actually or constructively) more than 5% of the Company Common Stock should consult their own tax advisors regarding the U.S. federal income tax consequences of the Merger.

Backup Withholding and Information Reporting for U.S. Holders and Non-U.S. Holders

Payments of the Merger Consideration made in exchange for shares of Company Common Stock pursuant to the Merger may be subject, under certain circumstances, to information reporting and backup withholding (at the current statutory rate). To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return an IRS Form W-9, certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding. To avoid backup withholding, a non-U.S. holder is required to establish an exemption, for example, by completing and providing to the applicable withholding agent the appropriate IRS Form W-8 for the non-U.S. holder, in accordance with the instructions thereto.

Backup withholding is not an additional tax. Any amount withheld under the backup withholding rules will be allowed as a refund or credit against the U.S. federal income tax liability of a Company stockholder, provided the required information is timely furnished to the IRS. The IRS may impose a penalty upon a Company stockholder that fails to provide the correct taxpayer identification number.

 

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Dividends

The Company has never declared or paid cash dividends on shares of Company Common Stock. Under the terms of the Merger Agreement, during the period from the date of the Merger Agreement until the Effective Time, the Company is prohibited from declaring, setting aside or paying, or setting a record date for or setting aside payment for, any dividends or other distribution on (whether in cash, stock property or otherwise) in respect of any of its capital stock, except for dividends by any of its subsidiaries.

Regulatory Approvals

The Company and Parent agreed to use their reasonable best efforts to take all actions and to cooperate to do all things necessary, proper or advisable under applicable law to consummate the Merger and the other transactions contemplated by the Merger Agreement at the earliest practicable date, including filing all forms, registrations and notices necessary to be filed with any governmental authority or third party to obtain any requisite consent, non-action or expiration of any applicable waiting period under the HSR Act or any other foreign antitrust law. Each party also agreed to take, or cause to be taken, all things necessary, property or advisable under antitrust laws to consummate the Merger, including with respect to Parent agreeing, among other things, to divest assets of Parent and its affiliates or of the Company and its affiliates, subject to the qualification that Parent will not be required to divest Parent’s or the Company’s assets that generate aggregate EBITDA for the 12 months ended December 31, 2020 of more than $80 million measured in accordance with in the Merger Agreement. Parent also agreed not acquire any rights, assets, business, person or division thereof if such acquisition would reasonably be expected to materially increase the risk of not obtaining, or materially delay receipt of, any applicable clearance, consent, approval or waiver under the HSR Act with respect to the Merger Agreement.

Each party, as applicable, agreed to prepare and file as promptly as practicable (and no later than five business days from the date of the Merger Agreement) a notification and report form pursuant to the HSR Act.

Under the HSR Act and related rules, certain transactions, including the Merger, may not be completed until any notifications have been given and information furnished to the Antitrust Division of the United Sates Department of Justice and the Federal Trade Commission and all statutory waiting period requirements have been satisfied or early termination has been granted by the applicable agencies. On February 26, 2021, both the Company and Parent filed their respective notification and report forms under the HSR Act.

Even after any applicable waiting period under the HSR Act expires or is terminated, the Federal Trade Commission and the Antitrust Division of the Department of Justice retain the authority to challenge the Merger on antitrust grounds before or after the Merger is completed. Likewise, at any time before or after the consummation of the Merger, a U.S. state or a foreign governmental authority with jurisdiction over the parties could take such action under antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Merger, to rescind the Merger or to seek divestiture of particular assets. Private parties also may seek to take legal action under the antitrust laws under certain circumstances. Neither the Company nor Parent can provide assurance that any action under antitrust laws will not result in the delay or abandonment of the Merger.

De-listing and De-registration of Company Common Stock

If the Merger is completed, shares of Company Common Stock will be de-listed from Nasdaq and de-registered under the Exchange Act. As such, following completion of the Merger and such de-registration, the Company will no longer file periodic and other reports with the SEC on account of Company Common Stock.

Anticipated Accounting Treatment of the Merger

The Company prepares its financial statements in accordance with GAAP. The Merger will be accounted for pursuant to purchase accounting in accordance with applicable accounting guidance.

 

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THE MERGER AGREEMENT

Below is a summary of the material provisions of the Merger Agreement, a copy of which is attached to this Information Statement as Annex A and which is incorporated by reference into this Information 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 encourage you to read the Merger Agreement in its entirety carefully, as the rights and obligations of the parties thereto are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this Information Statement. This section is not intended to provide you with factual information about the Company. Such information can be found elsewhere in this Information Statement and in the public filings the Company makes with the SEC, which may be obtained by following the instructions set forth in the section entitled “Where You Can Find Additional Information,” beginning on page 79 of this Information Statement.

Explanatory Note Regarding the Merger Agreement

The following summary of the Merger Agreement and the copy of the Merger Agreement attached to this Information Statement as Annex A are intended only to provide information regarding the terms of the Merger Agreement. The Merger Agreement and the related summary are not intended to be a source of factual, business or operational information about the Company, Parent or Merger Sub, and the following summary of the Merger Agreement and the copy thereof included as Annex A are not intended to modify or supplement any factual disclosure about the Company in any documents the Company has or will publicly file with the SEC. The Merger Agreement contains representations and warranties by, and covenants of, the Company, Parent and Merger Sub that were made only for purposes of the Merger Agreement and as of specified dates. The representations, warranties and covenants in the Merger Agreement were made solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts and certain information of the Company filed with the SEC prior to the date of the Merger Agreement, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants contained in the Merger Agreement may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Until the Effective Time, stockholders are not third party beneficiaries under the Merger Agreement (and after the Effective Time, stockholders will be third party beneficiaries under the Merger Agreement solely to the extent necessary to receive the Merger Consideration due to such persons under the Merger Agreement).

The Merger

Subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub, a wholly-owned subsidiary of Parent, will merge with and into the Company. Following the Merger, the separate existence of Merger Sub will cease, and the Company will continue as the Surviving Corporation in the Merger and a wholly-owned subsidiary of Parent.

Merger Consideration

Upon completion of the Merger, each issued and outstanding share of Company Common Stock (except for Canceled Shares, Company Restricted Shares and Dissenting Shares, which shall be treated as set forth in the Merger Agreement) will automatically be canceled and will cease to exist and will be converted into the right to receive the Merger Consideration. All shares of Company Common Stock so converted will cease to have any rights with respect to such Company Common Stock, except for the right to receive the Merger Consideration.

 

49

Treatment of the Company’s Equity Awards

At the Effective Time, each Company Stock Option granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the product of (x) the remainder, if positive, of the Merger Consideration minus the exercise price per share of such Company Stock Option, multiplied by (y) the number of shares of Company Common Stock subject to such Company Stock Option. If the exercise price per share of a Company Stock Option equals or exceeds the Merger Consideration, such Company Stock Option will be canceled at the Effective Time for no consideration.

At the Effective Time, each Company RSU granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the product of (a) the Merger Consideration, multiplied by (b) the number of shares of Company Common Stock subject to such vested Company RSU.

At the Effective Time, each Company PSU Award granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will immediately vest (based on the level of achievement of the applicable performance goals described below) and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the product of (a) the Merger Consideration, multiplied by (b) the number of shares of Company Common Stock subject to such vested Company PSU Award immediately prior to the Effective Time. The number of shares subject to outstanding Company PSU Awards that will vest will be determined based on the greater of (x) the level of actual performance achieved prior to the Effective Time as reasonably determined by a duly authorized committee of the Board using the information available through the latest practicable date prior to the Effective Time and otherwise consistent with past practice and (y) the target level of performance set forth in each applicable restricted stock unit award agreement.

At the Effective Time, each Company Restricted Share granted under the Company Stock Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholding) equal to the Merger Consideration.

Certificate of Incorporation; Bylaws; Directors and Officers

At the Effective Time, the Company Charter and Company Bylaws will be amended and restated in their entirety to be in the form of the exhibits to the Merger Agreement, and as so amended and restated, they will be the certificate of incorporation and bylaws of the Surviving Corporation until subsequently amended in accordance with their terms. The name of the Surviving Corporation will be Forterra, Inc.

The directors of Merger Sub immediately prior to the Effective Time will be the initial directors of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time will be the initial officers of the Surviving Corporation. The initial directors and officers will hold office until the earlier of their resignation or removal or until their successors are duly elected and qualified in accordance with Delaware law.

Closing and Effective Time of the Merger

The closing of the Merger will occur at 10:00 a.m. Eastern time on the second business day after the satisfaction or, to the extent permitted, waiver of all of the conditions described under “—Conditions to Consummation of the Merger” unless another time, date or place is agreed to in writing by Parent and the Company. Parent will not be obligated to consummate the closing of the Merger prior to April 20, 2021. The closing may occur remotely via electronic exchange of required closing documentation in lieu of an in-person closing. At the closing of the Merger, Parent and the Company will cause a certificate of merger to be executed and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and will make all other filings or recordings required under the DGCL.

 

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The Merger will become effective when the certificate of merger has been filed with the Secretary of State of the State of Delaware, or at such other date or time as Parent and the Company agree in writing and specify in the certificate of merger.

Payment Procedures

Merger Sub will appoint the Company’s transfer agent to act as the paying agent for the payment and delivery of the Merger Consideration to stockholders of the Company, and Parent will deposit (or cause to be deposited) with the paying agent cash in an amount sufficient to pay the Merger Consideration payable to such holders.

Promptly after the Effective Time (but no later than two business days thereafter), the Surviving Corporation will cause the paying agent to mail to each holder of record of shares of Company Common Stock that were outstanding and represented by one or more certificates immediately prior to the Effective Time a letter of transmittal and instructions for use in effecting the surrender of such holder’s shares of Company Common Stock in exchange for the Merger Consideration. Promptly after the Effective Time (but no later than two business days thereafter), the paying agent will issue and deliver to each holder of uncertificated shares of Company Common Stock that were outstanding and represented by book entry (i.e., holders whose shares are held in book-entry form, including those held in street name) immediately prior to the Effective Time a check or wire transfer for the amount of cash that such holder is entitled to receive in accordance with the terms of the Merger Agreement in respect of such uncertificated shares of Company Common Stock, without such holder being required to deliver a certificate or an executed letter of transmittal to the paying agent, and such uncertificated shares of Company Common Stock will then be canceled.

If payment of the Merger Consideration is to be made to a person other than the person in whose name any share of Company Common Stock represented by any surrendered certificate or book-entry share of Company Common Stock is registered, it will be a condition of payment that such certificate so surrendered will be properly endorsed or will be otherwise in proper form for transfer or such book-entry share of common stock will be properly transferred and that the person requesting such payment will have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the share of Company Common Stock represented by such certificate or book-entry share of Company Common Stock surrendered or will have established to the satisfaction of Parent that such tax either has been paid or is not applicable.

The Surviving Corporation will pay through its payroll the amounts due in accordance with the treatment of Company RSUs, Company PSUs, Company Restricted Shares and Company Options no later than the later of (i) the next scheduled payroll payment date following the Effective Time and (ii) three business days following the Effective Time; provided that with respect to any Company RSU Award or Company PSU Award that constitutes “deferred compensation” subject to Section 409A of the Code, settlement of such award shall be made on the earliest permissible date that such delivery would not trigger a tax or penalty under Section 409A of the Code.

Dissenting Shares

Holders of shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time may exercise appraisal rights available under Section 262, which is included as Annex D to this Information Statement. Dissenting Shares will not be converted into the right to receive the Merger Consideration (discussed above), unless and until such holder has failed to perfect, or has effectively withdrawn or lost, such holder’s right to appraisal under the DGCL, and will instead be treated in accordance with Section 262. If any such holder fails to perfect or withdraws or loses any such right to appraisal, each such share of Company Common Stock of such holder will thereupon be converted into and become exchangeable only for the right to receive, as of the later of the Effective Time and the time that such right to appraisal has been

 

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irrevocably lost, withdrawn or expired, the Merger Consideration in accordance with the terms of the Merger Agreement.

The Company will serve prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company Common Stock, attempted withdrawals of such notices or demands and any other instruments received by the Company relating to rights of appraisal (including providing Parent with copies of all notices and demands), and Parent will have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company will not, without the prior consent of Parent, make any payment with respect to, or compromise or settle, any such demands or waive any failure to timely deliver a written demand for appraisal or otherwise comply with the provisions under Section 262.

Representations and Warranties; Material Adverse Effect

The Merger Agreement contains customary representations and warranties of Parent, Merger Sub and the Company, including representations and warranties relating to, among other things:

 

•

organization, good standing and similar company matters;

 

•

due authorization, execution, delivery and enforceability of the Merger Agreement;

 

•

absence of conflicts with the parties’ governing documents, applicable laws and contracts;

 

•

accuracy of information supplied by each of Parent and the Company in connection with the Information Statement; and

 

•

absence of brokers’, investment bankers’ and financial advisors’ fees or commissions.

In addition, the Merger Agreement contains the following customary representations and warranties of the Company relating to, among other things:

 

•

ownership of the Company’s subsidiaries;

 

•

capitalization;

 

•

the Company’s SEC reports and financial statements;

 

•

absence of undisclosed liabilities;

 

•

the conduct of the business;

 

•

absence of certain changes or events;

 

•

legal proceedings;

 

•

compliance with laws;

 

•

benefit plans;

 

•

labor matters;

 

•

environmental matters;

 

•

taxes;

 

•

contracts;

 

•

insurance;

 

•

properties;

 

•

intellectual property and data privacy;

 

•

inapplicability of certain takeover laws;

 

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•

affiliate transactions;

 

•

the receipt of a fairness opinion from Citi; and

 

•

compliance with anti-corruption laws.

The Merger Agreement also contains the following customary representations and warranties of Parent and Merger Sub relating to, among other things:

 

•

the absence of certain litigation;

 

•

the sufficiency of funds necessary to consummate the Merger;

 

•

the formation, ownership and operations of Merger Sub;

 

•

absence of ownership of Company Common Stock;

 

•

the vote or consent required from Parent’s stockholders to approve the Merger Agreement;

 

•

solvency of Parent, Merger Sub, the Surviving Corporation and its subsidiaries upon consummation of the Merger; and

 

•

the Investment Canada Act (Canada) and the Competition Act (Canada).

Certain of the representations and warranties in the Merger Agreement are qualified as to “materiality” or “Material Adverse Effect”. The Merger Agreement provides that a Material Adverse Effect means any event, change, circumstance, occurrence or effect that has had or would reasonably be expected to have a material adverse effect on the business, assets, properties, liabilities, financial condition or results of operations of the Company and its subsidiaries, taken as a whole; provided, however, that no such effect will constitute a Material Adverse Effect to the extent that such effect arises out of, is attributable to or results from:

 

1.

changes in general economic or business conditions or in the financial, debt, banking, capital, credit or securities markets, or in interest or exchange rates, in each case, in the United States or elsewhere in the world;

 

2.

general changes or developments in any of the primary industries in which the Company or its subsidiaries operate;

 

3.

actions required under the Merger Agreement to obtain any approval or authorization under applicable antitrust or competition laws for the consummation of the Merger or any other transaction contemplated hereby;

 

4.

(x) changes after the date of the Merger Agreement in any applicable laws (excluding any COVID-19 measures, which are subject to clause 9 below) or (y) changes after the date of the Merger Agreement in GAAP or applicable accounting regulations, or principles or interpretations thereof;

 

5.

any change in the price or trading volume of the Company’s stock, in and of itself (provided, that the facts or occurrences giving rise to or contributing to such change in price or trading volume that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect);

 

6.

any failure by the Company to meet internal or published projections, forecasts or revenue or earnings predictions, in and of itself (provided, that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect);

 

7.

geopolitical conditions or any outbreak, continuation or escalation of any military conflict, declared or undeclared war, armed hostilities, or acts of foreign or domestic terrorism (including cyber-terrorism);

 

8.

natural or manmade disasters, hurricanes, floods, tornados, tsunamis, earthquakes or other weather conditions or other acts of God;

 

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9.

any epidemic, pandemic or disease outbreak (including COVID-19), or any law issued by a governmental entity, the Centers for Disease Control and Prevention, the World Health Organization or industry group providing for COVID-19 measures, quarantines, “shelter-in-place” or “stay at home” orders, workforce reductions, social distancing, shut downs, closures, sequesters or other restrictions relating thereto or any change in such law or interpretation thereof following the date of the Merger Agreement or worsening of such conditions;

 

10.

any national or international political or social conditions, including civil unrest, protests, public demonstrations or the response of any governmental entity thereto or any escalation or worsening thereof;

 

11.

the announcement of the Merger Agreement and the transactions contemplated hereby, including the initiation of stockholder litigation with respect to the Merger Agreement and any termination of, reduction in or similar negative impact on relationships with any customers, suppliers, distributors, partners or employees of the Company or any of its subsidiaries due to the announcement of the Merger Agreement or the identity of the parties to the Merger Agreement, or the performance of the Merger Agreement and the transactions contemplated thereby, including compliance with the covenants set forth therein (provided, that the effects referred to in this clause (11) will not impact the Company’s representations as to no conflicts, consents and approvals);

 

12.

any actions, determinations, terms or conditions taken, not taken, made, set or imposed by any lessor in accordance with the terms of the Sale Leaseback Agreements (as defined in the Merger Agreement) in response to any actions taken by the Company or any of its subsidiaries solely to comply with the Company’s obligations under certain of the covenants as more fully described in the section entitled “—Further Action; Efforts” and to the extent such actions are expressly required by such covenants; or

 

13.

any actions taken or omitted to be taken at Parent’s express written direction (except to the extent the Company was prohibited from taking such action pursuant to the Company’s covenants under the Merger Agreement with respect to conduct of business and requested Parent’s consent to take such action).

Any such effect referred to in clauses (1), (2), (4), (7), (8) and (10) above may constitute, and will be taken into account in determining the occurrence of, a Material Adverse Effect to the extent the impact of such effect is disproportionately adverse to the Company and its subsidiaries, taken as a whole, relative to other companies operating in the industries in which the Company and its subsidiaries operate (provided, that in such event, only the incremental disproportionate impact will be taken into account).

Conduct of Business by the Company Pending the Merger

The Company agrees that prior to the Effective Time, except (i) as expressly required by the Merger Agreement, (ii) as disclosed in the Company Disclosure Letter (as defined in the Merger Agreement), (iii) as required by applicable law (including COVID-19 measures and similar laws) or (iv) as Parent otherwise consents in writing (e-mail by an officer of Parent being sufficient) (which consent will not be unreasonably withheld, conditioned or delayed), the Company will, and will cause each of its subsidiaries to, use commercially reasonable efforts to conduct its business in the ordinary course of business consistent with past practice and use commercially reasonable efforts to preserve intact its businesses.

Further, the Company agrees that until the Effective Time, it will not and will cause each of its subsidiaries not to (except (i) as expressly required by the Merger Agreement, (ii) disclosed in the Company Disclosure Letter, (iii) required by applicable law (including COVID-19 measures and similar laws) or (iv) as Parent consents in writing (e-mail by an officer of Parent being sufficient) (which consent will not be unreasonably withheld, conditioned or delayed)):

 

•

amend or otherwise change its governing instruments (other than amendments to the governing documents of any wholly-owned subsidiary of the Company that would not prevent, materially delay or materially impair the Merger or the other transactions contemplated by the Merger Agreement);

 

54

•

issue, deliver, sell, encumber, pledge, dispose of or encumber any shares of capital stock or other equity securities or voting interests, or grant any person any right to acquire any shares of its capital stock or other equity securities or voting interests, except (i) pursuant to the vesting or settlement of Company RSUs or Company Stock Options outstanding as of the date of the Merger Agreement as set forth in the Company Disclosure Letter or (ii) grants to new employees of Company RSU Awards (as defined in the Merger Agreement) (and the issuance of shares pursuant thereto) and annual grants of Company RSU Awards (and the issuance of shares pursuant thereto), in each case with respect to clause (ii) made in the ordinary course of business consistent with past practice covering no more than 500,000 shares of capital stock of the Company in the aggregate;

 

•

declare, set aside, make or pay, or set a record date for or set aside payment for, any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for any dividend or distribution by a Company subsidiary to the Company or to other subsidiaries), provided that neither this covenant nor any other provision of the Merger Agreement will prohibit the Company or its subsidiaries from, with or without the consent of Parent, making payments to LSF9 Stardust Holdings, L.P. or its successors and assigns pursuant to the terms of the Tax Receivable Agreement;

 

•

adjust, split, combine, redeem, repurchase or otherwise acquire any shares of capital stock of the Company (except in connection with the cashless exercises, withholding of taxes or similar transactions pursuant to the vesting or settlement of Company equity awards outstanding as of the date of the Merger Agreement or permitted to be granted thereafter), or reclassify, combine, split, subdivide or otherwise amend the terms of its capital stock;

 

•

(i) acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any business, division, corporation, partnership, or other business organization or division thereof, in each case, in excess of $10,000,000 individually or $25,000,000 in the aggregate, other than certain acquisitions as set forth in the Company Disclosure Letter and purchases of inventory and other assets in the ordinary course of business or pursuant to existing contracts; or (ii) sell, assign, transfer, convey, license or otherwise dispose of (whether by merger, consolidation or acquisition of stock or assets or otherwise) any business, division, corporation, partnership, or other business organization or division thereof, other than (a) as set forth in the Company Disclosure Letter and (2) sales or dispositions of inventory or other assets (other than intellectual property) in the ordinary course of business or pursuant to obligations under contracts existing as of the date of the Merger Agreement;

 

•

(i) sell, assign, transfer, license, abandon, allow to lapse or expire, otherwise dispose of or grant any material rights in any owned intellectual property (other than non-exclusive licenses granted to third persons in the ordinary course of business consistent with past practice or with respect to immaterial or obsolete owned intellectual property) or (ii) disclose any material trade secret of the Company or any of its subsidiaries to any other person (other than in the ordinary course of business to a person bound by sufficient written confidentiality obligations);

 

•

except as permitted in the Merger Agreement, make any material new capital expenditures (including any leases of capital assets) which are, in the aggregate, in excess of (i) $70,000,000 for the fiscal year ended December 31, 2021 or (ii) $25,000,000 (plus any amounts that were unutilized as of December 31, 2021 pursuant to clause (i) for the period beginning on January 1, 2022 and ending on the closing date);

 

•

(i) make any loans, advances or capital contributions to, or investments in, any other person (other than a subsidiary of the Company) (other than as would be permitted under the Merger Agreement), (ii) incur, guarantee or become liable for any indebtedness for borrowed money or any debt securities or (iii) assume, guarantee, endorse or otherwise become liable or responsible for the indebtedness for borrowed money, debt securities or other obligations of another person (other than a guaranty by the Company on behalf of its subsidiaries), in each case, other than (a) working capital facilities, capital lease obligations, purchase money debt and letter of credit, bank guaranty and similar facilities incurred

 

55

in the ordinary course of business or (b) any indebtedness under the Company’s Credit Agreements (as defined in the Merger Agreement), provided, that the outstanding balance of the Company’s revolving credit facility cannot exceed (1) $75,000,000 as of June 30, 2021, (2) $25,000,000 as of September 30, 2021, (3) $0 as of December 31, 2021 and (4) $50,000,000 as of March 31, 2022;

 

•

except to the extent required by applicable law (including Section 409A of the Code) or an existing Company benefit plan as of the date of the Merger Agreement or as set forth in the Company Disclosure Letter, (i) increase or grant any increase in the compensation or benefits of any current or former director, executive officer, employee, or independent contractor of the Company, other than (a) increases in base salary in the ordinary course of business consistent with past practice for employees with annual base salaries below $300,000 or (b) annual increases in base salary or cash bonus targets in the ordinary course of business consistent with past practice, (ii) amend or adopt any Company benefit plan (other than annual renewals in the ordinary course of business or any amendment that does not materially increase the benefits under or materially increase the cost to the Company or any of its subsidiaries of maintaining the applicable plan), (iii) accelerate the vesting or lapsing of restrictions with respect to, or otherwise fund or secure payment of, any compensation or benefits under any Company benefit plan or (iv) amend or modify the terms of any outstanding Company equity awards;

 

•

implement or adopt any material change in its methods of accounting, except as may be appropriate to conform to changes in statutory or regulatory accounting rules or GAAP or regulatory requirements with respect thereto;

 

•

compromise, settle or agree to settle any action (including any action relating to the Merger Agreement or the transactions contemplated thereby), or consent to the same, other than compromises, settlements or agreements in the ordinary course of business that involve only the payment of money damages (excluding monetary damages that are covered by the Company’s insurance policies) (i) not in excess of $2,000,000 or (ii) consistent with the reserves reflected in the Company’s balance sheet; provided, that any such compromise, settlement or agreement to settle any such action does not (a) involve injunctive or equitable relief that would impose any material restrictions, obligations or change on the business or operations of the Company or any of its subsidiaries that, in each case, would be effective after, or not terminate as a result of, the closing or (b) involve any admission of wrongdoing or liability of the Company, Parent or any of their respective subsidiaries;

 

•

(i) make, change or revoke any material tax election, (ii) change an annual accounting period or change (or request any tax authority to change) any material aspect of its method of accounting for tax purposes, (iii) consent to any extension or waiver of the limitation period applicable to any tax claim or assessment with respect to a material amount of taxes, (iv) enter into any material tax sharing, closing or similar agreement in respect of any material taxes, or (v) obtain or request any material tax ruling;

 

•

cancel, modify, reduce or terminate any material insurance policy without entering into a comparable replacement insurance policy on commercially reasonable terms;

 

•

adopt or implement any stockholder rights agreement, “poison pill” or similar antitakeover agreement or plan;

 

•

enter into, amend or modify in any material respect or terminate any (except with respect to the expiration of the stated term or renewal in connection therewith) any Material Contract (as defined in the Merger Agreement) of a type referred to in clauses (a), (b), (c), (d), (e), (f), (g), (i) or (l) of the definition of Material Contract that, if entered into as of or prior to the date of the Merger Agreement, would constitute a Material Contract of any such type; or

 

•

agree to take any of the actions described above.

Notwithstanding the restrictions on the Company’s conduct of business prior to the closing (i) nothing will prevent the Company or any of its subsidiaries from taking or failing to take any action in response to any

 

56

COVID-19 measure that would otherwise violate or breach the Merger Agreement, potentially be deemed to constitute an action outside the ordinary course of business or potentially serve as a basis for Parent or Merger Sub to terminate the Merger Agreement or assert that closing conditions have not been satisfied; (ii) no consent of Parent or Merger Sub will be required with respect to any such action or failure to take such action (A) to the extent that the requirement of such consent would violate applicable law or (B) if such action is taken or omitted to be taken pursuant to any law, directive or other pronouncement issued by a governmental entity in response to COVID-19; and (iii) in determining whether the Company and its subsidiaries have satisfied their obligations to operate in the “ordinary course” or use “reasonable best efforts” or similar covenants, any actions or omissions should be assessed based on what is practicable or reasonable based on the circumstances created or influenced by COVID-19 and its effects on the domestic and international economy.

Further Action; Efforts

Each of the parties agreed to, upon the terms and subject to the conditions of the Merger Agreement, use its reasonable best efforts to take, or cause to be taken, all actions and to do or cause to be done, and cooperate with each other in order to do, all things necessary, proper or advisable under applicable law to consummate the Merger and the other transactions contemplated by the Merger Agreement at the earliest practicable date, including: (i) causing the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the taking of such actions as are necessary to obtain any requisite consent, non-action or expiration of any applicable waiting period under the HSR Act or any other foreign antitrust law; (ii) using reasonable best efforts to defend all lawsuits and other proceedings by or before any governmental entity challenging the Merger Agreement or the consummation of the Merger; and (iii) using reasonable best efforts to resolve any objection asserted with respect to the transactions contemplated under the Merger Agreement, including the Merger, under any antitrust law raised by any governmental entity and to prevent the entry of any court order, and to have vacated, lifted, reversed or overturned any injunction, decree, ruling, order or other action of any governmental entity, that would prevent, prohibit, restrict or delay the consummation of the transactions contemplated by the Merger Agreement, including the Merger.

Both Parent and the Company agreed to prepare and file as promptly as practicable, and in any event no later than five business days after the date of the Merger Agreement, a notification and report form pursuant to the HSR Act. Parent will pay all filing fees required under the HSR Act by the Company and Parent. On February 26, 2021, both the Company and Parent filed their respective notification and report forms under the HSR Act.

If a party receives a request for information or documentary material from any governmental entity with respect to the Merger Agreement or the Merger or any of the other transactions contemplated hereby, including a Second Request for Information under the HSR Act, then such party will, unless otherwise mutually agreed to in writing by the parties, in good faith make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, a response in substantial compliance with the request.

The parties will keep each other apprised of the status of matters relating to the completion of the Merger and the other transactions contemplated by the Merger Agreement and work cooperatively in connection with obtaining the approvals of or clearances from each applicable governmental entity, including:

 

i.

cooperating with each other in connection with filings required to be made by any party under any antitrust law and liaising with each other in relation to each step of the procedure before the relevant governmental entities and as to the contents of all communications with such governmental entities, including any notifications in relation to the transactions contemplated by the Merger Agreement;

 

ii.

furnishing to the other party all information within its possession that is required for any application or other filing to be made by the other party pursuant to applicable law in connection with the Merger Agreement or the consummation of the Merger or the other transactions contemplated by the Merger Agreement;

 

57

iii.

promptly notifying each other of any communications from or with any governmental entity, and ensuring to the extent permitted that each of the parties is entitled to attend any meetings with or other appearances before any governmental entity, with respect to the Merger Agreement or the consummation of the Merger or the other transactions contemplated by the Merger Agreement;

 

iv.

consulting and cooperating with one another in connection with all analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the antitrust laws; and

 

v.

consulting and cooperating in all respects with the other party in defending all lawsuits and other proceedings by or before any governmental entity challenging the Merger Agreement or the consummation of the Merger or the other transactions contemplated by the Merger Agreement.

Parent and the Company also will take, or cause to be taken, all other action and to do, or cause to be done, all other things necessary, proper or advisable under all antitrust laws to consummate the Merger and the other transactions contemplated by the Merger Agreement, including using their respective reasonable best efforts to obtain the expiration of all waiting periods and obtain all other approvals and any other consents or non-actions required to be obtained in order for the parties to consummate the transactions contemplated by the Merger Agreement, including the Merger. This obligation includes Parent committing to: (i) selling, divesting or otherwise conveying particular assets, categories or portions or parts of assets or businesses of Parent and its affiliates; (ii) agreeing to sell, divest or otherwise convey any particular asset, category, or portion or part of an asset or business of the Company and its subsidiaries contemporaneously with or subsequent to the Effective Time; (iii) permitting the Company to sell, divest or otherwise convey any of the particular assets, categories or portions or parts of assets or business of the Company or any of its subsidiaries prior to the Effective Time, in each case on terms and conditions that are reasonably acceptable to Parent; and (iv) licensing, holding separate or entering into similar arrangements with respect to its respective assets or the assets of the Company or conduct of business arrangements or terminating any and all existing relationships and contractual rights and obligations as a condition to obtaining any and all expirations of waiting periods under the HSR Act or consents or non-actions from any governmental entity necessary to consummate the Merger and the other transactions contemplated by the Merger Agreement; provided, that (a) Parent and its affiliates will not be required to take or agree to take, or cause to be taken (and the Company will not take or agree to take, without the prior written consent of Parent), any of the foregoing actions with respect to the assets, businesses or product lines of Parent or any of its subsidiaries, or the Company or any of its subsidiaries, or any combination thereof, if the result of such actions would, either individually or in the aggregate, require certain actions with respect to assets, businesses or product lines of Parent or any of its subsidiaries, or the Company or any of its subsidiaries, accounting for more than $80 million of EBITDA (as defined in the Merger Agreement) for the 12 months ended December 31, 2020, measured in accordance with the Merger Agreement; and (b) Parent will have the right to compel the Company to take any of the actions referred to above in clauses (ii) through (iv) to the extent applicable to the Company and/or its subsidiaries (or agree to take such actions) solely to the extent such actions are effective at or after the Effective Time, and the Company will cooperate with Parent, as reasonably requested by Parent in connection with such actions, including (w) cooperating with Parent in negotiating any divestiture, licensing, holding separate or similar arrangements involving the business or assets of the Company or its subsidiaries, (x) making the management team and other personnel of the Company and its subsidiaries available for management presentations, due diligence sessions and other meetings requested by potential buyers, (y) responding promptly to reasonable due diligence requests from, and making information regarding the Company and its subsidiaries available to, potential buyers, to the extent permitted by law and subject to customary confidentiality obligations of such potential buyers and (z) providing potential buyers with access to the facilities and properties of the Company and its subsidiaries, in the case of each of the foregoing during normal business hours and with reasonable advance notice.

Parent and its affiliates also agreed not to acquire or agree to acquire any rights, assets, business, person or division thereof if such acquisition would reasonably be expected to materially increase the risk of not obtaining,

 

58

or materially delay receipt of, any applicable clearance, consent, approval or waiver under the HSR Act with respect to the Merger Agreement.

For purposes of the Merger Agreement, “antitrust law” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, any other foreign antitrust laws and all other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.

Stockholder Written Consent

The Company agreed to (i) submit the Stockholder Written Consent, to the Principal Stockholder and (ii) use its reasonable best efforts to obtain the Stockholder Written Consent, duly executed by the Principal Stockholder by the Stockholder Approval Deadline and deliver the executed Stockholder Written Consent to Parent. The Stockholder Written Consent was delivered to the Company on February 19, 2021, promptly following the execution and delivery of the Merger Agreement.

No Solicitation

The Merger Agreement provides that the Company and its subsidiaries will not, and will direct its and their respective representatives not to, and will not publicly announce any intention to, directly or indirectly:

 

i.

initiate, solicit or knowingly encourage (including by providing information) any inquiries, proposals or offers with respect to, or the making or completion of, an Acquisition Proposal (as defined below) or that would reasonably be expected to lead to an Acquisition Proposal; or

 

ii.

engage or participate in any negotiations or discussions concerning, or provide or cause to be provided any non-public information or data relating to the Company or any of its subsidiaries in connection with, an Acquisition Proposal.

The Company also agreed to promptly, and in any event no later than one business day following the date of the Merger Agreement, request the prompt return or destruction of all confidential information previously provided to any person (other than to Parent or to the Company’s or Parent’s respective representatives) in the last twelve months in connection with an Acquisition Proposal and to terminate all data room access previously granted to any such person or its representatives. The Company agrees that it will immediately cease any existing activities, discussions or negotiations with any persons conducted prior to the date of the Merger Agreement with respect to any Acquisition Proposal, provided that the Company is permitted on a confidential basis to release or waive any “standstill” obligation solely to the extent necessary to comply with fiduciary duties under applicable law.

The Merger Agreement also provides that, prior to obtaining the requisite approval of the Company’s stockholders for the Merger (which has now been obtained), if the Company had received an unsolicited bona fide written Acquisition Proposal that did not result from a breach of the non-solicitation restrictions described above and that the Board had determined in good faith constituted or may reasonably have been expected to lead to a Superior Proposal (as defined below), the Company would have been permitted to furnish information to the person making the Acquisition Proposal and participate in discussions and negotiations with such person and its representatives regarding the Acquisition Proposal, subject to the terms and conditions set forth in the Merger Agreement.

In the Merger Agreement, “Acquisition Proposal” means any inquiry, proposal or offer from any person or group of persons other than Parent or one of its subsidiaries made after the date of the Merger Agreement relating to (A) a merger, reorganization, consolidation, share purchase, share exchange, business combination, recapitalization, liquidation, dissolution, joint venture, partnership, spin-off, extraordinary dividend or similar transaction involving the Company or any of its subsidiaries, which is structured to permit such person or group

 

59

of persons to, directly or indirectly, acquire beneficial ownership of 20% or more of the outstanding equity securities of the Company, or 20% or more of the consolidated net revenues, net income or total assets of the Company and its subsidiaries, taken as a whole or (B) the acquisition in any manner, directly or indirectly, of over 20% of the equity securities or consolidated total assets of the Company and its subsidiaries, in each case other than the Merger and the other transactions contemplated by the Merger Agreement.

In the Merger Agreement, “Superior Proposal” means any bona fide written Acquisition Proposal (A) on terms which the Board determines in good faith, after consultation with its external advisors, to be more favorable from a financial point of view to the holders of Company Common Stock than the Merger and the other transactions contemplated by the Merger Agreement, taking into account all the terms and conditions of such proposal and the Merger Agreement and (B) that the Board determines in good faith is capable of being completed, taking into account all financial, regulatory, legal and other aspects of such proposal; provided, that for purposes of the definition of “Superior Proposal,” the references to “20%” in the definition of Acquisition Proposal will be deemed to be references to “50%.”

The Company’s rights to engage in negotiations or discussions with third parties and to terminate the Merger Agreement in connection therewith (as described in “—Termination of the Merger Agreement”) ceased on February 19, 2021 following the delivery of the Stockholder Written Consent in accordance with the terms of the Merger Agreement.

Change of Recommendation

Subject to certain actions permitted by the Merger Agreement, the Board will not:

 

i.

withhold, withdraw, amend, qualify or modify in a manner adverse to Parent or Merger Sub, or publicly propose to or resolve to do so in a manner adverse to Parent or Merger Sub, the Company’s recommendation to the Company’s stockholders to approve the Merger Agreement, or approve or recommend, or publicly propose to approve, recommend or otherwise declare advisable, any Acquisition Proposal, or make or authorize any public statement that has the substantive effect of such a withdrawal, amendment, qualification or modification (any such actions, an “Adverse Recommendation Change”); or

 

ii.

cause or permit the Company or any of its subsidiaries to enter into an Alternative Acquisition Agreement relating to any Acquisition Proposal.

Notwithstanding the restrictions described above, prior to obtaining the requisite approval of the Company’s stockholders for the Merger (which has now been obtained), following receipt of a written Acquisition Proposal that did not result from a material breach of the Merger Agreement and that the Board had determined in good faith, after consultation with its external advisors, constituted a Superior Proposal, the Board had the right to make an Adverse Recommendation Change or terminate the Merger Agreement to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal, subject to the terms and conditions set forth in the Merger Agreement.

Prior to obtaining the requisite approval of the Company’s stockholders for the Merger (which has now been obtained), the Board was also permitted to make an Adverse Recommendation Change upon the occurrence of any Intervening Event, subject to the terms and conditions set forth in the Merger Agreement. In the Merger Agreement, “Intervening Event” means a material event, circumstance, change or development that was not known to, or reasonably foreseeable by, the Board prior to the execution of the Merger Agreement (or if known or reasonably foreseeable, the material consequences of which were not known or reasonably foreseeable), which effect, or any material consequence thereof, becomes known to, or reasonably foreseeable by, the Board prior to the receipt of the Stockholder Written Consent; provided, that an “Intervening Event” excludes any event, circumstance, change or development related to (A) any Acquisition Proposal or other inquiry, offer or proposal that would reasonably be expected to lead to an Acquisition Proposal, (B) consisting of or resulting from a breach

 

60

of the Merger Agreement by the Company or any of its subsidiaries or (C) any changes in the market price, or change in trading volume, of Company Common Stock (it being understood that the underlying causes of any such changes or developments may, if they are not otherwise excluded from the definition of “Intervening Event”, be taken into account in determining whether an Intervening Event has occurred).

The Board’s rights to make an Adverse Recommendation Change and to terminate the Merger Agreement to enter into an Alternative Acquisition Agreement (as described in “—Termination of the Merger Agreement”) ceased on February 19, 2021 following the delivery of the Stockholder Written Consent in accordance with the terms of the Merger Agreement.

Financing Cooperation

Prior to the Effective Time, the Company will use its reasonable best efforts, and will cause each of its subsidiaries to use its respective reasonable best efforts, and will use its reasonable best efforts to cause its and their respective directors, officers, employees and representatives to use reasonable best efforts, to provide Parent and Merger Sub with all customary cooperation reasonably requested by Parent or Merger Sub to assist it in causing the conditions in any debt commitment letters entered into by Merger Sub following the date of the Merger Agreement, including that certain debt commitment letter described in “The Merger—Financing of the Merger” on page 39 of this Information Statement (the “Debt Commitment Letter”), to be satisfied or as is otherwise customary and reasonably requested by Parent or Merger Sub in connection with any debt financing contemplated by the Debt Commitment Letter (the “Debt Financing”). Such cooperation includes using reasonable best efforts in connection with:

 

i.

appropriate members of senior management of the Company participating in a reasonable and limited number of meetings, calls, presentations, due diligence sessions and sessions with those persons that have committed to provide the Debt Financing, together with their affiliates and representatives involved in the Debt Financing and their successors and assigns (the “Debt Financing Sources”) and/or rating agencies;

 

ii.

(a) reasonably assisting Parent, Merger Sub and the Debt Financing Sources with the preparation of customary rating agency presentations, and public-side and private-side bank information memoranda and lender presentations required in connection with the Debt Financing (including customary letters), (b) (1) furnishing Parent and Merger Sub (and Parent and Merger Sub may then furnish to applicable Debt Financing Sources) with financial information of the Company and its subsidiaries required to be provided to Parent, Merger Sub or the Debt Financing Sources pursuant to the Debt Commitment Letter, in each case to the extent such information is not disclosed or reflected in the Company SEC Documents (as defined in the Merger Agreement), and (2) providing such other customary, pertinent and readily available information with respect to the Company and its subsidiaries as may reasonably be requested by Parent, Merger Sub or the Debt Financing Sources (such financial and other information described in clauses (1) and (2) above, the “Required Information”), (c) supplementing and/or periodically updating the Required Information to the extent that any Required Information, to the knowledge of the Company, contains any untrue statement of a material fact or omits to state any material fact necessary to make such information not misleading, as soon as practicable after obtaining knowledge thereof; and (d) identifying any such information as is material non-public information with respect to the Company;

 

iii.

reasonably assisting Parent and Merger Sub in connection with the preparation of any pledge and security documents and other definitive financing documents as may be reasonably requested by Parent, Merger Sub or the Debt Financing Sources and otherwise reasonably cooperating with Parent and/or Merger Sub in facilitating the pledging of collateral and the granting of security interests required by the Debt Commitment Letters, it being understood that such documents will not take effect until the Effective Time;

 

iv.

reasonably facilitating (A) the pledging or the reaffirmation of the pledge of collateral and (B) the payoff of existing indebtedness for borrowed money of the Company and its subsidiaries (including

 

61

under the Credit Agreements) and the release and termination of any and all related liens (including obtaining and delivering the Payoff Letters (as defined in the Merger Agreement) and other cooperation in connection therewith) to the extent required by its Debt Commitment Letters, on or prior to the closing date;

 

v.

taking all corporate and other customary actions, subject to the occurrence of the closing, reasonably requested by Parent or Merger Sub to (A) permit the consummation of the Debt Financing (including distributing the proceeds of the Debt Financing, if any, obtained by any subsidiary of the Company to the Surviving Corporation), and (B) cause the direct borrowing, by the Surviving Corporation or any of its subsidiaries concurrently with or immediately following the Effective Time;

 

vi.

if reasonably requested in writing at least 10 business days prior to the closing, providing at least three business days prior to closing, Parent, Merger Sub and/or the Debt Financing Sources with all documentation and other information required by regulatory authorities pursuant to applicable “know your customer” and anti-money laundering rules and regulations; and

 

vii.

providing reasonable and customary cooperation to Parent, Merger Sub and the Debt Financing Sources (or third party evaluators on their behalf) in obtaining customary appraisals and field exams required in connection with the Debt Financing upon reasonable prior notice during normal business hours and in providing such available information as it reasonably requested to assist Parent and Merger Sub in their preparation of borrowing base certificates required in connection with the Debt Financing and determination of eligible borrowing base assets, including permitting prospective lenders or investors involved in the Debt Financing to evaluate the Company’s and its subsidiaries’ inventory, current assets, cash management and accounting systems, policies and procedures relating thereto for the purpose of establishing collateral arrangements (including conducting field exams, commercial finance examinations and inventory appraisals, conducting other customary collateral-related diligence and reasonably assisting Parent and Merger Sub with the establishment of blocked account and control agreements of the Company and its subsidiaries to be effective no earlier than the Effective Time) in connection with the Debt Financing, in each case, to the extent customary and necessary to obtain any portion of the Debt Financing consisting of an asset-based credit facility.

Nothing in the Merger Agreement provision regarding financing cooperation will require the Company or any of its subsidiaries to (i) waive or amend any terms of the Merger Agreement or agree to pay any fees or reimburse any expenses prior to the Effective Time, (ii) cause any closing condition set forth in the Merger Agreement to not be satisfied, (iii) enter into any definitive agreement that would be effective prior to the Effective Time or that is not contingent on the occurrence of the Effective Time, (iv) give any indemnities that are effective prior to the Effective Time, or (v) take any action that, in the good faith determination of the Company, would unreasonably interfere with the ordinary conduct of the business of the Company and its subsidiaries.

Parent has the obligation to, on request, reimburse the Company for any reasonable and documented out-of-pocket costs and expenses (including attorneys’ fees) incurred by the Company or any of its representatives in connection with the financing cooperation of the Company and its representatives.

Parent also has the obligation to indemnify and hold harmless the Company, its subsidiaries and their respective representatives from and against any and all liabilities, losses, damages, claims, costs, expenses (including attorneys’ fees), interest, awards, judgments, penalties and amounts paid in settlement suffered or incurred by them in connection with their cooperation in arranging the Debt Financing, except to the extent such liabilities, losses, damages, claims, costs, expenses (including attorneys’ fees), interest, awards, judgments, penalties and amounts paid in settlement arise out of or result from the willful misconduct or bad faith of the Company, its subsidiaries and/or their respective representatives.

Parent obtaining the Debt Financing is not a condition to the closing.

 

62

Employees

Parent will, or will cause the Surviving Corporation to, provide each employee who is employed by the Company or any of its subsidiaries as of immediately prior to the closing date and whose employment continues with the Surviving Corporation or any of its subsidiaries from the closing date (each, a “Continuing Employee”), for a one-year period from the closing date (or, if shorter, the employee’s remaining period of employment) with (i) an annual base salary or hourly wage rate, as applicable, that is no less than the annual base salary or hourly wage rate provided to such Continuing Employee immediately prior to the Effective Time and (ii) employee benefits (excluding equity and other long-term incentive awards, change in control and retention bonuses, defined benefit pension plans and post-employment welfare benefits) that are, on an aggregate basis, at least substantially comparable to the benefits (excluding equity and other long-term incentive awards, change in control and retention bonuses, defined benefit pension plans and post-employment welfare benefits) provided by the Company to such Continuing Employee immediately prior to the closing date.

As of and after the Effective Time, Parent will, or will cause the Surviving Corporation to, recognize all service credited under each Company benefit plan in which each Continuing Employee participated immediately prior to the Effective Time for purposes of eligibility, vesting and vacation and severance and benefit accruals (but not for purposes of benefit accruals under any other plan, program or policy, including any defined benefit pension plans) under any plan, program or policy maintained for the benefit of Continuing Employees as of and after the Effective Time by Parent, its subsidiaries or the Surviving Corporation (each, a “Parent Plan”), to the same extent recognized by the Company under such Company benefit plan. However, the foregoing will not apply to the extent that its application would result in a duplication of benefits for purposes of benefit accrual. With respect to each Parent Plan that is a group health plan, Parent and its subsidiaries will use commercially reasonable efforts to (i) cause there to be waived any pre-existing condition, actively at work requirement, waiting period, or other eligibility limitation to the extent such pre-existing condition, actively at work requirement, waiting period, or other eligibility limitation was not applicable as of immediately prior to the Effective Time under any Company benefit plan and (ii) for the plan year in which employees of the Company transition from Company group health plans to other Parent Plans, give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, Continuing Employees under similar Company benefit plans immediately prior to such benefit plan transition date.

Parent will ensure that the Surviving Corporation and its subsidiaries do not, for a period commencing at the Effective Time and ending 90 days thereafter, effectuate a “plant closing” or “mass layoff” as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988 or in any similar state or local law affecting in whole or in part any site of employment, facility, operating unit or Continuing Employee.

Access to Information

From the date of the Merger Agreement until the Effective Time or the earlier termination of the Merger Agreement, the Company will, and will use its reasonable best effects to cause its subsidiaries, officers, directors and representative to, afford to Parent, Merger Sub and their respective representatives reasonable access during normal business hours, consistent with applicable law (including any applicable COVID-19 measures), so long as such access does not jeopardize the health and safety of any employee of the Company or its subsidiaries, and solely for the purpose of consummating the Merger or the other transactions contemplated in the Merger Agreement, to its officers, employees, properties, offices, other facilities and books and records, and shall furnish Parent with all financial, operating and other data and information as Parent shall reasonably request in writing (it being agreed, however, that the foregoing shall not permit Parent or its officers, employees or representatives to conduct any environmental testing or sampling, including but not limited to facility surface and subsurface soils and water, air or building materials and, provided, that neither the Company nor any of its subsidiaries shall be required to prepare, produce, compile or furnish any such data or information that is not already being prepared, produced or compiled by the Company or such subsidiary, as the case may be, in the ordinary course of business,

 

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and any such data or information may be delivered in the form in which it is ordinarily maintained). Notwithstanding the foregoing, any such investigation or consultation shall be conducted in such a manner as not to result in any significant interference with the business or operations of the Company or its subsidiaries or otherwise result in any significant interference with the prompt and timely discharge by the employees of the Company or its subsidiaries of their normal duties. Neither the Company nor any of its subsidiaries shall be required to provide access to or to disclose information, books and records, or other data or materials where such access or disclosure would (i) breach any agreement with any third party, (ii) constitute a waiver of or jeopardize the attorney-client or other privilege held by the Company or any such subsidiary or (iii) violate any applicable law.

Indemnification and Insurance

For six years following the Effective Time, the Surviving Corporation will, and Parent will cause the Surviving Corporation to indemnify and hold harmless each present (as of the Effective Time) and former officer, director or employee of the Company and its subsidiaries (the “Indemnified Parties”) against all claims, losses, liabilities, damages, judgments, inquiries, fines, amounts paid in settlement and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any pending or threatened action, whether civil, criminal, administrative or investigative, (i) arising out of the fact that the Indemnified Party is or was an officer, director, employee, fiduciary or agent of the Company or any of its subsidiaries or is or was serving at the request of the Company or any of its subsidiaries as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, (ii) arising out of matters existing at or prior to the Effective Time (including the Merger Agreement and the transactions and actions contemplated thereby), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable law and the Company Charter and Company Bylaws as of the date of the Merger Agreement or (iii) in connection with the enforcement of any Indemnified Party’s rights under the Merger Agreement by the Indemnified Party or his or her heirs or legal representatives. In the event of any such pending or threatened action, including an action to enforce the Indemnified Party’s rights under the Merger Agreement, (A) each Indemnified Party will be entitled to advancement of expenses (including attorneys’ fees and expenses) incurred in connection with such action from Parent and the Surviving Corporation to the fullest extent permitted under applicable law and the Company Charter and Company Bylaws as of the date of the Merger Agreement prior to the final disposition of such action; provided, that any such person provides an undertaking, if and only to the extent required by DGCL or the Company Charter or Company Bylaws, to repay such advances if it is ultimately determined that such person is not entitled to indemnification under the Merger Agreement or any law, contract or other source for which indemnification may be available, (B) neither Parent nor the Surviving Corporation will settle, compromise or consent to the entry of any judgment in any proceeding or threatened action (and in which indemnification could be sought by an Indemnified Party), unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liability arising out of such action or the Indemnified Party otherwise consents in writing, and (C) the Surviving Corporation will cooperate in the defense of any such matter.

Except as may be required by law, Parent and the Company agree that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time and the right to advancement of expenses relating thereto that currently exist in favor of any Indemnified Party as provided in the Company Charter or Company Bylaws (or comparable organizational documents) of the Company and its subsidiaries or in any indemnification agreement between such Indemnified Party and the Company or any of its subsidiaries, as set forth in the Company Disclosure Letter, 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.

At the Company’s option, the Company may purchase, prior to the Effective Time, a six-year prepaid “tail policy” on terms and conditions providing substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by the Company and its subsidiaries

 

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with respect to matters arising on or before the Effective Time, covering without limitation the transactions contemplated hereby, including the Merger. If such prepaid tail policy has been obtained by the Company prior to the Effective Time, Parent will cause such policy to be maintained in full force and effect, for its full term, and cause all the obligations thereunder to be honored by the Surviving Corporation.

If the Company has not purchased such tail policy prior to the Effective Time, for a period of six years from the Effective Time, Parent will either cause to be maintained in effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by the Company and its subsidiaries or cause to be provided substitute policies or purchase or cause the Surviving Corporation to purchase, a “tail policy,” in either case of at least the same coverage and amounts containing terms and conditions that are not less advantageous in the aggregate than such policy with respect to matters arising on or before the Effective Time; provided, however, that after the Effective Time, Parent will not be required to pay with respect to such insurance policies in respect of any one policy year annual premiums in excess of 300% of the last annual premium paid by the Company prior to the date of the Merger Agreement in respect of the coverage required to be obtained pursuant hereto, but in such case will purchase as much coverage as reasonably practicable for such amount; provided further, that if the Surviving Corporation purchases a “tail policy” and the annual coverage thereunder costs more than 300% of such last annual premium, the Surviving Corporation will purchase the maximum amount of coverage that can be obtained for 300% of such last annual premium.

Other Covenants and Agreements

The Merger Agreement contains other covenants and agreements, among which:

 

•

each of Parent and the Company agrees to consult with the other party to the extent reasonably practicable before issuing, and give each other a reasonable opportunity to review and comment on, any press release or other public statement with respect to the Merger Agreement or the Merger, except as may be required by law, court process or any stock exchange listing agreement;

 

•

each of Parent the Company agrees, in the event any “fair price,” “moratorium,” “control share acquisition” or similar antitakeover law is or becomes applicable to the Merger Agreement, the Merger or the other transactions contemplated by the Merger Agreement, to take all action necessary ensure that the Merger and the other transactions contemplated by the Merger Agreement are consummated as promptly as practicable on the terms contemplated by the Merger Agreement and otherwise to eliminate or minimize the effect of such law on the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement;

 

•

Parent will cause (and the Company will reasonably cooperate with Parent to cause) the Company Common Stock to be de-listed from Nasdaq and de-registered under the Exchange Act as promptly as practicable following the Effective Time;

 

•

the Company agrees to obtain and deliver to Parent, no later than one business day prior to the closing, customary payoff letters for the Company’s credit agreements, in form and substance reasonably satisfactory to Parent and the lenders thereunder and the Debt Financing Sources evidencing the discharge of outstanding indebtedness for borrowed money of the Company and its subsidiaries thereunder; and

 

•

the Company agrees to give Parent the opportunity to participate in, but not control, the defense and settlement of any stockholder litigation against the Company and/or its officers or directors relating to the Merger or any of the other transactions contemplated by the Merger Agreement in accordance with the terms of a mutually agreed upon joint defense agreement, and agrees not to offer to settle, settle or compromise any such stockholder litigation without Parent’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).

 

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Conditions to Consummation of the Merger

The obligation of each party to consummate the Merger is subject to the satisfaction or waiver, at or prior to the Effective Time, of, the following conditions:

 

•

the adoption of the Merger Agreement by holders of a majority of the outstanding shares of Company Common Stock entitled to voted thereon in accordance with the DGCL (which condition was satisfied upon the delivery of the Stockholder Written Consent by the Principal Stockholder to the Company);

 

•

the absence of any order, injunction or other judgment, order or decree issued by a court of competent jurisdiction or any other legal restraint or prohibition, and the absence of any applicable law or other legal restraint, injunction or prohibition enforced or deemed applicable by any governmental entity that makes consummation of the Merger illegal or otherwise prohibited;

 

•

the expiration or termination of any applicable waiting period (and any extensions thereof) under the HSR Act relating to the consummation of the Merger; and

 

•

the mailing of this Information Statement to the stockholders of the Company at least twenty (20) days prior to the date of closing of the Merger.

The obligation of the Company to consummate the Merger is further subject to the satisfaction or waiver, at or prior to the Effective Time of, among other things, the following additional conditions:

 

•

the representations and warranties of Parent and Merger Sub are true and correct except where such failure to be true and correct would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impede the performance by Parent or Merger Sub of its obligations under the Merger Agreement or any of the transactions contemplated thereby;

 

•

the performance in all material respects by Parent and Merger Sub of all obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time; and

 

•

the receipt by the Company of a certificate signed by an executive officer of Parent on behalf of Parent stating that each of the conditions specified above has been satisfied.

The obligation of Parent and Merger Sub to consummate the Merger is further subject to the satisfaction or waiver, at or prior to the Effective Time, of, among other things, the following additional conditions:

 

•

the representations and warranties of the Company are true and correct to various degrees of materiality;

 

•

the performance in all material respects by the Company of all obligations required to be performed by it under the Merger Agreement at or prior to the Effective Time;

 

•

since the date of the Merger Agreement, the absence of any event, change, occurrence or effect that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

 

•

the receipt by Parent of a certificate signed by an executive officer of the Company on behalf of the Company stating that certain of the conditions specified above has been satisfied.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time by the mutual written consent of Parent and the Company.

In addition, the Merger Agreement may be terminated by either Parent or the Company:

 

•

if the Merger has not been consummated on or before November 19, 2021 (the “Initial Outside Date”, and as may be extended pursuant to the terms of the Merger Agreement, the “Outside Date”); provided,

 

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however, that the Initial Outside Date will be automatically extended until January 18, 2022 (the “First Extended Outside Date”) if, on the Initial Outside Date, any of the conditions to closing with respect to Antitrust Law or the expiration or termination of the applicable waiting period under the HSR Act have not been satisfied or waived and all other conditions to closing have been satisfied or waived (or in the case of conditions that by their nature are to be satisfied at the closing, shall be capable of being satisfied on such date); provided further that the First Extended Outside Date will be automatically extended until March 22, 2022, if, on the First Extended Outside Date, any of the foregoing conditions to closing with respect to Antitrust Law or the expiration or termination of the applicable waiting period under the HSR Act has not have been satisfied or waived and all other conditions to closing have been satisfied or waived (or in the case of conditions that by their nature are to be satisfied at the closing, will be capable of being satisfied on such date); provided, further, that neither Parent nor the Company will have the right to terminate the Merger Agreement pursuant to this provision if any action of such party or failure of such party to perform or comply with the covenants and agreements of such party set forth in the Merger Agreement will have materially contributed to the failure of the Merger to be consummated by such date;

 

•

if any court of competent jurisdiction or other governmental entity has issued a judgment, order, injunction, rule or decree, or taken any other action, restraining, enjoining or otherwise prohibiting any of the transactions contemplated by the Merger Agreement, and such judgment, order, injunction, rule, decree or other action will have become final and nonappealable (a “Restraint”); provided, that the party seeking to terminate the Merger Agreement pursuant to this provision will have used its reasonable best efforts to contest, appeal and remove such judgment, order, injunction, rule, decree, ruling or other action in accordance with the Merger Agreement.

The Merger Agreement also may be terminated by Parent:

 

•

if the Company will have breached or failed to perform any of its representations, warranties, covenants or agreements pursuant to the Merger Agreement, and such breach or failure to perform (i) would result in the failure to satisfy the conditions to Parent’s or Merger Sub’s obligations to consummate the Merger and (ii) cannot be cured by the Outside Date (although Parent will not be entitled to terminate the Merger Agreement if such breach has been cured within the Company Breach Notice Period (to the extent capable of being cured)); provided, that Parent will not have the right to terminate the Merger Agreement pursuant to this provision if Parent or Merger Sub is then in breach of any of its covenants or agreements set forth in the Merger Agreement in any material respect.

The Merger Agreement also may be terminated by the Company:

 

•

at any time prior to the closing, if Parent or Merger Sub will have breached or failed to perform any of their representations, warranties, covenants or agreements pursuant to the Merger Agreement, and such breach or failure to perform (i) prevents or would reasonably be expected to prevent Parent or Merger Sub from consummating the Merger or would result in the failure to satisfy the conditions to the Company’s obligations to consummate the Merger and (ii) cannot be cured by the Outside Date (although the Company will not be entitled to terminate the Merger Agreement if such breach has been cured within the Parent Breach Notice Period (to the extent capable of being cured)); provided, that the Company will not have the right to terminate the Merger Agreement pursuant to this provision if it is then in breach of any of its covenants or agreements set forth in the Merger Agreement in any material respect.

The Merger Agreement also provides that Parent could have terminated the Merger Agreement if (i) the Stockholder Written Consent was not executed and delivered to Parent by the Stockholder Approval Deadline, or (ii) prior to receipt of the required stockholder approval for the Merger, the Company had effected an Adverse Recommendation Change. However, these termination rights are no longer applicable following delivery of the Stockholder Written Consent on February 19, 2021 in accordance with the terms of the Merger Agreement.

 

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The Company also could have terminated the Merger Agreement if (i) prior to obtaining the requisite stockholder approval for the Merger, the Board authorized the Company to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal and concurrently with such termination the Company entered into an Alternative Acquisition Agreement providing for a Superior Proposal, or (ii) the Stockholder Written Consent had not been delivered to Parent by the Stockholder Approval Deadline, subject to certain terms and conditions. However, these termination rights are no longer applicable following the delivery of the Stockholder Written Consent on February 19, 2021 in accordance with the terms of the Merger Agreement.

Company-Paid Termination Fee

In the event that (i) the Merger Agreement is terminated by Parent because the Company breaches or fails to perform any of it representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach or failure to perform would result in the failure of a closing condition and cannot be cured by the Outside Date, subject to the terms and conditions set forth in the Merger Agreement, and (ii)(A) after the date of the Merger Agreement and prior to such termination, an Acquisition Proposal is communicated to the senior management of the Company, the Board or the Board and not withdrawn prior to such termination and (B) within twelve months after such termination, the Company will have consummated an Acquisition Proposal or entered into a definitive agreement with respect to such Acquisition Proposal, which is ultimately consummated (with references to “20% or more” in the definition of “Acquisition Proposal” to be deemed to be references to “more than 50%” for purposes of this termination right), then the Company will pay Parent $50,000,000 (the “Company-Paid Termination Fee”).

The Company would also have been obligated to pay the Company-Paid Termination Fee if the Merger Agreement were terminated because (i) the Company had not delivered the Stockholder Written Consent to Parent by the Stockholder Approval Deadline, (ii) the Board authorized the Company to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal and concurrently with such termination the Company entered into an Alternative Acquisition Agreement providing for a Superior Proposal or (iii) the Board had effected an Adverse Recommendation Change. However, these termination rights are no longer applicable following the delivery of the Stockholder Written Consent on February 19, 2021 in accordance with the terms of the Merger Agreement.

Payment of the Company-Paid Termination Fee, if applicable, will be made by wire transfer of same-day funds to the account(s) designated by Parent within two business days after termination.

Parent-Paid Termination Fee

In the event that (i) the Merger Agreement is terminated by either the Company or Parent (a) because the Outside Date has been reached and all of the conditions to closing have been satisfied or waived (other than such conditions that by their nature are to be satisfied at the closing) other than the conditions to closing with respect to Antitrust Law or the expiration or termination of the applicable waiting period under the HSR Act or (b) as a result of a Restraint arising under the HSR Act or any other applicable Antitrust Law, then Parent will pay the Company $85,000,000 (the “Parent-Paid Termination Fee”).

Payment of the Parent-Paid Termination Fee, if applicable, will be made by wire transfer of same-day funds to the account(s) designated by Parent within two business days after termination.

Specific Performance

The parties to the Merger Agreement are entitled to specific performance of the terms thereof, including an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in the Court of Chancery of the State of Delaware and any states appellate court therefrom, or, if such courts do not have proper jurisdiction, any federal court located in the State of

 

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Delaware or any other Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In any action for specific performance, each party waives the defense of adequacy of a remedy at law and waives any requirement under any law to post security as a prerequisite to obtaining equitable relief. In the event of any action by a party with respect to the Merger Agreement, the prevailing party in the action will be entitled to receive, in addition to all other remedies to which it may be entitled, the reasonable costs incurred by such party in connection with such action, including reasonably attorneys’ fees and expenses and court costs.

Amendment; Extension; Waivers

The Merger Agreement may be amended, modified or supplemented by the parties prior to the Effective Time by action taken or authorized by their respective boards of directors. However, because the Stockholder Written Consent has been delivered and the requisite stockholder approval for the Merger has been obtained, no amendment may be made that would require 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 thereto, signed on behalf of each of the parties in interest at the time of the amendment. Notwithstanding anything to the contrary in the Merger Agreement, certain provisions relating to the Debt Financing Sources in the Merger Agreement may not be amended, modified or altered without the prior written consent of the Debt Financing Sources.

At any time prior to the Effective Time, the parties may, by action taken or authorized by their respective boards of directors, to the extent permitted by applicable law, (a) extend the time for the performance of any of the obligations or acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other parties set forth in the Merger Agreement or any document delivered pursuant thereto or (c) subject to applicable law, waive compliance with any of the agreements or conditions of the other parties contained therein. Any agreement on the part of a party to any such waiver will be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party. No failure or delay of any party in exercising any right or remedy under the Merger Agreement will operate as a waiver thereof, nor will any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power.

Expenses

Except as otherwise expressly provided in the Merger Agreement, each of the parties has agreed to bear its own fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby, whether or not the Merger is consummated.

Governing Law

The Merger Agreement and all disputes or controversies arising out of or relating to the Merger Agreement, the Merger or the other transactions contemplated by the Merger Agreement will be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware. Notwithstanding anything in the Merger Agreement to the contrary, the parties agreed that certain claims involving Debt Financing Sources will be governed by, and construed in accordance with, the laws of the State of New York without regard to conflict of law principles (other than sections 5-1401 and 5-1402 of the New York General Obligations Law).

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS

The following tables set forth information as of the close of business on March 8, 2021 (except as otherwise indicated by footnote), regarding the beneficial ownership of shares of Company Common Stock by each director, named executive officer, by all directors and executive officers as a group, and by each person known by the Company to own 5% or more of Company Common Stock.

We have determined beneficial ownership in accordance with the rules of the SEC, which generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all shares of Company Common Stock that they beneficially own. Shares of common stock subject to equity awards that are exercisable or have vested, or will become exercisable or will vest, as applicable, within 60 days of March 8, 2021, are considered outstanding and beneficially owned by the person holding the options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

For purposes of the table below, the beneficial ownership amounts and percentages are based on a total of 66,340,787 shares of Company Common Stock outstanding as of the close of business on March 8, 2021. The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted.

 

Name of Beneficial Owner(1)		Number of Shares of Company Common Stock Beneficially Owned				Percentage of Shares of Company Common Stock Outstanding
5% Stockholder
Forterra US Holdings, LLC(2)			34,907,250				52.6	%
Electron Capital Partners, LLC(3)			4,419,200				6.7	%
Named Executive Officers
Karl H. Watson Jr.(4)			1,090,076				1.6	%
Charlie Brown(5)			798,706				1.2	%
Vikrant Bhatia(6)			379,915				*
Lori Browne(7)			329,699				*
Richard Hunter(8)			35,422				*
Directors
Richard “Chip” Cammerer, Jr. (9)			—				—
Rafael Colorado(9)			—				—
Maureen Harrell(9)			—				—
Chad Lewis(9)			—				—
Chris Meyer(9)			62,500				*
Clint McDonnough(10)			62,439				*
John McPherson(11)			176,029				*
Jacques Sarrazin(12)			19,149				*
All Executive Officers and Directors as a group (13 persons)			2,953,935				4.5	%

 

*	Represents less than one percent (1%).

(1)	Unless otherwise indicated below, the address of each beneficial owner is c/o Forterra, Inc., 511 East John Carpenter Freeway, Suite 600, Irving, TX 75062.

(2)	Beneficial ownership is based on the amended Schedule 13G/A filed on February 3, 2021 (the “Schedule 13G/A”) by Principal Stockholder. According to the Schedule 14G/A, Forterra US Holdings, LLC, a Delaware limited liability company, is wholly owned by LSF9 Stardust Holdings, L.P., a Bermuda

 

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exempted limited partnership, which is controlled by its general partner, LSF9 Stardust GP, LLC, a Delaware limited liability company, which is wholly owned by Lone Star Fund IX (U.S.), L.P., a Delaware limited partnership, which is controlled by its general partner, Lone Star Partners IX, L.P., a Bermuda exempted limited partnership, which is controlled by its general partner, Lone Star Management Co. IX, Ltd., a Bermuda limited exempted company, which is controlled by its sole owner (shareholder) John P. Grayken. The address for such persons is 2711 North Haskell Avenue, Suite 1700, Dallas, Texas 75204.

(3)

The information regarding the beneficial ownership of Electron Capital Partners, LLC is based on the Schedule 13G filed jointly with the SEC by Electron Capital Partners, LLC and James O. Shaver on February 16, 2021. According to this Schedule 13G, both of Electron Capital Partners and Mr. Shaver have (i) sole power to vote 0 shares of common stock, (ii) shared power to vote 4,419,200 shares of common stock, (iii) sole power to dispose of 0 shares of common stock and (iv) shared power to dispose of 4,419,200 shares of common stock. The address for each reporting person is 10 East 53rd Street, 19th Floor, New York, NY 10022.

(4)	Mr. Watson is also a Director. Includes 41,241 restricted stock units that will vest within 60 days of March 8, 2021.

(5)	Includes options to purchase 579,331 shares of common stock that have vested or will vest within 60 days of March 8, 2021 and 41,267 restricted stock units that will vest within 60 days of March 8, 2021.

(6)	Includes options to purchase 257,678 shares of common stock that have vested or will vest within 60 days of March 8, 2021 and 26,942 restricted stock units that will vest within 60 days of March 8, 2021.

(7)	Includes options to purchase 233,333 shares of common stock that have vested or will vest within 60 days of March 8, 2021 and 28,225 restricted stock units that will vest within 60 days of March 8, 2021.

(8)	Based on the latest information available to the Company. Mr. Hunter’s employment with the Company terminated effective December 31, 2020, and all unvested equity awards were forfeited and cancelled under the term of the awards.

(9)	Owns interests in entities which own direct or indirect non-controlling interests in Forterra US Holdings, LLC and therefore expressly disclaims any beneficial ownership of our common stock owned by Forterra US Holdings, LLC.

(10)	Includes options to purchase 2,810 shares of common stock that have vested.

(11)	Includes options to purchase 114,951 shares of common stock that have vested.

(12)	Includes options to purchase 2,810 shares of common stock that have vested.

 

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RESTRICTIVE COVENANT AGREEMENT

Concurrently with the execution of the Merger Agreement, the Principal Stockholder and LSF9 entered into a Restrictive Covenant Agreement with Parent, effective as of the closing of the Merger. Pursuant to the terms of the Restrictive Covenant Agreement, the Principal Stockholder will be subject to certain confidentiality, non-solicit and non-disparagement obligations, whereby the Principal Stockholder and LSF9 have agreed, among other things, that for a period of two years from the closing of the Merger, that it will not, and will cause its affiliates not to, directly or indirectly (i) solicit, induce or knowingly encourage certain senior employees of the Company as of immediately prior to the closing to leave such employment, (ii) hire, employ or otherwise engage any such senior employee or (iii) direct or cause an affiliate to engage in such activities, subject to certain exceptions set forth in the Restrictive Covenant Agreement.

The Principal Stockholder and LSF9 have also agreed, among other things, that for a period of one year from the closing of the Merger that it will not, and will not permit any of its affiliates who it controls to, and will not direct or cause any of its portfolio companies, any portfolio company of any of its affiliated investment funds or any other third party to, directly or indirectly (i) engage in or assist others in engaging in any merger or acquisition transaction or agreement involving assets, voting stock, capital stock or other equity interests of certain acquisition targets (“restricted targets”) or (ii) have an interest in any such restricted target, subject to certain exceptions set forth in the Restrictive Covenant Agreement. Parent also acknowledged and agreed that the Tax Receivable Agreement is a valid and binding obligation of the Company.

 

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