Form DEFM14A STAMPS.COM INC

August 30, 2021 4:44 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ☒
Filed by a party other than the Registrant
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12
STAMPS.COM INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
(2)
Aggregate number of securities to which transaction applies:
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
(4)
Proposed maximum aggregate value of transaction:
 
(5)
Total fee paid:
 
 
 
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
(2)
Form, Schedule or Registration Statement No.:
 
(3)
Filing Party:
 
(4)
Date Filed:

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Stamps.com Inc.
1990 E. Grand Avenue
El Segundo, CA 90245
August 30, 2021
Dear Stamps.com Stockholder:
You are cordially invited to virtually attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of Stamps.com Inc. (“Stamps.com” or the “Company”) to be held on September 30, 2021 at 9:00 a.m., Pacific Daylight Time. This Special Meeting will be a “virtual meeting” conducted solely online. You will be able to attend the Special Meeting online by logging in at www.virtualshareholdermeeting.com/STMP2021SM.
At the Special Meeting, you will be asked to consider and vote on (i) a proposal to approve and adopt the Agreement and Plan of Merger, dated as of July 8, 2021 (as amended from time to time, the “Merger Agreement”), by and among Stamps.com, Stream Parent, LLC, a Delaware limited liability company (“Parent”), and Stream Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Stamps.com’s named executive officers (as defined in Item 402 of Regulation S-K) that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting from time to time, if necessary or appropriate as determined in the discretion of the board of directors of Stamps.com (the “Board of Directors”) or the Chairman of the Board of Stamps.com, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”). Parent and Merger Sub are entities that are affiliated with Thoma Bravo, L.P., a private equity investment firm. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Stamps.com and the separate corporate existence of Merger Sub will cease, with Stamps.com continuing as the surviving corporation (the “Merger”) and a wholly owned subsidiary of Parent.
If the Merger is completed, you will be entitled to receive $330.00 in cash, less any applicable withholding taxes, for each share of Stamps.com common stock that you own (unless you have properly exercised your appraisal rights).
The Board of Directors, after considering the factors more fully described in the enclosed proxy statement, has unanimously: (1) determined that it is fair to and in the best interests of Stamps.com and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger on the terms and conditions set forth in the Merger Agreement; (2) approved, adopted and declared advisable the Merger Agreement and the execution and delivery of the Merger Agreement by Stamps.com, the performance by Stamps.com of its obligations and other agreements under the Merger Agreement, and the consummation of the Merger and the other transactions contemplated by the Merger, on the terms and conditions set forth in the Merger Agreement; (3) directed that the Merger Agreement and the Merger be submitted for approval and adoption by the stockholders of the Company; and (4) resolved to recommend that Stamps.com stockholders adopt the Merger Agreement and approve the Merger in accordance with the General Corporation Law of the State of Delaware. The Board of Directors unanimously recommends that you vote:
(1)
“FOR” the adoption of the Merger Agreement;
(2)
“FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and
(3)
“FOR” the Adjournment Proposal, if necessary or appropriate.
The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is also attached as Annex A to the proxy statement.
The proxy statement describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.

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Whether or not you plan to virtually attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you virtually attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of Stamps.com common stock entitled to vote at the Special Meeting.
If you have any questions or need assistance voting your shares, please contact our proxy solicitor:
D.F. King & Co, Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokers, Call Collect: (212) 269-5550
All Others Call Toll Free: (866) 745-0267
Email: STAMPS@dfking.com
On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of this matter. Sincerely,
 
/s/ Ken McBride
 
 
 
Ken McBride
 
Chief Executive Officer
The accompanying proxy statement is dated August 30, 2021 and, together with the enclosed form of proxy card, is first being mailed on or about August 30, 2021.

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Stamps.com Inc.
1990 E. Grand Avenue
El Segundo, CA 90245
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 30, 2021
Notice is hereby given that a special meeting of stockholders (including any adjournments or postponements thereof, the “Special Meeting”) of Stamps.com Inc., a Delaware corporation (“Stamps.com”), will be held on September 30, 2021 at 9:00 a.m., Pacific Daylight Time. This Special Meeting will be a “virtual meeting” conducted solely by means of remote communication. You will be able to attend the Special Meeting online by logging in at www.virtualshareholdermeeting.com/STMP2021SM. The Special Meeting is being called for the following purposes:
1.
To consider and vote on the proposal to approve and adopt the Agreement and Plan of Merger, dated as of July 8, 2021 (as amended from time to time, the “Merger Agreement”), by and among Stamps.com, Stream Parent, LLC, a Delaware limited liability company (“Parent”), and Stream Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Stamps.com and the separate corporate existence of Merger Sub will cease, with Stamps.com continuing as the surviving corporation (the “Merger”) and a wholly owned subsidiary of Parent;
2.
To consider and vote on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Stamps.com’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”); and
3.
To consider and vote on any proposal to adjourn the Special Meeting from time to time, if necessary or appropriate as determined in the discretion of the Board of Directors or the Chairman of the Board of Stamps.com to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”).
Only Stamps.com stockholders of record as of the close of business on August 26, 2021, are entitled to notice of the Special Meeting and to vote at, participate in and examine the Company’s list of stockholders at the Special Meeting.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.

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Whether or not you plan to virtually attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you virtually attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote “FOR” the adoption of the Merger Agreement, “FOR”, on an advisory (non- binding) basis, the Compensation Proposal and “FOR” the Adjournment Proposal, if necessary or appropriate.
 
By Order of the Board of Directors,
 
 
 
/s/ Ken McBride
 
 
 
Ken McBride
 
Chief Executive Officer
Dated: August 30, 2021
 

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YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO VIRTUALLY ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
If you are a Stamps.com stockholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.
If you fail to (1) return your proxy card or voting instruction form, (2) grant your proxy electronically over the Internet or by telephone or (3) vote by ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal.
You should carefully read and consider the entire accompanying proxy statement and its annexes, including, but not limited to, the Merger Agreement, along with all of the documents incorporated by reference into the accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Stamps.com common stock, please contact our proxy solicitor:
D.F. King & Co, Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokers, Call Collect: (212) 269-5550
All Others Call Toll Free: (866) 745-0267
Email: STAMPS@dfking.com

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Annexes
Annex A
The Merger Agreement
Annex B
Opinion of J.P. Morgan Securities LLC
Annex C
Section 262 of the General Corporation Law of Delaware
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SUMMARY
This summary highlights selected information from this proxy statement related to the merger of Stream Merger Sub, Inc. with and into Stamps.com Inc. (the “Merger”), and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.” The Merger Agreement (as defined below) is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.
Except as otherwise specifically noted in this proxy statement, “Stamps.com,” “we,” “our,” “us,” the “Company” and similar words refer to Stamps.com Inc. Throughout this proxy statement, we refer to Stream Parent, LLC as “Parent” and Stream Merger Sub, Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated July 8, 2021, as amended from time to time, by and among Stamps.com, Parent and Merger Sub, as the “Merger Agreement,” our common stock, par value $0.001 per share as “Stamps.com common stock” and the holders of Stamps.com common stock, as “Stamps.com stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.
Parties Involved in the Merger
Stamps.com Inc.
Stamps.com is a leading provider of postage online and shipping software solutions to customers including consumers, small businesses, e-commerce shippers, enterprises, and high volume shippers. Stamps.com offers solutions that help businesses run their shipping operations more smoothly and function more successfully under the brand names Stamps.com, Endicia®, ShipStation®, ShippingEasy®, ShipWorks®, and MetaPack™. Stamps.com’s family of brands provides seamless access to mailing and shipping services through integrations with more than 500 unique partner applications. Stamps.com common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “STMP.”
Stream Parent, LLC
Parent was formed on July 2, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Stream Merger Sub, Inc.
Merger Sub is a wholly owned subsidiary of Parent and was formed on July 2, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Parent and Merger Sub are affiliates of Thoma Bravo Fund XIV, L.P. (the “Thoma Bravo Fund”) managed by Thoma Bravo, L.P. (formerly Thoma Bravo, LLC) (“Thoma Bravo”). Thoma Bravo is a leading private equity firm focused on the software and technology-enabled services sectors. At the Effective Time, Stamps.com, as the Surviving Corporation (each, as defined below), will be indirectly owned by the Thoma Bravo Fund.
In connection with the transactions contemplated by the Merger Agreement, the Thoma Bravo Fund has provided Parent with an equity commitment which, when taken together with the proceeds from the debt financing, is sufficient to fund the aggregate purchase price required to be paid at the closing of the Merger. In addition, the Thoma Bravo Fund has obtained a debt commitment sufficient to fund, together with cash on hand at Stamps.com, certain fees and expenses to be paid at the closing of the Merger, including any amounts required to terminate Stamps.com’s credit facility, subject to the terms and conditions of the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
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The Merger (page 22)
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Stamps.com and the separate corporate existence of Merger Sub will cease, with Stamps.com continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, Stamps.com common stock will no longer be publicly traded and will be delisted from Nasdaq. In addition, Stamps.com common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Stamps.com will no longer file periodic reports with the United States Securities and Exchange Commission (the “SEC”). If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the “DGCL”) (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent, Merger Sub and Stamps.com and specified in the certificate of merger, being referred to herein as the “Effective Time”).
Merger Consideration (page 59)
Stamps.com common stock
At the Effective Time, each then outstanding share of Stamps.com common stock (other than shares of Stamps.com common stock (1) held by Stamps.com as treasury stock, (2) owned by Parent or Merger Sub, (3) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub (collectively, the “Owned Company Shares”) or (4) owned by Stamps.com stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of Stamps.com common stock in accordance with Section 262 of the DGCL (the shares contemplated by this clause (4), collectively, the “Dissenting Company Shares”)) will be cancelled and extinguished and automatically converted into the right to receive an amount in cash equal to $330.00, without interest thereon (the “Per Share Price”), less any applicable withholding of taxes.
At or prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate consideration with a designated payment agent for payment of each share of Stamps.com common stock owned by each Stamps.com stockholder. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”
After the Merger is completed, you will have the right to receive the Per Share Price, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive payment for the “fair value” of their shares determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.
Treatment of Company Options and Company RSU Awards
The Company from time to time has granted options to purchase shares of Stamps.com common stock (each, a “Company Option”) and restricted stock units covering shares of Stamps.com common stock (each, a “Company RSU Award”). The Merger Agreement provides that equity awards, whether vested or unvested, that are outstanding as of immediately before the Effective Time will be cancelled and converted into cash consideration equal to, for Company RSU Awards, the product of (A) the aggregate number of shares of Stamps.com common stock subject to the Company RSU Award multiplied by (B) the Per Share Price, and for Company Options, the product of (A) the aggregate number of shares of Stamps.com common stock subject to such Company Option multiplied by (B) the excess, if any, of the Per Share Price over the applicable share exercise price under such Company Option. Payments in respect of the cancellation of Company RSU Awards and Company Options will be subject to any required withholdings of taxes. Any Company Options with a per share exercise price equal to or greater than $330.00 will be cancelled at the Effective Time for no payment or consideration. Stamps.com’s equity incentive plans will terminate as of the Effective Time. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Outstanding Company Options and Company RSU Awards.”
Treatment of Stamps.com Employee Stock Purchase Plan
The Merger Agreement generally provides that no new purchase intervals will begin or be extended under Stamps.com’s Employee Stock Purchase Plan (the “ESPP”) after July 8, 2021, and the ESPP will terminate
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immediately prior to, and effective as of, the Effective Time. In addition, no new participants will be permitted in the ESPP following July 8, 2021, or as soon as administratively practicable thereafter, and with respect to any purchase intervals in effect on July 8, 2021, as of and following such date, existing participants in the ESPP will not be allowed to increase payroll contribution rates or make separate non-payroll contributions to the ESPP, except as required by applicable law. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Treatment of Stamps.com Employee Stock Purchase Plan.”
Material U.S. Federal Income Tax Consequences of the Merger (page 53)
The receipt of cash by Stamps.com stockholders in exchange for shares of Stamps.com common stock in the Merger will be a taxable transaction to Stamps.com stockholders for U.S. federal income tax purposes. Such receipt of cash by each Stamps.com stockholder that is a U.S. Holder (as defined under the caption, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Stamps.com common stock surrendered in the Merger by such stockholder. Backup withholding taxes may also apply to the cash payments made pursuant to the Merger, unless such U.S. Holder complies with certification procedures under the backup withholding rules (generally, by providing a properly completed and executed IRS Form W-9 or applicable successor form).
A Stamps.com stockholder that is a Non-U.S. Holder (as defined under the caption, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Stamps.com common stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. Holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax (generally, by providing a properly completed and executed applicable IRS Form W-8 or applicable successor form).
Stamps.com stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”
Stamps.com stockholders should also consult their own tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under U.S. federal estate, gift and other non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction.
Appraisal Rights (page 48)
If the Merger is consummated, stockholders who continuously hold shares of Stamps.com common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw or waive their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL (“Section 262”). This means that Stamps.com stockholders may be entitled to have their shares of Stamps.com common stock appraised by the Delaware Court of Chancery, and to receive payment in cash of the “fair value” of their shares of Stamps.com common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, Stamps.com stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Stamps.com stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Stamps.com common stock.
To exercise appraisal rights, Stamps.com stockholders must: (1) submit a written demand for appraisal to Stamps.com before the vote is taken on the proposal to adopt the Merger Agreement; (2) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (3) continue to hold shares of Stamps.com common stock of record through the Effective Time; and (4) strictly comply with all other procedures for exercising appraisal rights
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under the DGCL. Failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Stamps.com unless certain stock ownership conditions are satisfied by Stamps.com stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, which is qualified in its entirety by Section 262, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 is reproduced in Annex C to this proxy statement. If you hold your shares of Stamps.com common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”
Litigation Related to the Merger (page 53)
Between August 23 and August 27, 2021, three lawsuits have been filed in the United States District Court for the Southern District of New York against Stamps.com and its directors: Stein v. Stamps.com Inc. et al., 1:21-cv-7108 (S.D.N.Y.); Hejazi v. Stamps.com Inc. et al., 1:21-cv-07227 (S.D.N.Y.); and Ciccotelli v. Stamps.com Inc. et al., 1:21-cv-07246 (S.D.N.Y.). The complaints name Stamps.com and the Stamps.com directors as defendants. The complaints each allege that the Preliminary Proxy Statement filed on August 19, 2021 relating to the Merger omitted material information that rendered it false and misleading. As a result of the alleged omissions, the lawsuits seek to hold Stamps.com and its directors liable for violating Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and additionally seeks to hold Stamps.com’s directors liable as control persons pursuant to Section 20(a) of the Exchange Act.
Stamps.com has not yet responded to the complaints filed in any of the above lawsuits. Each complaint seeks, among other relief, an injunction preventing the closing of the merger, rescission of the merger agreement or any of its terms to the extent already implemented or awarding of rescissory damages, damages, and an award of attorneys’ and experts’ fees. While Stamps.com believes the complaints are without merit, there can be no assurance that it will ultimately prevail in any or all such lawsuits. Additionally, additional lawsuits may be filed before the stockholder meeting and/or the consummation of the Merger.
Regulatory Approvals Required for the Merger (page 56)
Under the Merger Agreement, the Merger cannot be completed until the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and the Austrian Cartel Act 2005 (the “Austrian Cartel Act”) have each expired or been terminated or declaratory clearance confirmation has been received from the competent authority. For more information, please see the section of this proxy captioned “The Merger—Regulatory Approvals Required for the Merger.
Stamps.com and the Thoma Bravo Fund made the filings required under (i) the HSR Act on July 21, 2021 and (ii) the Austrian Cartel Act on July 29, 2021. The waiting period under the HSR Act has expired and declaratory clearance confirmation has been received under the Austrian Cartel Act.
Closing Conditions (page 75)
The obligations of Stamps.com, Parent and Merger Sub, as applicable, to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions), the following:
the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;
the expiration or termination of the applicable waiting period under the HSR Act;
with respect to the filing under the Austrian Cartel Act, the expiration of the applicable waiting period as dictated by the Federal Competition Authority or otherwise receiving a declaratory clearance decision from the Federal Competition Authority or the application for an in-depth review having been rejected or withdrawn;
the absence of any laws or court orders making the Merger illegal or otherwise prohibiting the Merger;
the accuracy of the representations and warranties of Stamps.com, Parent and Merger Sub in the Merger Agreement, subject, in certain instances, to materiality qualifiers, as of the Effective Time or the date in respect of which such representation or warranty was specifically made;
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the performance in all material respects by Stamps.com, Parent and Merger Sub of their respective obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time; and
in the case of Parent and Merger Sub, the absence of any continuing change, event, violation, effect, occurrence, development, circumstance or other matter at Stamps.com that, individually or in the aggregate, generally: (1) is or would reasonably be expected to be materially adverse (with certain limitations) to the business, assets or financial condition of Stamps.com and its subsidiaries (the “Company Group”), taken as a whole; or (2) would reasonably be expected to prevent, materially impair or materially delay the consummation of the Merger prior to the Termination Date.
Financing of the Merger (page 46)
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $6.6 billion. This amount includes funds needed to: (1) pay Stamps.com stockholders the amounts due under the Merger Agreement and (2) make payments in respect of our outstanding equity-based awards payable at closing of the Merger pursuant to the Merger Agreement.
In connection with the financing of the Merger, the Thoma Bravo Fund and Parent have entered into an equity commitment letter, dated as of July 8, 2021 (the “Equity Commitment Letter”), pursuant to which the Thoma Bravo Fund has agreed to provide Parent with an equity commitment which, when taken together with the proceeds from the debt financing, is sufficient to fund (i) the aggregate purchase price required to be paid at the closing of the Merger, (ii) the cash consideration required to be paid in connection with the Company RSU Awards and (iii) the cash consideration required to be paid in connection with the Company Options. Stamps.com has a contractual right to enforce the foregoing Equity Commitment Letter against the Thoma Bravo Fund, and under the terms of the Merger Agreement, Stamps.com has the right to specifically enforce Parent’s obligation to consummate the Merger upon receipt of the proceeds of the foregoing equity commitment.
In addition, in connection with the Merger Agreement, Parent entered into a debt commitment letter, dated July 8, 2021 (the “Debt Commitment Letter”) with certain commitment parties (the “Debt Commitment Parties”), pursuant to which the Debt Commitment Parties have committed to provide, upon certain terms and subject to certain conditions, Merger Sub with certain debt financing. A portion of the proceeds under this debt financing will be used for all fees and expenses to be paid at the closing of the Merger by Stamps.com, Parent or Merger Sub, including any amounts required to terminate that certain Amended and Restated Credit Agreement, dated as of June 29, 2020, by and among the Company, Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, BOFA Securities, Inc., JPMorgan Chase Bank, N.A. and the other parties thereto (the “Credit Facility”), subject to the terms and conditions of, the Merger Agreement.
Pursuant to the limited guaranty delivered by the Thoma Bravo Fund in favor of Stamps.com, dated as of July 8, 2021 (the “Guaranty”), the Thoma Bravo Fund has agreed to guarantee the payment of the liabilities and obligations of Parent or Merger Sub under the Merger Agreement, which are subject to an aggregate cap equal to $397,000,000, including amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Stamps.com, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger— Financing of the Merger.”
Required Stockholder Approval (page 17)
The affirmative vote of the holders of a majority of the outstanding shares of Stamps.com common stock is required to adopt the Merger Agreement. As of the close of business on August 26, 2021, 9,287,828 votes constitute a majority of the outstanding shares of Stamps.com common stock. Approval of the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Stamps.com’s named executive officers (as defined in Item 402 of Regulation S-K) that is based on or otherwise relates to the Merger Agreement, the Compensation Proposal and the proposal to adjourn the special meeting (including any adjournments or postponements thereof (the “Special Meeting”) from time to time, if necessary and appropriate as determined by the Board of Directors or the Chairman of the Board of Stamps.com, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”), whether or not a quorum is present, each require the affirmative vote of the holders of a majority of the shares of Stamps.com
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common stock virtually present in person, by remote communication, or represented by proxy at the Special Meeting and entitled to vote on the subject matter. The approval of the Compensation Proposal is advisory (non-binding) and is not a condition to the completion of the Merger.
As of August 26, 2021, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 685,370 shares of Stamps.com common stock, representing approximately 3.69% of the shares of Stamps.com common stock outstanding as of August 26, 2021 (and own Company Options to acquire an additional 641,720 shares (of which 425,758 shares are currently vested), representing approximately 6.91% of the shares of Stamps.com common stock outstanding when taking into account Company Options held, in the aggregate, by our directors and executive officers).
Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of Stamps.com common stock: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal. Certain executive officers, who hold an aggregate of 5,889 shares of Stamps.com common stock, representing less than 1% of our common stock at August 26, 2021, have entered into agreements to vote in favor of the Merger.
The Special Meeting (page 17)
Date, Time and Place
The Special Meeting of Stamps.com stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on September 30, 2021 at 9:00 a.m., Pacific Daylight Time. This Special Meeting will be a “virtual meeting” conducted solely online. You will be able to attend the Special Meeting online by logging in at www.virtualshareholdermeeting.com/STMP2021SM.
Record Date; Shares Entitled to Vote
You are entitled to vote at the Special Meeting if you owned shares of Stamps.com common stock at the close of business on August 26, 2021 (the “Record Date”). Each holder of Stamps.com common stock shall be entitled to one (1) vote for each such share owned at the close of business on the Record Date.
Quorum
As of August 26, 2021, there were 18,575,655 shares of Stamps.com common stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the shares of Stamps.com common stock issued and outstanding and entitled to vote thereat, virtually present in person, by remote communication, or represented by proxy, will constitute a quorum at the Special Meeting.
Recommendation of Stamps.com Board of Directors (page 31)
The Board of Directors has unanimously: (1) determined that it is fair to and in the best interests of Stamps.com and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger on the terms and conditions set forth in the Merger Agreement; (2) approved, adopted and declared advisable the Merger Agreement and the execution and delivery of the Merger Agreement by Stamps.com, the performance by Stamps.com of its obligations and other agreements under the Merger Agreement, and the consummation of the Merger and the other transactions contemplated by the Merger, on the terms and conditions set forth in the Merger Agreement; (3) directed that the Merger Agreement and the Merger be submitted for approval and adoption by the stockholders of the Company; and (4) resolved to recommend that Stamps.com stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL. The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.
Prior to the adoption of the Merger Agreement by Stamps.com stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its financial advisor and its outside legal counsel) that failure to do so would be reasonably likely to be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, providing prior written notice thereof to Parent and negotiating with Parent and its representatives in good faith so that a failure to make a Company Board Recommendation Change
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(as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change”) would no longer reasonably be likely to be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. The termination of the Merger Agreement by Stamps.com following the Board of Directors’ authorization for Stamps.com to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘Go Shop’ Period—Solicitation of Other Offers”) will result in the payment by Stamps.com of a termination fee of either (1) $99,500,000 if the Merger Agreement is terminated before the No Shop Period Start Date (as defined below) with respect to an Excluded Party, or (2) $199,000,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”
Opinion of J.P. Morgan Securities LLC (page 35)
Pursuant to an engagement letter dated April 29, 2021, Stamps.com retained J.P. Morgan Securities LLC (“J.P. Morgan”) as its financial advisor in connection with the proposed Merger.
At the meeting of the Board of Directors on July 8, 2021, J.P. Morgan rendered its oral opinion to the Board of Directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the Per Share Price to be paid to Stamps.com’s common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders. J.P. Morgan confirmed its July 8, 2021 oral opinion by delivering its written opinion to the Board of Directors of Stamps.com, dated July 8, 2021, that, as of such date, the Per Share Price to be paid to Stamps.com’s common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders.
The full text of the written opinion of J.P. Morgan, dated July 8, 2021, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Stamps.com’s stockholders are urged to read the opinion in its entirety.
J.P. Morgan’s written opinion was addressed to the Board of Directors of Stamps.com (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the Per Share Price to be paid in the proposed Merger and did not address any other aspect of the proposed Merger. J.P. Morgan expressed no opinion as to the fairness of the consideration paid to the holders of any other class of securities, creditors or other constituencies of Stamps.com or as to the underlying decision by Stamps.com to engage in the proposed Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The Opinion does not constitute a recommendation to any stockholder of Stamps.com as to how such stockholder should vote with respect to the proposed Merger or any other matter.
For more information, see the section of this proxy statement captioned “The Merger—Opinion of J.P. Morgan Securities LLC.”
Interests of Stamps.com’s Directors and Executive Officers in the Merger (page 42)
When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, Stamps.com stockholders should be aware that Stamps.com’s directors and executive officers may have interests in the Merger that are different from, or in addition to, Stamps.com stockholders more generally. In (1) evaluating and negotiating the Merger Agreement, (2) approving the Merger Agreement and the Merger and (3) recommending that the Merger Agreement be adopted by stockholders, the Board of Directors was aware of and considered these interests, among other matters, to the extent that these interests existed at the time. These interests include:
at the Effective Time of the Merger, each Company Option and Company RSU Award will receive the treatment described in the section of this proxy statement captioned “The Merger—Interests of Stamps.com’s Directors and Executive Officers in the Merger—Treatment of Company Options and Company RSU Awards”;
continued receipt of salary and benefits by executive officers who are expected to continue to be employed by the Surviving Corporation following the closing of the Merger.
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continued eligibility of Ken McBride, Stamps.com’s Chief Executive Officer, to receive severance payments, including on a change of control and accelerated vesting of equity awards issued to Stamps.com’s executive officers, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Stamps.com’s Directors and Executive Officers in the Merger—Potential Payments At or Following Change in Control”;
at the Effective Time, each unvested equity award held by Stamps.com’s non-employee directors will become fully vested; and
continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.
If the proposal to adopt the Merger Agreement is approved, the shares of Stamps.com common stock held by Stamps.com directors and executive officers will be treated in the same manner as outstanding shares of Stamps.com common stock held by all other stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of Stamps.com’s Directors and Executive Officers in the Merger.”
Alternative Acquisition Proposals (page 65)
The “Go-Shop” Period—Solicitation of Other Acquisition Proposals
Under the Merger Agreement, from the date of the Merger Agreement until 11:59 p.m., Pacific Time, on August 17, 2021 (the “No-Shop Period Start Date”), Stamps.com, its affiliates and their respective representatives had the right, directly or indirectly to: (1) solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist any inquiries regarding any proposal or inquiry that constitutes, could constitute or could reasonably be expected to lead to, an Acquisition Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘Go-Shop’ Period—Solicitation of Other Offers”), (2) subject to the entry into (and solely in accordance with) an acceptable confidentiality agreement, provide any information (including non-public information and data) relating to the Company Group to any third person with the intent to facilitate the making of an Acquisition Proposal and (3) continue, enter into, maintain, participate or otherwise engage in discussions with any third person (and its representatives and financing sources) with respect to any proposal or inquiry that constitutes, could constitute or could reasonably be expected to lead to, an Acquisition Proposal and cooperate with, assist or participate in, or facilitate in any way, such proposals or inquiries or any effort or attempt to make any proposal or inquiry that constitutes, could constitute or could reasonably be expected to lead to, an Acquisition Proposal.
The termination of the Merger Agreement by Stamps.com following the Board of Directors’ authorization for Stamps.com to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Stamps.com of a termination fee of either (1) $99,500,000 if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, or (2) $199,000,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.
The “No-Shop” Period—No Solicitation of Other Acquisition Proposals
Under the Merger Agreement, from the No-Shop Period Start Date until the Effective Time, Stamps.com may not: (1) solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any inquiries regarding any Acquisition Proposal or (2) engage in discussions or negotiations with, or provide any non-public information to, any person relating to an Acquisition Proposal.
Notwithstanding the foregoing restrictions, under specified certain circumstances, from the No-Shop Period Start Date until the adoption of the Merger Agreement by Stamps.com’s stockholders, Stamps.com may provide information to, and engage or participate in negotiations or substantive discussions with, a person in respect of a bona fide Acquisition Proposal, and otherwise facilitate such Acquisition Proposal or assist such person (and its representatives and financing sources) with such Acquisition Proposal (in each case, if requested by such person) if (and only if) the Board of Directors (or a committee thereof) determines in good faith (after consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal, and, in each case, the failure to take such actions in respect of such Acquisition Proposal would be reasonably likely to be inconsistent with the Board of Directors’ fiduciary duties
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to stockholders under applicable law. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘No-Shop’ Period—No Solicitation of Other Offers.”
After the No-Shop Period Start Date but prior to the adoption of the Merger Agreement by Stamps.com’s stockholders, Stamps.com is entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal if it complies with certain procedures in the Merger Agreement, including, but not limited to, providing prior written notice to Parent at least two business days prior to such termination in advance to the effect that the Board of Directors (or a committee thereof) has (1) received a bona fide Acquisition Proposal that has not been withdrawn; (2) concluded in good faith that such Acquisition Proposal constitutes a Superior Proposal; and (3) resolved to effect a Company Board Recommendation Change or to terminate the Merger Agreement absent any revision to the terms and conditions of the Merger Agreement, which notice will include the identity of the person or “group” of persons making such Acquisition Proposal (unless such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person or “group” of persons that was in effect on the date of the Merger Agreement), the material terms thereof and copies of all relevant documents relating to such Acquisition Proposal.
The termination of the Merger Agreement by Stamps.com following the Board of Directors’ authorization for Stamps.com to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Stamps.com of a termination fee of either (1) $99,500,000 if the Merger Agreement is terminated before the No-Shop Period Start Date with respect to an Excluded Party, or (2) $199,000,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”
Termination of the Merger Agreement (page 77)
In addition to the circumstances described above, Parent and Stamps.com have certain rights to terminate the Merger Agreement under customary circumstances, including by mutual agreement, the imposition of laws or non-appealable court orders that make the Merger illegal or otherwise prohibit the Merger, an uncured breach of the Merger Agreement by the other party, if the Merger has not been consummated by 11:59 p.m., Pacific Time, on January 8, 2022, or if Stamps.com stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof). Under some circumstances, (1) Stamps.com is required to pay Parent a termination fee equal to either $99,500,000 or $199,000,000; and (2) Parent is required to pay Stamps.com a termination fee equal to $365,000,000. Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
Effect on Stamps.com if the Merger is Not Completed (page 23)
If the Merger Agreement is not adopted by Stamps.com stockholders, or if the Merger is not completed for any other reason:
i.
the stockholders of Stamps.com will not be entitled to, nor will they receive, any payment for their respective shares of Stamps.com common stock pursuant to the Merger Agreement;
ii.
(a) Stamps.com will remain an independent public company; (b) Stamps.com common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act; and (c) Stamps.com will continue to file periodic reports with the SEC; and
iii.
under certain specified circumstances, Stamps.com will be required to pay Parent a termination fee of either $99,500,000 or $199,000,000, upon the termination of the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
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QUESTIONS AND ANSWERS
The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”
Q:
Why am I receiving these materials?
A:
The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Stamps.com common stock in connection with the solicitation of proxies to be voted at the Special Meeting.
Q:
When and where is the Special Meeting?
A:
The Special Meeting will take place on September 30, 2021 at 9.00 a.m., Pacific Daylight Time. This Special Meeting will be a “virtual meeting” conducted solely online. You will be able to attend the Special Meeting online by logging in at www.virtualshareholdermeeting.com/STMP2021SM.
Q:
What am I being asked to vote on at the Special Meeting?
A:
You are being asked to vote on the following proposals:
to adopt the Merger Agreement pursuant to which Merger Sub will merge with and into Stamps.com, and Stamps.com will become a wholly owned subsidiary of Parent;
to approve, on an advisory (non-binding) basis, the Compensation Proposal; and
to approve the Adjournment Proposal, if necessary or appropriate.
Q:
Who is entitled to vote at the Special Meeting?
A:
Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Stamps.com common stock shall be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each such share owned at the close of business on the Record Date.
Q:
May I attend the Special Meeting and vote in person?
A:
As the Special Meeting is being conducted via an audio webcast, there is no physical meeting location. To attend the Special Meeting, log in at www.virtualshareholdermeeting.com/STMP2021SM. You will need your unique control number included on your proxy card or on the instructions that accompanied your proxy materials. We recommend that you log in a few minutes before the meeting to ensure you are logged in when the meeting starts. If you encounter any technical difficulties accessing the virtual meeting, a toll-free number will be available to assist.
If your shares are held through a broker, trustee or other nominee, it is likely that they are registered in the name of the nominee and you are the beneficial owner of shares held in street name. As the beneficial owner of shares held for your account, you have the right to direct the registered holder to vote your shares as you instruct. Your broker, trustee or other nominee has provided a voting instruction card for you to use in directing how your shares are to be voted. As a beneficial owner, you will need to obtain a “legal proxy” from your broker, trustee or other nominee to vote your shares online during the virtual Special Meeting. We will not be required to allow access to the Special Meeting to anyone that does not log in at www.virtualshareholdermeeting.com/STMP2021SM with valid credentials.
Once online access to the Special Meeting is open, shareholders may submit questions, if any, on www.virtualshareholdermeeting.com/STMP2021SM. You will need your unique control number included on your proxy card or on the instructions that accompanied your proxy materials. Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. As appropriate, we may answer some questions in writing and post the answers on our website following the Special Meeting. You may vote your shares at the Special Meeting even if you have previously submitted your vote.
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Q:
Why did we choose to hold a virtual Special Meeting?
Our Board decided to hold the Special Meeting virtually in response to public health concerns over, large gatherings of people in order to help limit potential transmission of COVID-19. Furthermore, our experience with virtual meetings demonstrated that the goals of accessibility and stockholder participation can be well served by the virtual format.
Q:
Do you expect the Merger to be taxable to Stamps.com stockholders?
The exchange of Stamps.com common stock for cash in the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. In general, you will recognize gain or loss equal to the difference between (1) the aggregate Per Share Merger Consideration you receive and (2) the adjusted tax basis of the shares of common stock you surrender in the Merger. If you are a Non-U.S. Holder, your exchange of shares of common stock for the Per Share Merger Consideration generally will not result in U.S. federal income tax unless you have certain connections with the United States. You should read the section entitled “The Merger - Material U.S. Federal Income Tax Consequences of the Merger” and consult your tax advisors regarding the U.S. federal income tax consequences of the Merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local, or non-U.S. taxing jurisdiction.
Q:
What will I receive if the Merger is completed?
A:
Upon completion of the Merger, you will be entitled to receive the Per Share Merger Consideration (as defined in the Merger Agreement) of $330.00 in cash, less any applicable withholding taxes, for each share of Stamps.com common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of Stamps.com common stock, you will receive $33,000 in cash in exchange for your shares of Stamps.com common stock, less any applicable withholding taxes.
Q:
What vote is required to adopt the Merger Agreement?
A:
The affirmative vote of the holders of a majority of the outstanding shares of Stamps.com common stock is required to adopt the Merger Agreement.
If a quorum is present at the Special Meeting, the failure of any stockholder of record to vote his or her shares at the Special Meeting by: (1) submitting a signed proxy card; (2) granting a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (3) voting in person by ballot at the Special Meeting will have the same effect as a voting such shares “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. Each “broker non-vote” (if any) will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy card will be voted: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.
Q:
What happens if the Merger is not completed?
A:
If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of Stamps.com common stock. Instead, Stamps.com will remain an independent public company, Stamps.com common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act, and we will continue to file periodic reports with the SEC.
Under specified circumstances, Stamps.com will be required to pay Parent a termination fee of either $99,500,000 or $199,000,000, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.
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Q:
Why are the stockholders being asked to cast an advisory (non-binding) vote to approve the Compensation Proposal?
A:
The Exchange Act and applicable SEC rules thereunder require Stamps.com to seek an advisory (non-binding) vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger.
Q:
What vote is required to approve the Compensation Proposal and the Adjournment Proposal?
A:
The affirmative vote of the holders of a majority of the shares virtually present in person, by remote communication, or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of each of the Compensation Proposal and the Adjournment Proposal.
Q:
What will happen if the stockholders do not approve the Compensation Proposal at the Special Meeting?
A:
Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Stamps.com. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Stamps.com’s named executive officers in accordance with the terms and conditions of the applicable agreements.
Q:
What do I need to do now?
A:
You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or by telephone up until 11:59 p.m. Eastern Time the day before the meeting date (using the instructions provided in the enclosed proxy card), so that your shares can be voted at the Special Meeting. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares.
Q:
Should I surrender my book-entry shares now?
A:
No. After the Merger is completed, the payment agent will send each holder of record a letter of transmittal and written instructions that explain how to exchange shares of Stamps.com common stock represented by such holder’s book-entry shares for merger consideration.
Q:
What happens if I sell or otherwise transfer my shares of Stamps.com common stock after the Record Date but before the Special Meeting?
A:
The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Stamps.com common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Stamps.com in writing of such special arrangements, you will transfer the right to receive the Per Share Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of Stamps.com common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card).
Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Stamps.com.
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If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of Stamps.com common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to virtually attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
Q:
How may I vote?
A:
If you are a stockholder of record (that is, if your shares of Stamps.com common stock are registered in your name with Computershare, our transfer agent), there are four ways to vote:
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;
by visiting the Internet at the address on your proxy card up until 11:59 p.m. Eastern Time the day before the meeting date;
by calling toll-free (within the U.S. or Canada) at the phone number on your proxy card up until 11:59 p.m. Eastern Time the day before the meeting date; or
by attending the Special Meeting virtually and voting in person by ballot.
A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Stamps.com common stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet or by telephone, you may incur costs such as Internet access and telephone charges for which you will be responsible.
Even if you plan to virtually attend the Special Meeting in person, you are strongly encouraged to vote your shares of Stamps.com common stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Stamps.com common stock virtually in person by ballot at the Special Meeting even if you have previously voted by proxy. If you are virtually present at the Special Meeting and vote in person by ballot, your previous vote by proxy will not be counted.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.
Q:
If my broker holds my shares in “street name,” will my broker vote my shares for me?
A:
No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal.
Q:
May I change my vote after I have mailed my signed and dated proxy card?
A:
Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:
signing another proxy card with a later date and returning it to us prior to the Special Meeting;
submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to the Secretary of Stamps.com; or
attending the Special Meeting virtually and voting in person by ballot.
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If you hold your shares of Stamps.com common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
Q:
What is a proxy?
A:
A proxy is your legal designation of another person to vote your shares of Stamps.com common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Stamps.com common stock is called a “proxy card.” Ken McBride, our Chief Executive Officer, and Matthew A. Lipson, our Chief Legal Officer and Secretary, are the proxy holders for the Special Meeting, with full power of substitution and re-substitution.
Q:
If a stockholder gives a proxy, how are the shares voted?
A:
Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.
Q:
What should I do if I receive more than one set of voting materials?
A:
Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive.
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.
Q:
Where can I find the voting results of the Special Meeting?
A:
Stamps.com intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Stamps.com files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.”
Q:
When do you expect the Merger to be completed?
A:
We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the fourth quarter of 2021. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.
Q:
Who can help answer my questions?
A:
If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Stamps.com common stock, please contact our proxy solicitor:
D.F. King & Co, Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokers, Call Collect: (212) 269-5550
All Others Call Toll Free: (866) 745-0267
Email: STAMPS@dfking.com
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FORWARD-LOOKING STATEMENTS
This proxy statement, and any documents to which Stamps.com refers to in this proxy statement, contains not only historical information, but also forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Stamps.com’s current expectations or beliefs concerning future events, including but not limited to the expected completion and timing of the proposed transaction, expected benefits and costs of the proposed transaction, management plans and other information relating to the proposed transaction, strategies and objectives of Stamps.com for future operations and other information relating to the proposed transaction. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “forecasts,” “should,” “estimates,” “contemplate,” “future,” “goal,” “potential,” “predict,” “project,” “projection,” “target,” “seek,” “may,” “will,” “could,” “should,” “would,” “assuming,” “depend” and similar expressions are intended to identify forward-looking statements. Stockholders are cautioned that any forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including in our most recent filings on Forms 10-K and 10-Q, factors and matters described or incorporated by reference in this proxy statement, and the following factors:
the inability to complete the Merger due to the failure to obtain stockholder approval or failure to satisfy the other conditions to the completion of the Merger, including, but not limited to, receipt of required regulatory approvals;
the risk that the Merger Agreement may be terminated in certain circumstances that require us to pay Parent a termination fee of either $99.5 million or $199 million;
the outcome of any legal proceedings that may be instituted against us and others related to the Merger Agreement;
risks that the proposed Merger disrupts our current operations or affects our ability to retain or recruit key employees;
the fact that receipt of the all-cash Per Share Merger Consideration (as defined in the Merger Agreement) would be taxable to Stamps.com stockholders that are treated as U.S. Holders (as defined under the caption “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) for U.S. federal income tax purposes;
the fact that, if the Merger is completed, stockholders will forgo the opportunity to realize the potential long-term value of the successful execution of Stamps.com’s current strategy as an independent public company;
the fact that under the terms of the Merger Agreement, Stamps.com is unable to solicit other Acquisition Proposals after the No-Shop Period Start Date;
the effect of the announcement or pendency of the Merger on our business relationships, operating results and business generally;
the amount of the costs, fees, expenses and charges related to the Merger Agreement or the Merger;
risks related to the Merger diverting management’s or employees’ attention from ongoing business operations;
risks that our stock price may decline significantly if the Merger is not completed;
risks related to obtaining the requisite consents to the Merger, including the timing and receipt of regulatory approvals from various governmental entities, including any conditions, limitations or restrictions placed on these approvals, and the risk that one or more governmental entities may deny approval; and
other risks relating to the operation of our business described in our filings with the SEC.
Consequently, all of the forward-looking statements that we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including: (1) the information contained under this
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caption; and (2) the information contained under the caption “Risk Factors,” and information in our consolidated financial statements and notes thereto included in our most recent filings on Forms 10-K and 10-Q. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.
Except as required by applicable law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any future disclosures that we make on related subjects as may be detailed in our other filings made from time to time with the SEC.
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THE SPECIAL MEETING
The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.
Date, Time and Place
We will hold the Special Meeting on September 30, 2021 at 9:00 a.m., Pacific Daylight Time. This Special Meeting will be a “virtual meeting” conducted solely online. You will be able to attend the Special Meeting online by logging in at www.virtualshareholdermeeting.com/STMP2021SM.
Purpose of the Special Meeting
At the Special Meeting, we will ask stockholders to vote on proposals to: (1) adopt the Merger Agreement; (2) approve, on an advisory (non-binding) basis, the Compensation Proposal; and (3) approve the Adjournment Proposal, if necessary or appropriate.
Record Date; Shares Entitled to Vote; Quorum
Only stockholders of record as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A complete list of stockholders will be available for examination by any stockholder commencing no later than September 20, 2021 at our headquarters at 1990 E. Grand Ave., El Segundo, California 90245. If you would like to view the list, please contact our Investor Relations Department to schedule an appointment by calling (310) 482-5830. In addition, the list will be available for inspection by stockholders on the virtual meeting website during the meeting. As of the August 26, 2021 Record Date, there were 18,575,655 shares of Stamps.com common stock outstanding and entitled to vote at the Special Meeting.
The holders of a majority of the stock issued and outstanding and entitled to vote at the Special Meeting that are virtually present in person, by remote communication or represented by proxy, will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.
Special Meeting Attendance
The audio webcast of the Special Meeting will begin promptly at 9:00 a.m., Pacific Daylight Time. Online access to the audio webcast will open approximately thirty minutes prior to the start of the Special Meeting to allow time for you to log in and test your computer audio system. We encourage you to access the meeting prior to the start time.
As the Special Meeting is being conducted via an audio webcast, there is no physical meeting location. To attend the Special Meeting, log in at www.virtualshareholdermeeting.com/STMP2021SM. You will need your unique control number included on your proxy card or on the instructions that accompanied your proxy materials. We recommend that you log in a few minutes before the meeting to ensure you are logged in when the meeting starts. If you encounter any technical difficulties accessing the virtual meeting, a toll-free number will be available to assist.
Once online access to the Special Meeting is open, shareholders may submit questions, if any, on www.virtualshareholdermeeting.com/STMP2021SM. You will need your unique control number included on your proxy card or on the instructions that accompanied your proxy materials. Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. As appropriate, we may answer some questions in writing and post the answers on our website following the Special Meeting. You may vote your shares at the Special Meeting even if you have previously submitted your vote.
Vote Required; Abstentions and Broker Non-Votes
The affirmative vote of the holders of a majority of the outstanding shares of Stamps.com common stock is required to adopt the Merger Agreement. As of August 26, 2021, 9,287,828 votes constitute a majority of the outstanding shares of Stamps.com common stock. Adoption of the Merger Agreement by stockholders is a condition to the closing of the Merger.
The affirmative vote of the holders of a majority of the shares virtually present in person, by remote communication or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required to approve, on an advisory (non-binding) basis, the Compensation Proposal.
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Approval of the Adjournment Proposal whether or not a quorum is present, requires the affirmative vote of the holders of a majority of the shares virtually present in person, by remote communication or represented by proxy at the Special Meeting and entitled to vote on the subject matter.
If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement and “AGAINST” the proposal to approve each of the Compensation Proposal and the Adjournment Proposal.
Each “broker non-vote” (if any) will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Stamps.com does not expect any broker non-votes at the Special Meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas each of the proposals to be presented at the Stamps.com Special Meeting is considered non-routine. As a result, no broker will be permitted to vote your shares of Stamps.com common stock at the Special Meeting without receiving instructions. Failure to instruct your broker on how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
Shares Held by Stamps.com’s Directors and Executive Officers
As of August 26, 2021, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 685,370 shares of Stamps.com common stock, representing approximately 3.69% of the shares of Stamps.com common stock outstanding as of August 26, 2021 (and own Company Options to acquire an additional 641,720 shares (of which 425,758 shares are currently vested), representing approximately 6.91% of the shares of Stamps.com common stock outstanding when taking into account Company Options held, in the aggregate, by our directors and executive officers).
Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of Stamps.com common stock: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal. Certain executive officers, who hold an aggregate of 5,889 shares of Stamps.com common stock, representing less than 1% of our common stock at August 26, 2021, have entered into agreements to vote in favor of the Merger.
Voting of Proxies
If your shares are registered in your name with our transfer agent, Computershare, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card available and follow the instructions on the proxy card in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.
If you plan to virtually attend the Special Meeting and wish to vote in person, a ballot will be available online at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to virtually attend the Special Meeting in person. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any previously submitted proxy.
Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return
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your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not virtually attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will not have any effect on the Compensation Proposal or the Adjournment Proposal.
Revocability of Proxies
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:
signing another proxy card with a later date and returning it to us prior to the Special Meeting;
submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to our Corporate Secretary; or
attending the Special Meeting and voting in person by ballot.
If you have submitted a proxy, your appearance at the Special Meeting will not have the effect of revoking your prior proxy; provided that you do not vote in person or submit an additional proxy or revocation, which, in each case, will have the effect of revoking your proxy.
If you hold your shares of Stamps.com common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting, as adjourned, postponed or delayed.
Recommendation of the Board of Directors
The Board of Directors has unanimously: (1) determined that it is fair to and in the best interests of Stamps.com and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger on substantially the terms and conditions set forth in the Merger Agreement; (2) approved, adopted and declared advisable the Merger Agreement and the execution and delivery of the Merger Agreement by Stamps.com, the performance by Stamps.com of its obligations and other agreements under the Merger Agreement, and the consummation of the Merger and the other transactions contemplated by the Merger, on substantially the terms and conditions set forth in the Merger Agreement; (3) directed that the Merger Agreement and the Merger be submitted for approval and adoption by the stockholders of the Company; and (4) resolved to recommend that Stamps.com stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL. The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.
Solicitation of Proxies
The expense of soliciting proxies will be borne by Stamps.com. We have retained D.F. King & Co, Inc. (“D.F. King”), a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $15,000 plus expenses. We will also indemnify D.F. King against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.
Anticipated Date of Completion of the Merger
Assuming timely satisfaction of necessary closing conditions, including the approval by stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the fourth calendar quarter of 2021.
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Appraisal Rights
If the Merger is consummated, stockholders who continuously hold shares of Stamps.com common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and do not withdraw or waive their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262. This means that holders of shares of Stamps.com common stock who perfect their appraisal rights, who do not thereafter withdraw their demand for appraisal, and who follow the procedures in the manner prescribed by Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Stamps.com common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be fair value, if any, (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger— Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to review Section 262 carefully and to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares.
To exercise your appraisal rights, you must: (1) submit a written demand for appraisal to Stamps.com before the vote is taken on the adoption of the Merger Agreement; (2) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (3) continue to hold your shares of Stamps.com common stock of record through the Effective Time; and (4) strictly comply with all other procedures for exercising appraisal rights under Section 262. Your failure to follow exactly the procedures specified under Section 262 may result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the Merger unless certain stock ownership conditions are satisfied by the stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” which is qualified in its entirety by Section 262, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 is reproduced and attached as Annex C to this proxy statement and incorporated herein by reference. If you hold your shares of Stamps.com common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.
Delisting and Deregistration of Stamps.com common stock
If the Merger is completed, the shares of Stamps.com common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and shares of Stamps.com common stock will no longer be publicly traded.
Other Matters
At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of Stamps.com common stock will be voted in accordance with the discretion of the appointed proxy holders.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting
The proxy statement is available at https://investor.Stamps.com and clicking on the link titled “SEC Filings”.
Householding of Special Meeting Materials
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.
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If you would like to receive your own set of our disclosure documents this year or in future years, please contact us using the instructions set forth below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.
If you are a stockholder of record, you may contact us by writing to Stamps.com at 1990 E. Grand Avenue, El Segundo, CA 90245. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.
Questions and Additional Information
If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Stamps.com common stock, please contact our proxy solicitor:
D.F. King & Co, Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokers, Call Collect: (212) 269-5550
All Others Call Toll Free: (866) 745-0267
Email: STAMPS@dfking.com
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THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.
Parties Involved in the Merger
Stamps.com Inc.
1990 E. Grand Avenue
El Segundo, CA 90245
(310) 482-5800
Stamps.com is a leading provider of postage online and shipping software solutions to customers including consumers, small businesses, e-commerce shippers, enterprises, and high volume shippers. Stamps.com offers solutions that help businesses run their shipping operations more smoothly and function more successfully under the brand names Stamps.com, Endicia®, ShipStation®, ShippingEasy®, ShipWorks®, and MetaPack™. Stamps.com’s family of brands provides seamless access to mailing and shipping services through integrations with more than 500 unique partner applications. Stamps.com common stock is listed on Nasdaq under the symbol “STMP.”
Stream Parent, LLC
c/o Thoma Bravo, L.P.
600 Montgomery Street, 20th Floor
San Francisco, CA 94111
(415) 263-3660
Parent was formed on July 2, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Stream Merger Sub, Inc.
c/o Thoma Bravo, L.P.
600 Montgomery Street, 20th Floor
San Francisco, CA 94111
(415) 263-3660
Merger Sub is a wholly owned subsidiary of Parent and was formed on July 2, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Parent and Merger Sub are affiliates of the Thoma Bravo Fund, managed by Thoma Bravo. Thoma Bravo is a leading private equity investment firm focused on the software and technology-enabled services sectors. At the Effective Time, Stamps.com, as the Surviving Corporation, will be indirectly owned by the Thoma Bravo Fund.
In connection with the transactions contemplated by the Merger Agreement, the Thoma Bravo Fund has provided Parent with an equity commitment which, when taken together with the proceeds from the debt financing, is sufficient to fund the aggregate purchase price required to be paid at the closing of the Merger. In addition, the Thoma Bravo Fund has obtained a debt commitment sufficient to fund, together with cash on hand at Stamps.com, certain fees and expenses to be paid at the closing of the Merger, including any amounts required to terminate Stamps.com’s credit facility, subject to the terms and conditions of, the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”
Effect of the Merger
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Stamps.com and the separate corporate existence of Merger Sub will cease, with Stamps.com continuing as the Surviving Corporation. As a result of the Merger, Stamps.com will become a wholly owned subsidiary of Parent, and Stamps.com common stock will no longer be publicly traded and will be delisted from Nasdaq. In addition,
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Stamps.com common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.
The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).
Effect on Stamps.com if the Merger is Not Completed
If the Merger Agreement is not adopted by stockholders, or if the Merger is not completed for any other reason:
i.
the stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Stamps.com common stock pursuant to the Merger Agreement;
ii.
(a) Stamps.com will remain an independent public company; (b) Stamps.com common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act; and (c) Stamps.com will continue to file periodic reports with the SEC;
iii.
we anticipate that (a) management will operate the business in a manner similar to that in which it is being operated today and (b) stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect to Stamps.com’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which Stamps.com operates and economic conditions;
iv.
the price of Stamps.com common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of Stamps.com common stock would return to the price at which it trades as of the date of this proxy statement;
v.
the Board of Directors will continue to evaluate and review Stamps.com’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that Stamps.com’s business, prospects and results of operations will be adversely impacted; and
vi.
under specified circumstances, Stamps.com will be required to pay Parent a termination fee of either $99.5 million or $199 million, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.
Merger Consideration
At the Effective Time, each share of Stamps.com common stock (other than Owned Company Shares or Dissenting Company Shares) outstanding as of immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the Per Share Price, less any applicable withholding of taxes.
At or prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate consideration with a designated payment agent for payment of each share of Stamps.com common stock owned by each Stamps.com stockholder. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”
After the Merger is completed, you will have the right to receive the Per Share Price in respect of each share of Stamps.com common stock that you own (less any applicable withholding of taxes), but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights will have a right to receive payment of the “fair value” of their shares as determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “—Appraisal Rights.”
Background of the Merger
The Board of Directors, with Stamps.com senior management, regularly and in the ordinary course of business, reviews and assesses Stamps.com’s long-term strategy, financial performance and operations in light of developments in Stamps.com’s business and overall developments in the industry in which it operates, taking into account the overall performance of the market and the mailing and shipping industries generally. As part of this ongoing review
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and assessment, the Board of Directors considers various alternatives to Stamps.com’s long-term strategy, including alternatives involving possible strategic acquisitions to expand the markets and service offerings that Stamps.com provides, alternatives involving possible organic expansion into new markets and service offerings that Stamps.com provides, and alternatives involving possible strategic transactions and partnerships with third parties. Stamps.com regularly engages with its stockholders to discuss and to solicit feedback on their views and perspectives of Stamps.com’s long-term business plan, strategic opportunities and value.
In May 2017 representatives of Thoma Bravo contacted Mr. Ken McBride, CEO of Stamps.com, to express an interest in pursuing a transaction in which Thoma Bravo would acquire Stamps.com indicating it would be willing to pay a price of $135.00 per share. The closing market price per share of Stamps.com common stock during the month of May 2017 ranged from approximately $103 to $141. The Board of Directors discussed this indication of interest and the then current prospects for the Stamps.com’s business and determined not to proceed with any discussion or confidential information sharing with Thoma Bravo at that time.
In May 2019 representatives of Thoma Bravo contacted Mr. McBride to express an interest in pursuing a transaction in which Thoma Bravo would acquire Stamps.com indicating it would be willing to pay a price of $50.00 per share. The closing market price per share of Stamps.com common stock during the month of May 2019 ranged from approximately $34 to $87. The Board of Directors discussed this indication of interest and the then current prospects for the Stamps.com’s business and determined not to proceed with any discussion or confidential information sharing with Thoma Bravo at that time.
In August 2019, in connection with commercial discussions with an industry participant (“Industry Participant A”), Industry Participant A discussed the possibility of making an equity investment in Stamps.com. These discussions did not progress beyond preliminary or exploratory discussions and Industry Participant A indicated that it was not interested in further pursuing the discussions.
On March 2, 2021, financial sponsor (“Sponsor A”) contacted David Habiger, a director of Stamps.com, who had a prior relationship with a portfolio company of Sponsor A that concluded several years earlier, asking for an introduction to Mr. McBride. Mr. Habiger did not engage in any substantive discussions with Sponsor A and shortly thereafter made an introduction of Sponsor A to Mr. McBride.
On March 9, 2021 Sponsor A contacted Mr. McBride. The discussion addressed investor-related matters and did not discuss any potential acquisition of Stamps.com.
On April 14, 2021, Sponsor A sent Mr. McBride a preliminary, non-binding written indication of interest to acquire Stamps.com for a per share price range of $260 to $270 in cash, which represented a 25% to 30% premium to Stamps.com’s closing price as of April 13, 2021 and a 30% to 35% premium to Stamps.com’s 60-day volume weighted average trading price at that time. The proposal did not include any other material terms. Later that day, Mr. McBride shared the letter from Sponsor A with the Board of Directors and Proskauer Rose LLP (“Proskauer”), Stamps.com’s general outside legal counsel who from time to time has advised Stamps.com on a number of matters.
On April 21, 2021, the Board of Directors met virtually and discussed the indication of interest from Sponsor A. In the course of this meeting, Matthew Lipson, Chief Legal Officer of Stamps.com, provided the directors with an overview of their fiduciary duties. Mr. Habiger described Sponsor A’s outreach to him and how he made the introduction to Mr. McBride. Stamps.com senior management provided a summary of Sponsor A’s proposal. The Board of Directors discussed overall strategy to maximize stockholder value, including engaging in a sales process relative to other opportunities available to Stamps.com, the manner of conducting, and timing of, a sale process, valuation, business risks and other parties that could potentially be interested in acquiring Stamps.com. The Board also discussed the possibility of retaining a financial advisor and authorized management to approach a potential financial advisor in connection with a possible transaction. After discussion the Board of Directors instructed Mr. McBride to notify Sponsor A that it was rejecting the proposal at the proposed price range and to separately communicate to Sponsor A that the Board of Directors could potentially be open to considering a proposal at a higher valuation.
On April 21, 2021, Mr. McBride sent a letter to Sponsor A stating that at the price range indicated in Sponsor A’s proposal Stamps.com had no interest in pursuing a transaction. Mr. McBride the same day communicated telephonically with a representative of Sponsor A that the Board of Directors was open to considering other proposals
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from Sponsor A, but at a higher valuation. That same day Sponsor A sent a letter to Mr. McBride requesting access to confidential information and time with management in order to revisit Sponsor A’s original offer price. Sponsor A also provided Stamps.com with a form of non-disclosure agreement.
Between April 22, 2021 and April 29, 2021, members of Stamps.com senior management, spoke with J.P. Morgan concerning its possible retention as financial advisor. Stamps.com senior management approached J.P. Morgan concerning the engagement given Stamps.com’s long-term relationship with J.P. Morgan, J.P. Morgan’s strength as a financial advisor and the historical and ongoing discussions Stamps.com senior management had with J.P. Morgan on a variety of topics including capital raising and mergers and acquisition transactions.
During the period between April 22, 2021 and April 29, 2021, J.P. Morgan provided a proposal for its engagement as a financial advisor and provided a draft of an engagement letter, which Stamps.com senior management and Proskauer negotiated with J.P. Morgan. J.P. Morgan also provided Stamps.com with a presentation, which, among other things addressed preliminary valuation perspectives, process alternatives for pursuing a transaction (including use of a post-signing “go-shop”) and a review of potential buyers, including highlighting Sponsor A, Thoma Bravo, and Industry Participant A as the most logical buyers, based largely upon the past interest such parties had expressed in a potential transaction with Stamps.com and in the case of Sponsor A and Thoma Bravo, the size and type of transactions such sponsors have historically pursued.
On April 22, 2021, Mr. McBride informed Sponsor A that the Board was reviewing its April 21, 2021 letter and list of requested due diligence items and provided Sponsor A with a form of non-disclosure agreement that Stamps.com would be willing to execute in order to provide Sponsor A access to Stamps.com confidential information.
On April 29, 2021, the Board of Directors met virtually, among other things, to discuss with Stamps.com’s senior management and Proskauer the process of considering strategic transactions and the retention of a financial advisor. At the meeting Proskauer made a presentation concerning the fiduciary duties of the Board of Directors in considering strategic transactions. Directors and members of Stamps.com senior management also discussed various options available to Stamps.com to enhance stockholder value. These considerations included Stamps.com’s continued operation as a standalone company, review of discussions to date with Sponsor A, and potential strategic transactions involving one or more other financial or industry participants. The Board also discussed the process going forward in connection with consideration of strategic transactions, the non-disclosure agreement, including the proposed standstill included in the form of non-disclosure agreement, and the diligence requests received from Sponsor A. Stamps.com senior management summarized for the Board of Directors the previously noted presentation that had been received from J.P. Morgan prior to the meeting concerning the potential process, preliminary valuation perspectives and the universe of potential buyers. In the presentation, J.P. Morgan had, as previously noted, indicated that the most logical buyers were Sponsor A, Thoma Bravo and Industry Participant A. Stamps.com senior management noted that both Thoma Bravo and Industry Participant A had previously expressed interest in making acquisition or investment proposals, as noted above. At this meeting Mr. Habiger expressly disclosed to the Board of Directors his conflict of interest involving Thoma Bravo, including that he was President of J.D. Power, which was a portfolio company of Thoma Bravo and that he had investments in several funds managed by Thoma Bravo. Mr. Habiger also expressly disclosed to the Board of Directors his prior relationship with a company owned by Sponsor A, which had concluded several years earlier. Having been informed regarding Mr. Habiger’s relationship to Thoma Bravo and his prior relationship with a company owned by Sponsor A and having considered the potential conflicts of interest implications, the Board of Directors determined to include Mr. Habiger in the ensuing meetings of the Board of Directors, with exceptions noted. The Board of Directors also reviewed the proposed final terms of engagement with J.P. Morgan, including the financial terms. Stamps.com senior management reviewed with the Board of Directors information J.P. Morgan had provided concerning its qualifications and experience. Following a discussion by the Board of Directors, the Board of Directors approved the retention of J.P. Morgan as its exclusive financial advisor in connection with any potential strategic transaction, subject to finalizing the proposed engagement letter, which was finalized and executed that same day. The Board then considered that Sponsor A and Thoma Bravo were among the best suited financial sponsors to make strong proposals. The Board noted that Thoma Bravo had shown interest in Stamps.com based on its proposals in 2017 and 2019. The Board also considered, after discussion with J.P. Morgan, whether the inclusion of two financial sponsors of the caliber, financial resources and relevant industry focus as Thoma Bravo and Sponsor A would be sufficient to test the market for financial sponsor interest and whether the potential benefits of conducting a broader marketing process was outweighed by the risks of distraction of management, the potential for leaks and disruption of existing commercial relationships. Stamps.com senior management also informed the Board of Directors that the J.P. Morgan presentation noted different process
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alternatives that Stamps.com could pursue, including (i) moving forward with current parties with a “go-shop” arrangement, (ii) targeting outreach efforts to a limited number of additional potential buyers and/or (iii) conducting a broad confidential outreach to potential buyers. As the Board of Directors considered the valuation in the initial proposal from Sponsor A to be inadequate, the Board of Directors discussed using J.P. Morgan’s assistance in determining whether materially higher valuations might be obtainable. After a discussion, the Board of Directors authorized management, with advice from and in conjunction with J.P. Morgan, to engage in outreach to selected buyers by enabling due diligence reviews by Sponsor A pursuant to a non-disclosure agreement and initiating outreach to Thoma Bravo and, potentially, Industry Participant A, to determine whether they would be interested in making any strategic proposals and their willingness to agree to the use of a “go-shop” process.
On April 29, 2021, following the meeting of the Board of Directors, Stamps.com and Sponsor A entered into a non-disclosure agreement. The non-disclosure agreement contained standstill provisions but did not contain a prohibition on Sponsor A requesting a waiver of the standstill provisions, and expressly permitted Sponsor A to confidentially communicate to the Board of Directors, senior management of Stamps.com or its external financial advisors any non-public proposals regarding a potential transaction in a manner not reasonably expected to require public disclosure.
On May 1, 2021, Stamps.com provided Sponsor A access to the virtual dataroom containing a selected and limited set of information regarding Stamps.com.
On May 3, 2021, at the direction of Stamps.com, J.P. Morgan contacted representatives of Sponsor A to discuss Sponsor A’s due diligence requests, including scheduling live management sessions regarding business strategy and finance, financial forecasts and other data requests and the anticipated results for the fiscal quarter ended March 31, 2021.
On May 16 and 17, 2021, Mr. McBride contacted representatives of Thoma Bravo and told such representatives that Stamps.com would be willing to consider an indication of interest from Thoma Bravo if Thoma Bravo was willing to submit one.
On May 18, 2021, at the direction of Stamps.com, J.P. Morgan contacted Thoma Bravo regarding signing a non-disclosure agreement and providing Thoma Bravo’s access to due diligence information. That same day, at the direction of Stamps.com, J.P. Morgan provided Thoma Bravo with a non-disclosure agreement, which was executed on May 20, 2021. The non-disclosure agreement contained standstill provisions but did not contain a prohibition on Thoma Bravo requesting a waiver of the standstill provisions, and expressly permitted Thoma Bravo to confidentially communicate to the Board of Directors, senior management of Stamps.com or external financial advisors any non-public proposals regarding a potential transaction in a manner not reasonably expected to require public disclosure.
Between May 18, 2021 and June 9, 2021, Sponsor A and Thoma Bravo and their respective advisors and representatives conducted due diligence on Stamps.com. Stamps.com provided substantially the same information set to both parties. During this period, at the direction of Stamps.com, J.P. Morgan facilitated calls and virtual meetings with both Sponsor A and Thoma Bravo and the Company in order to address diligence requests and prepare both interested parties to provide proposals for the Board of Directors to consider. During this period, at the direction of Stamps.com, J.P. Morgan indicated to both sponsors that, at this time, if the Board of Directors made the decision to move ahead, it would require the sponsor to agree to a post-signing go-shop process.
On May 20, 2021, Stamps.com senior management hosted a meeting with Sponsor A to provide a detailed overview of Stamps.com’s business.
On May 26, 2021, Stamps.com senior management hosted a meeting with Thoma Bravo to provide a detailed overview of Stamps.com’s business.
On May 28, 2021, the Board of Directors met virtually, among other things, to receive an update from Stamps.com senior management regarding J.P. Morgan’s discussions with Sponsor A and Thoma Bravo.
On June 2, 2021, at the direction of Stamps.com, J.P. Morgan informed Sponsor A and Thoma Bravo that, having substantially concluded their respective due diligence processes, they should each be prepared to provide an updated proposal (in Sponsor A’s case) or an initial proposal (in Thoma Bravo’s case), in each case, regarding a potential
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acquisition of Stamps.com. J.P. Morgan specifically noted, at the direction of Stamps.com, that since the Board of Directors would be deciding whether or not to proceed with either party regarding a potential strategic transaction, valuation was the single most important aspect of any revised or new proposal.
During early June 2021, Stamps.com conducted business and legal due diligence calls with both Sponsor A and Thoma Bravo.
On June 8, 2021 and June 9, 2021, Mr. McBride and J.P. Morgan contacted Industry Participant A to inform Industry Participant A of the existence of the outreach to selected buyers. A representative of Industry Participant A stated that it might consider an acquisition transaction through participation in the “go-shop” process but was unlikely to make any proposal at the current time.
On June 8, 2021, Sponsor A provided an updated nonbinding indication of interest to acquire Stamps.com for $260 per share, which was at the lowest end of the range that Sponsor A had proposed in its initial proposal on April 14, 2021. The Stamps.com closing price on the Nasdaq on June 7, 2021 was $191.96, and thus Sponsor A’s proposal reflected an approximately 36% premium to the price per share of Stamps.com common stock at such time, which was an increase from the premium in its initial proposal. The Sponsor A indication of interest proposed to fund the potential transaction with a majority equity contribution from Sponsor A’s funds and a limited set of certain of its limited partners, as well as borrowings from lenders. Sponsor A’s indication of interest did not offer a “go-shop,” did not request exclusivity and noted several additional confirmatory due diligence items it needed.
On June 8, 2021, Thoma Bravo provided a non-binding indication of interest to acquire Stamps.com for $270 per share, which reflected an approximately 41% premium to the closing price per share of Stamps.com common stock on June 7, 2021. The Thoma Bravo indication of interest proposed to fund the potential transaction with an equity contribution from Thoma Bravo’s funds (without the need to obtain equity from any co-investors), as well as borrowings from lenders. The Thoma Bravo indication of interest offered a 30 day “go-shop” and requested three weeks of exclusivity.
On June 9, 2021, the Board of Directors met virtually with senior management of Stamps.com, representatives of J.P. Morgan and representatives of Proskauer. Proskauer advised the Board on its fiduciary duties in this context. J.P. Morgan informed the Board of Directors it had provided services to both Sponsor A and Thoma Bravo and would provide a conflicts disclosure letter summarizing such services and the related fees earned, which it provided later that day. J.P. Morgan provided the Board of Directors with its preliminary valuation analysis of Stamps.com and its analysis of the financial terms of each of the Sponsor A and Thoma Bravo proposals. J.P. Morgan also summarized its work since its engagement, including discussions with Sponsor A, Thoma Bravo, Industry Participant A and facilitating due diligence. J.P. Morgan also provided the Board of Directors information about potential additional financial sponsors and strategic/industry bidders who could be invited to participate in the market outreach process. The presentation also covered various scenarios for additional outreach, and their respective advantages and disadvantages, including proceeding with the market outreach process with only Sponsor A and Thoma Bravo, broadening the market outreach process on a targeted basis or a further broadened market outreach process to a wide set of potential counterparties. J.P. Morgan noted various advantages and disadvantages with each of these approaches, including the risk of information leaks, the perception of Stamps.com being actively “shopped”, the impact on Stamps.com’s management’s attention and the risk of adversely impacting the interest and momentum with the current parties, as well as the ability to utilize a “go-shop” construct to solicit and actively engage with additional potential bidders after execution of a merger agreement.
The Board of Directors also discussed the status of discussions with Industry Participant A and Industry Participant A’s expressed preference to consider participation in a “go-shop” process rather than the current sales process. Additionally, the Board of Directors considered J.P. Morgan’s views as to the benefits and drawbacks of including other potential parties in a limited market outreach, and the strong competitive dynamic that could be engendered between Sponsor A and Thoma Bravo, and also considered the likelihood that any transaction would include a “go-shop” process, and decided that it was preferable to maintain the current process with only Sponsor A and Thoma Bravo. Given that the indications of interest from both Sponsor A and Thoma Bravo were nearly the same from a price perspective as Sponsor A’s initial proposal, the Board of Directors discussed with J.P. Morgan an approach to obtain materially higher proposals from both parties by potentially offering a limited period of exclusivity in a single round of bidding to the party that offered the highest and best valuation that was materially higher than the prior proposals. The Board of Directors then authorized J.P. Morgan to solicit the highest possible and best offer from Sponsor A and Thoma Bravo in a single round of bidding, in exchange for a limited period of
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exclusivity, instructing them to provide updated indications of interest by the morning of June 10, 2021, including with a price per share of at least $280 (which would reflect a price per share floor of an approximately 46% premium to the closing price per share of Stamps.com common stock on June 7, 2021) and to confirm their willingness to agree to a “go-shop” process following execution of a definitive agreement with respect to a strategic transaction with Stamps.com.
On June 10, 2021, the Board of Directors met virtually with Stamps.com senior management and representatives of J.P. Morgan to review the proposals that were received that morning from Sponsor A and Thoma Bravo. Representatives of Proskauer were consulted throughout the ensuing bid process. Sponsor A provided an updated nonbinding indication of interest of $311 per share (which reflected an approximately 62% premium to the closing price per share of Stamps.com common stock on June 7, 2021), a 45-day “go-shop” period with a 1.5% break-up fee applicable during the “go-shop” period and a 3% fee applicable thereafter. In addition, Sponsor A required 28 days of exclusivity. Thoma Bravo provided an updated nonbinding indication of interest of $320 per share (which reflected an approximately 67% premium to the closing price per share of Stamps.com common stock on June 7, 2021) and a 40-day “go-shop” period and with similar break-up fee and exclusivity terms as Sponsor A’s $311 indication. Given the material increase in valuation indicated by both bidders and taking into account the preliminary valuation analysis provided by J.P. Morgan, and given that Thoma Bravo’s bid was $9.00 per share higher than Sponsor A’s bid, the Board of Directors determined that it was in the best interests of stockholders to grant exclusivity to Thoma Bravo. Although J.P. Morgan, at the instruction of the Board of Directors, had informed both bidders that each should make only a single bid, in order to obtain the highest possible price in exchange for exclusivity (and without any commitment by the Board of Directors to agree to any eventual transaction), before Stamps.com entered into exclusivity with Thoma Bravo, Sponsor A made a new unsolicited proposal of $330 per share (which reflected an approximately 72% premium to the closing price per share of Stamps.com common stock on June 7, 2021). Although the Board of Directors believed that Thoma Bravo had been the high bidder based on the parameters established for the bidding process, and that there was a risk of Thoma Bravo abandoning the process if Thoma Bravo believed that the Board of Directors was changing the process in response to a second bid by Sponsor A that was submitted after the single round of bidding, the Board of Directors, nevertheless, determined that it would be in the best interests of stockholders to treat the Sponsor A unsolicited bid as the new high bid, and accordingly the Board of Directors was prepared to enter exclusivity with Sponsor A unless Thoma Bravo matched or exceeded the price per share offered in Sponsor A’s second bid. In response, Thoma Bravo increased its proposal to $330 per share, without changing the other non-financial terms in its prior proposal. Given the fact that Thoma Bravo had initially been the high bidder, the high premium to Stamps.com’s current market price implied by the proposed price, and the fact that Thoma Bravo’s bid did not require equity co-investors as Sponsor A’s indication of interest had specified, the Board of Directors decided it was in the best interests of stockholders to grant exclusivity to Thoma Bravo based on the updated $330 price per share proposal. This price represented a premium of approximately 72% to Stamps.com’s closing price and 90-day volume weighted average price as of June 7, 2021. The exclusivity agreement with Thoma Bravo was entered into later in the day on June 10, 2021.
Over the next several weeks, Stamps.com senior management and representatives of Thoma Bravo and Thoma Bravo’s legal counsel, Kirkland & Ellis LLP (“Kirkland”), engaged in telephonic and virtual meetings to address the legal and business due diligence inquiries of Thoma Bravo and Kirkland regarding Stamps.com.
On June 11, 2021, senior management of Stamps.com authorized Proskauer to prepare a draft merger agreement with respect to the potential transaction with Thoma Bravo.
On June 11, 2021, representatives of Proskauer and Kirkland discussed a draft merger agreement, confirming that Proskauer would prepare the initial draft while Kirkland would focus on completing the legal due diligence process on behalf of Thoma Bravo.
During the period from June 14, 2021 to July 6, 2021, representatives of Stamps.com met on a regular basis with, and provided requested information to, representatives of Thoma Bravo and its advisors to provide information in connection with Thoma Bravo’s due diligence review of Stamps.com.
On June 24, 2021, representatives of Proskauer provided Kirkland an initial draft merger agreement. The draft merger agreement contemplated, among other things, (i) a 40-day “go-shop” period following the execution of the definitive agreement for Stamps.com to solicit and consider superior proposals with a related 1.5% termination fee for parties that constituted “Excluded Part[ies]” as defined in the merger agreement; (ii) a 3% termination fee for a superior proposal accepted after the “go-shop” period or for parties that did not constitute “Excluded Part[ies]” as defined
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in the merger agreement; (iii) a 6% termination fee payable by Thoma Bravo if it failed to consummate the transactions under certain circumstances (a “reverse termination fee”); (iv) a best efforts covenant from both parties to secure regulatory approval of the transaction with a “hell or high water” required divestiture provision; (v) acceleration of all unvested stock options and restricted stock units; and (vi) other customary terms for a strategic transaction of this nature.
On July 2, 2021, representatives of Proskauer sent representatives of Kirkland a draft of the disclosure schedules to the draft merger agreement.
On July 2, 2021, representatives of Kirkland sent representatives of Proskauer a revised draft of the Stamps.com draft merger agreement. The revised draft merger agreement contained certain material revisions compared to the Stamps.com initial draft merger agreement, including, without limitation, (i) a requirement that all directors and officers sign voting agreements to vote their shares of Stamps.com common stock in favor of the merger concurrently with the execution of the merger agreement; (ii) a definition of “Excluded Party” that would have the effect that any offer during the “go-shop” period by a party that had previously made a written proposal (without any temporal limitation) to acquire Stamps.com prior to the signing of the merger agreement, such as Sponsor A, would (if the merger agreement were terminated to pursue such offer) trigger a 3% termination fee rather than the 1.5% termination fee that would be applicable to other parties; (iii) the removal of the “hell or high water” required divestiture provision; (iv) no acceleration of any unvested stock options or restricted stock units; (v) a requirement that Stamps.com reimburse up to $6 million of Thoma Bravo expenses incurred in connection with the proposed transaction if the stockholders of Stamps.com did not approve the merger as well as in other specified cases; and (vi) a 5% “reverse termination fee” if Thoma Bravo was unable to close the transaction due to not having the requisite debt financing.
On July 2, 2021, representatives of Kirkland sent representatives of Proskauer drafts of the other transaction documents, including an equity commitment letter, a limited guarantee and a voting agreement.
On or about July 3, 2021, representatives of Kirkland communicated in discussions with representatives of Proskauer that the modifications to the “Excluded Party” definition incorporated in Thoma Bravo’s July 1, 2021 draft of the merger agreement were critical to Thoma Bravo’s willingness to move forward with the transaction.
On July 6, 2021, the Board of Directors met virtually with senior management, representatives of J.P. Morgan and representatives of Proskauer. Proskauer advised the Board of Directors regarding its fiduciary duties in connection with the proposed transaction. Given his previously disclosed employment relationship with J.D. Power, a portfolio company of Thoma Bravo, Mr. Habiger excused himself from the Board of Directors meeting. Representatives of J.P. Morgan provided an update on Thoma Bravo’s diligence efforts and on their discussions with representatives of Thoma Bravo. Representatives of Proskauer summarized the legal and fiduciary issues presented by the changes to the merger agreement requested by Thoma Bravo and Kirkland, including Thoma Bravo and Kirkland’s continued resistance against a “hell or high water” antitrust covenant. Given the known lack of competitive business overlap between Stamps.com and Thoma Bravo’s portfolio companies, the “hell or high water” demand was deemed to be acceptable under the circumstances, and therefore the discussion focused on the definition of “Excluded Party.” The Board (with Mr. Habiger still being recused) engaged in an active discussion regarding the original purpose of the “go-shop” (namely to facilitate bids by parties who were not involved in pre-signing market outreach), the fact that Sponsor A had already been given several clear opportunities to be the higher bidder in the process of granting exclusivity, and in fact had caused Thoma Bravo to further increase its bid even after Thoma Bravo had been determined to be the highest and best bidder based on the single round of bidding of the original market outreach process, the fact that, based on the prior preliminary valuation analysis provided by J.P. Morgan, Thoma Bravo’s bid appeared to fully value Stamps.com at the highest end of all credible ranges, the fact that Thoma Bravo had made it clear that the “Excluded Party” provision proposed in its markup (and its implications on Sponsor A) was fundamental to its willingness to proceed with a transaction and the fact that Sponsor A had not made any outreach to Stamps.com since June 10, 2021 and that there was no assurance whatsoever that Sponsor A would be interested in making a “back up” offer should Thoma Bravo follow through on its credible threats of abandoning the process were this point not conceded by Stamps.com. Among other things, the Board was advised that Thoma Bravo had taken the position that unvested options and RSU Awards should not accelerate, that Thoma Bravo’s position was inconsistent with its original proposal which showed the capitalization of Stamps.com with all options and RSU Awards (whether vested or unvested) being exercised, and that Thoma Bravo was no longer raising acceleration of options or RSU Awards as an issue. In addition, representatives of Proskauer noted that there were various open points in the draft merger agreement where the Stamps.com draft provided the Board of Directors greater flexibility
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than the Thoma Bravo revised draft, and that any concession made regarding the definition of “Excluded Party” could be paired with concessions by Thoma Bravo to enhance the Board of Director’s flexibility in any “go-shop” process and in the event of unsolicited bids. Based on these factors, the Board of Directors (again, with Mr. Habiger still recused) determined that continuing to negotiate the merger agreement with Thoma Bravo was in the best interests of stockholders and that the concession on the “Excluded Party” definition was necessary to avoid the likely loss of a valuable opportunity for stockholders, while also providing an opportunity to negotiate added changes to the merger agreement that would enhance the overall flexibility of the Board of Directors to utilize the “go-shop” process and reduce risk to Stamps.com. In addition, the Board of Directors (with Mr. Habiger participating) also recognized that, although there had not been any discussions between Thoma Bravo and management concerning continued employment of management and it had not authorized any discussions between Thoma Bravo and management regarding management compensation, Thoma Bravo might want to retain management in the event that a merger agreement was signed. The Board further recognized that in such event management would require independent counsel, and therefore authorized management to retain, as a corporate expense, independent counsel to represent it should management wish to negotiate with Thoma Bravo after a merger agreement was executed.
Later on July 6, 2021, representatives of Proskauer provided representatives of Kirkland a revised draft of the merger agreement which included the elements of the “Excluded Party” definition and the removal of the “hell or high water” antitrust clause which Thoma Bravo had indicated were threshold issues, but also made other changes to enhance the utility of the “go-shop” period. In addition, the parties negotiated a final “reverse termination fee” of 5.5% and resolved other remaining open points in the draft merger agreement and disclosure schedules.
Between July 2, 2021 and July 8, 2021, representatives of Proskauer and Kirkland negotiated the ancillary agreements to the draft merger agreement and the draft disclosure schedules. On July 7, 2021, representatives of Proskauer and Kirkland discussed the final open points in the merger agreement, and Thoma Bravo agreed to a further request that no director other than Ken McBride would be required to enter into a voting agreement in connection with the parties’ execution of the merger agreement.
On July 7, 2021, the Board of Directors met virtually with senior management, representatives of J.P. Morgan and representatives of Proskauer. Representatives of Proskauer provided an update on the merger agreement, the voting agreement and the “go-shop” period. The Board of Directors discussed the terms of the merger agreement with Proskauer and J.P. Morgan. Representatives of Proskauer presented a further update on the Board of Directors’ fiduciary duties.
On July 8, 2021, after market close, the Board of Directors held a meeting with representatives of Stamps.com senior management, Proskauer and J.P. Morgan. Representatives of J.P. Morgan reviewed for the Board of Directors a summary of the current status and financial terms of the acquisition proposal submitted by Thoma Bravo as set forth in the merger agreement and related documentation. Representatives of J.P. Morgan and Proskauer reviewed with the Board of Directors the key legal and financial terms of the Thoma Bravo $330 per share proposal, and representatives of J.P. Morgan then provided J.P. Morgan’s financial analyses of the Thoma Bravo $330 per share proposal. J.P. Morgan then rendered its oral opinion to the Board of Directors, which was subsequently confirmed by delivery of its written opinion, dated July 8, 2021, that, as of such date, and based upon and subject to the factors and assumptions set forth in its opinion, the $330 per share merger consideration (as proposed in the Thoma Bravo $330 per share proposal) to be paid to the Stamps.com common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders. For more information about J.P. Morgan’s opinion, see below under the caption “The Merger—Opinion of J.P. Morgan.” Representatives of Proskauer then provided a review for the Board of Directors of its fiduciary duties, and reviewed certain material terms of the proposed final merger agreement. Representatives of Proskauer answered questions from members of the Board of Directors regarding the terms of the proposed merger agreement and Stamps.com’s ability to conduct its business during the pendency of the Merger. The Board of Directors continued to discuss the potential transaction with Thoma Bravo and the reasons that the Board of Directors believed that it was in the best interests of Stamps.com and its stockholders to enter into the merger agreement with Thoma Bravo and consummate the Merger upon the terms and subject to the conditions set forth in the merger agreement. For more information concerning the recommendation of the Board of Directors, see the section titled “The Merger Agreement—Reasons for the Merger.” Mr. Habiger again reminded other members of the Board of Directors of his employment by J.D. Power, which is a Thoma Bravo portfolio company, and again recused himself from the meeting so that the Board of Directors could continue to discuss the Merger in an executive session. Following such discussion, Mr. Habiger rejoined the meeting and then the Board of Directors unanimously (i) determined that it was in the best interests of Stamps.com and its stockholders, and declared it advisable, to enter
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into the merger agreement and consummate the Merger upon the terms and subject to the conditions set forth in the merger agreement; (ii) approved the execution and delivery of the merger agreement by Stamps.com, the performance by Stamps.com of its covenants and other obligations under the merger agreement, and the consummation of the Merger upon the terms and conditions set forth in the merger agreement; and (iii) resolved to recommend that Stamps.com stockholders adopt the merger agreement and approve the Merger in accordance with the DGCL.
Later that evening, Stamps.com and Thoma Bravo executed the merger agreement and related agreements entered into in connection with the transactions contemplated by the merger agreement. At the time of the execution of the merger agreement, Thoma Bravo and Stamps.com had not discussed the terms of any post-closing employment or equity participation for Stamps.com management, nor had any members of Stamps.com management had any such discussions with Thoma Bravo.
The following morning on July 9, 2021 before market open, Stamps.com issued a press release announcing the execution of the merger agreement.
Since the execution of the Merger Agreement, in connection with the “go-shop” period provided for in the Merger Agreement, which expired at 11:59 p.m. Pacific Time on August 17, 2021, at the direction of the Board of Directors, representatives of J.P. Morgan contacted and sought to engage in discussions with 35 parties regarding submitting an Acquisition Proposal, including Industry Participant A and Sponsor A with which Stamps.com had engaged prior to the execution of the Merger Agreement. 16 of the parties were financial parties and 19 of the parties were industry participants. In addition, J.P. Morgan received inquiries from two other potentially interested parties, one financial party and one industry participant, during the “go-shop” period. Stamps.com executed confidentiality agreements with three parties. None of the parties contacted or who made inquiries made an Acquisition Proposal.
Recommendation of the Board of Directors and Reasons for the Merger
Recommendation of the Board of Directors
The Board of Directors has unanimously: (1) determined that it is fair to and in the best interests of Stamps.com and its stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger on the terms and conditions set forth in the Merger Agreement; (2) approved, adopted and declared advisable the Merger Agreement and the execution and delivery of the Merger Agreement by Stamps.com, the performance by Stamps.com of its obligations and other agreements under the Merger Agreement, and the consummation of the Merger and the other transactions contemplated by the Merger, on the terms and conditions set forth in the Merger Agreement; (3) directed that the Merger Agreement and the Merger be submitted for approval and adoption by the stockholders of the Company; and (4) resolved to recommend that Stamps.com stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL. The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, if necessary or appropriate.
Reasons for the Merger
In the course of reaching its determination and recommendation, the Board of Directors consulted with Stamps.com management, Proskauer Rose LLP, its outside legal advisor, and J.P. Morgan, its financial advisor. The Board of Directors considered a number of factors, including those below (which are not listed in any relative order of importance), all of which it viewed as generally supporting its (i) approval of the execution and delivery of the Merger Agreement by Stamps.com, the performance by Stamps.com of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (ii) resolution to recommend that Stamps.com stockholders adopt the Merger Agreement and approve the Merger in accordance with the DGCL:
Attractive Value. The Board of Directors considered the current and historical market prices of the Stamps.com common stock, including the market performance of the common stock relative to those of other participants in the Stamps.com’s industry and general market indices, and the fact the current and historical trading price of Stamps.com common stock, including that the Per Share Merger Consideration constituted a substantial premium over the market price of Stamps.com common stock:
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A 64% premium to the one-month volume-weighted average closing price of $201, a 72% premium to the three-month volume-weighted average closing price of $192 and a 73% premium to the twelve-month volume-weighted average closing price of $191, in each case, ending on July 7, 2021, the last full trading day prior to the execution of the Merger Agreement.
Best Alternative for Maximizing Stockholder Value. The Board of Directors considered that the Per Share Merger Consideration was more favorable to Stamps.com stockholders than the potential value that might result from other alternatives reasonably available to Stamps.com, including, but not limited to, the continued operation of Stamps.com on a stand-alone basis in light of a number of factors, including the following:
the belief that the Per Share Merger Consideration represented the highest price that Thoma Bravo was willing to pay and the highest price per share value reasonably obtainable as of the date of the Merger Agreement and that the estimated cost savings from Stamps.com no longer being a public company were factored into Thoma Bravo’s final offer of $330.00 per share;
the fact that, after Stamps.com received an unsolicited proposal from Sponsor A at a price per share that management and the Board of Directors viewed as sufficiently high enough to pursue if the price could be improved, but not compelling enough at the price proposed, Stamps.com initiated a process that was designed to maximize the price while avoiding the disruption of a public process. Stamps.com solicited an offer from Thoma Bravo, which had previously expressed an interest in a transaction with Stamps.com and engaged in negotiations with Thoma Bravo and Sponsor A, which the Board of Directors, after discussions with J.P. Morgan, considered among the best suited financial sponsors to make strong proposals. This process created competitive tension between Thoma Bravo and Sponsor A and resulted in Stamps.com being able to negotiate an increase of the purchase price from the initial indication of $260.00 - $270.00 per share to $330.00 per share, an increase of 22%-27%, and a broad “go shop” provision, which allowed for a broad post-signing market test;
the fact that the Board of Directors and management of Stamps.com were generally aware of the potential market for the company at the time Stamps.com received the unsolicited proposal from Sponsor A, that the unsolicited proposal was at a premium over the Stamps.com common stock market price and that management and the Board of Directors were also aware of Thoma Bravo’s interest and believed that they could negotiate a higher price than the initial proposal from Sponsor A;
the fact that the “go shop” provision in the Merger Agreement provided the opportunity for Stamps.com to solicit Acquisition Proposals from other bidders, including both strategic and financial parties, and the potential for a transaction at a higher price, if one were available; and
the potential risk of losing the favorable opportunity with Thoma Bravo in the event Stamps.com continued trying to obtain any additional offers at higher prices and the potential negative effect that a protracted sale process might have on Stamps.com’s business, especially in light of the “go-shop” provision Thoma Bravo was willing to provide that would allow for Stamps.com to solicit Acquisition Proposals.
More Attractive Value Than Alternatives. The Board of Directors evaluated carefully, with the assistance of its financial advisor, the risks and potential benefits associated with other strategic or financial alternatives and the potential for stockholder value creation associated with those alternatives, including the alternative of not engaging in a strategic or financial transaction and executing on Stamps.com’s business plans. As part of these evaluations, the Board of Directors considered:
the belief that the Per Share Merger Consideration is more favorable to Stamps.com stockholders than the potential value that would reasonably be expected to result from other strategic and financial alternatives reasonably available, which could include:
the continuation of Stamps.com’s business plan as an independent, publicly-listed company, based on its historical results of operations, financial prospects and condition; or
potential expansion opportunities through strategic acquisitions to expand the markets that Stamps.com serves or increase the service offerings in its existing markets and possible strategic transactions with third parties, which has been part of Stamps.com’s ongoing strategy;
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the belief that the aforementioned other alternatives were not reasonably likely to create greater value for Stamps.com’s stockholders than the Merger, taking into account, among other variables, execution risks as well as business, competitive, industry and market risks, including:
the belief that the market price did not reflect the value of Stamps.com’s business and that public shareholders would not realize the full value of their investment through the market price of the common stock if Stamps.com remained as a public company;
the risk that Stamps.com may not be able to grow its business at the rates reflected in Stamps.com’s business plan;
the increasing difficulty of finding suitable acquisitions and the potential impact on Stamps.com’s growth;
the risks relating to our arrangements with USPS and the potential impact of changes in Stamps.com’s financial arrangements with USPS which could adversely affect its revenues and operating results;
the risks resulting from competition in the areas in which Stamps.com operates from current competitors and new competitors that could enter these business, which could include direct competitors such as Shippo, on-line marketplaces such as Amazon and e-commerce platforms such as Shopify; and
the uncertainty as to whether growth in e-commerce, including Stamps.com’s business, during the COVID-19 pandemic, would continue, and that, accordingly, the growth rate from 2019 to 2020 may not be sustainable and, if the impact of the COVID-19 pandemic subsides and consumers revert to pre-pandemic shopping habits, e-commerce growth could drop or even reverse rapidly.
Greater Certainty of Value. The Board of Directors considered that the all-cash Per Share Merger Consideration provides certainty of value and liquidity to stockholders at a substantial premium over the market price of Stamps.com common stock, while eliminating the effect on stockholders of long-term business and execution risk, as well as risks related to the financial markets generally.
Likelihood of Completion. The Board of Directors considered the likelihood of completion of the Merger in light of the terms of the Merger Agreement and the closing conditions, including:
the conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of Stamps.com’s representations and warranties, are generally subject to a “material adverse effect” qualification;
the ability of the parties to consummate the Merger, including the fact that Parent’s obligation to complete the Merger is not conditioned upon, nor limited by, the receipt of third-party debt financing or the completion of any marketing period;
the fact that Parent has obtained committed equity financing for the transaction from the Thoma Bravo Fund and committed debt financing from third party lenders sufficient to fund (i) the aggregate purchase price required to be paid at the closing of the Merger, and (ii) together with the cash on hand at Stamps.com, the payment of all fees and expenses to be paid at the closing of the Merger by Stamps.com, Parent or Merger Sub contemplated by, and subject to the terms and conditions of, the Merger Agreement; and
the requirement that, in the event of a failure of the merger to be consummated under specified circumstances, particularly circumstances relating to the failure of equity or debt financing sources to provide funds at closing, Parent will pay Stamps.com a termination fee of $365 million in cash, and the fact that Thoma Bravo Fund provided a limited guaranty in favor of Stamps.com, which guarantees the obligation to pay any termination fee, reimburse and indemnify Stamps.com with respect to certain expenses in connection with Parent’s debt financing and pay certain other amounts required under the Merger Agreement (as described in the below section captioned “—Financing of the Merger”).
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Opportunity to Receive Alternative Proposals and to Terminate the Transaction in Order to Accept a Superior Proposal. The Board of Directors considered the terms of the Merger Agreement permitting Stamps.com to solicit alternative proposals during a 40 day “go-shop period” and receive unsolicited alternative proposals, and the other terms and conditions of the Merger Agreement, including:
the right, pursuant to a 40-day “go-shop” period beginning on July 8, 2021 and continuing until 11:59 p.m., Pacific time on August 17, 2021, to solicit alternative Acquisition Proposals from, and participate in discussions and negotiations with, third parties regarding any alternative Acquisition Proposals;
the ability, under certain circumstances after the No Shop Period Start Date, to furnish information to, and conduct negotiations with, third parties regarding bona fide Acquisition Proposals;
Parent’s obligation to pay Stamps.com a termination fee of $365 million, if the Merger Agreement is terminated by Stamps.com due to any breach of representations or covenants made by Parent or Merger Sub that causes a closing condition not to be met (following notice and an opportunity to cure) or in certain circumstances in which all other closing conditions have been met, but Parent or Merger Sub fails to close when required to do so under the Merger Agreement;
Stamps.com’s ability to terminate the Merger Agreement in order to accept a Superior Proposal, subject to certain conditions of the Merger Agreement and paying Parent a termination fee of either (i) $99.5 million if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party, or (ii) $199 million in the case of any other such termination; and
the fact that the Board of Directors believed that the termination fee of either $99.5 million or $199 million payable by Stamps.com in the circumstances described above, which represents approximately 1.5% and 3%, respectively, of Stamps.com’s implied equity value in the Merger, is reasonable, is within the market averages for such fees, and is not preclusive of, or a substantial impediment to, other proposals.
Opinion of J.P. Morgan. The Board of Directors of Stamps.com considered the oral opinion of J.P. Morgan, subsequently confirmed by delivery of its written opinion, dated July 8, 2021, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the Per Share Price to be paid to Stamps.com's common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders, as more fully described below under the section of this proxy statement captioned “The Merger-Opinion of J.P. Morgan,” which full text of the written opinion is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety.
Additional Considerations and Risks. The Board of Directors also considered a number of uncertainties and risks concerning the Merger, including the following (which factors are not necessarily presented in order of relative importance):
the fact that Stamps.com would no longer exist as an independent, publicly traded company, and stockholders would no longer participate in any future earnings or growth and would not benefit from any potential future appreciation in value of Stamps.com;
the risks and costs to Stamps.com if the Merger is not completed in a timely manner or at all, including the potential adverse effect on Stamps.com’s ability to attract and retain key personnel, the diversion of management and employee attention and the potential disruptive effect on Stamps.com’s day-to-day operations and Stamps.com’s relationships with customers, suppliers and other third parties, any or all of which risks and costs, among other things, could adversely affect Stamps.com’s overall competitive position and the trading price of the common stock;
the requirement that Stamps.com pay Parent a termination fee, under certain circumstances following termination of the Merger Agreement, including if the Board of Directors terminates the Merger Agreement to accept a Superior Proposal, of either (1) $99.5 million if the Merger Agreement is terminated before the No Shop Period Start Date with respect to an Excluded Party or (2) $199 million, in the case of any other such termination;
if Parent fails to complete the Merger as a result of a breach of the Merger Agreement, depending upon the reason for not closing, remedies may be limited to the termination fee payable by Parent described
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above, which may be inadequate to compensate Stamps.com for the damage caused (and such termination fee is itself limited in certain situations), and if available, other rights and remedies may be expensive and difficult to enforce, and the success of any such action may be uncertain;
the restrictions on the conduct of Stamps.com’s business prior to the consummation of the Merger, including the requirement that Stamps.com use commercially reasonable efforts to conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Stamps.com from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, Stamps.com might have pursued;
the fact that, prior to the execution of the Merger Agreement, Stamps.com did not conduct a broad market check process or solicit bids from a large group of potential interested parties, although the Board of Directors followed a process that involved negotiations with two financial sponsors that the Board of Directors and management believe was well suited to maximize the value of Stamps.com and Stamps.com would be able to perform a market check during the ‘‘go shop” period;
the fact that while Sponsor A was not precluded from making a bid for Stamps.com, the termination fee applicable to a Superior Proposal from Sponsor A (or an entity in which it participated) would be $199 million (3% of Stamps.com’s implied equity value in the Merger).
the fact that an all cash transaction would be taxable to Stamps.com’s stockholders that are U.S. persons for U.S. federal income tax purposes;
the fact that under the terms of the Merger Agreement, Stamps.com is unable to solicit other Acquisition Proposals after the No Shop Period Start Date;
the significant costs involved in connection with entering into the Merger Agreement and completing the Merger (many of which are payable whether or not the Merger is consummated) and the substantial time and effort of Stamps.com management required to complete the Merger, which may disrupt its business operations and have a negative effect on its financial results;
the risk that the Merger might not be completed and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of Stamps.com common stock;
the fact that the completion of the Merger will require antitrust clearance in the United States;
the fact that Stamps.com’s directors and officers may have interests in the Merger that may be different from, or in addition to, those of Stamps.com’s stockholders (see below under the caption “—Interests of Stamps.com’s Directors and Executive Officers in the Merger”) and that David Habiger, one of Stamps.com’s independent directors is chief executive officer of a portfolio company of a fund managed by Thoma Bravo; and
the possible loss of key management or other personnel of Stamps.com during the pendency of the Merger.
The foregoing discussion of reasons for the recommendation to adopt the Merger Agreement and approve the Merger and the transactions contemplated thereby is not meant to be exhaustive but addresses the material information and factors considered by the Board of Directors in consideration of its recommendation. In view of the wide variety of factors considered by the Board of Directors in connection with its evaluation of the Merger and the complexity of these matters, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Board of Directors each applied his or her own personal business judgment to the process and may have given differing weights to differing factors. The Board of Directors based its unanimous recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Forward-Looking Statements.”
Opinion of J.P. Morgan
Pursuant to an engagement letter dated April 29, 2021, Stamps.com retained J.P. Morgan as its financial advisor in connection with the proposed Merger.
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At the meeting of the Board of Directors on July 8, 2021, J.P. Morgan rendered its oral opinion to the Board of Directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the Per Share Price to be paid to Stamps.com’s common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders. J.P. Morgan confirmed its July 8, 2021 oral opinion by delivering its written opinion to the Board of Directors of Stamps.com, dated July 8, 2021, that, as of such date, the Per Share Price to be paid to Stamps.com’s common stockholders in the proposed Merger was fair, from a financial point of view, to such stockholders.
The full text of the written opinion of J.P. Morgan dated July 8, 2021, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Stamps.com’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Board of Directors of Stamps.com (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the Per Share Price to be paid in the proposed Merger and did not address any other aspect of the proposed Merger. J.P. Morgan expressed no opinion as to the fairness of the consideration paid to the holders of any class of securities, creditors or other constituencies of Stamps.com or as to the underlying decision by Company to engage in the proposed Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. J.P. Morgan’s opinion does not constitute a recommendation to any stockholder of Stamps.com as to how such stockholder should vote with respect to the proposed Merger or any other matter.
In arriving at its opinion, J.P. Morgan, among other things:
reviewed a draft dated July 8, 2021 of the Merger Agreement;
reviewed certain publicly available business and financial information concerning Stamps.com and the industries in which it operates;
compared the proposed financial terms of the Merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;
compared the financial and operating performance of Stamps.com with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of the common stock and certain publicly traded securities of such other companies;
reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of Stamps.com relating to its business; and
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
In addition, J.P. Morgan held discussions with certain members of the management of Stamps.com and Parent with respect to certain aspects of the Merger, and the past and current business operations of Stamps.com, the financial condition and future prospects and operations of Stamps.com, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Stamps.com and Parent or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Stamps.com, Parent or the Merger Sub under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Stamps.com to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the Merger and the other transactions contemplated by the Merger Agreement will be consummated as described in the Merger Agreement and this proxy statement, and that the definitive Merger Agreement would not differ in any material respect from the draft thereof
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provided to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by Stamps.com, Parent and Merger Sub in the Merger Agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Stamps.com with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on Stamps.com or on the contemplated benefits of the Merger.
The projections furnished to J.P. Morgan were prepared by Stamps.com’s management. Stamps.com does not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the Merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Stamps.com’s management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. For more information regarding the use of projections and other forward-looking statements, please refer to the section entitled “The MergerCompany Financial Projection”.
J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the Per Share Price to be paid to Stamps.com’s common stockholders in the proposed Merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of Stamps.com or the underlying decision by Stamps.com to engage in the Merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Merger, or any class of such persons relative to the consideration to be paid to Stamps.com’s common stockholders in the Merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which the common stock will trade at any future time.
The terms of the Merger Agreement, including the Per Share Price to be paid to Stamps.com’s common stockholders, were determined through arm’s length negotiations among Stamps.com, Parent and the Merger Sub, and the decision to enter into the Merger Agreement was solely that of Stamps.com’s Board of Directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by Stamps.com’s Board of Directors in its evaluation of the Merger and should not be viewed as determinative of the views of Stamps.com’s Board of Directors or management with respect to the Merger or the consideration.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to Stamps.com’s Board of Directors on July 8, 2021 and contained in the presentation delivered to Stamps.com’s Board of Directors on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses. For each of the analyses performed by J.P. Morgan, J.P. Morgan utilized the treasury stock method to calculate fully diluted shares outstanding.
Public Trading Multiples. Using publicly available information, J.P. Morgan compared selected financial data of Stamps.com with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to Stamps.com. The companies selected by J.P. Morgan were: eBay Inc. (“eBay”), GoDaddy Inc. (“GoDaddy”), LendingTree, Inc. (“LendingTree”), Moneysupermarket.com Ltd. (“MoneySuperMarket”), Shutterstock, Inc. (“Shutterstock”) and Yelp Inc. (“Yelp”). These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analyses, may be considered sufficiently similar to those of Stamps.com based on business sector participation, operational characteristics and financial metrics.
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For each of the selected companies, J.P. Morgan calculated the multiple of firm value to estimated adjusted EBITDA for the 2022 calendar year (which we refer to as “CY2022E FV / Adj. EBITDA”). The multiples were based on the selected companies’ closing stock prices on July 7, 2021 and publicly available Wall Street analysts’ consensus estimates. The following table represents the results of this analysis:
Selected Company
CY2022E
FV / Adj. EBITDA
eBay
8.9x1
GoDaddy
19.0x
LendingTree
15.7x
MoneySuper Market
11.2x
ShutterStock
17.7x
Yelp
11.1x
Median
13.5x
Company
11.9x
(1)
Adjusted to include sale of eBay’s classifieds business to Adevinta.
Based on the results of this analysis and other factors J.P. Morgan considered appropriate, J.P. Morgan selected a multiple reference range of 9.0x to 19.0x for CY2022E FV / Adj. EBITDA, and applied this reference range to a CY2022E Adj. EBITDA for Stamps.com, as provided by Company management in its management projections. This resulted in an implied equity value range of $164.25 to $310.50 per share (in each case, rounded to the nearest $0.25) for Stamps.com, compared to (i) the closing price of the common stock on July 7, 2017 of $197.01 per share (which we refer to as the “Unaffected Price”), which was the last trading day prior to the public announcement of the Merger, and (ii) the merger consideration of $330.00 per share.
Selected Transaction Analysis. Using publicly available information, J.P. Morgan examined selected transactions involving companies that engaged in businesses which J.P. Morgan judged to be reasonably analogous to the business of Stamps.com or aspects thereof. For each of the selected transactions, J.P. Morgan calculated the ratio of the target company’s firm value to the public estimates of adjusted EBITDA for the 12-month period following the announcement of the transaction (which we refer to as “FV / NTM Adj. EBITDA”). Specifically, J.P. Morgan reviewed the following transactions:
Announcement Date
Acquiror
Target
FV / NTM Adj.
EBITDA
September, 2018
WeddingWire Inc.
XO Group Inc.
21.4x
March, 2018
Sycamore Partners/GTCR, LLC
CommerceHub, Inc.
20.3x
July, 2017
Internet Brands, Inc.
WebMD Health Corp.
11.2x
July, 2017
Red Ventures Holdco, LP
Bankrate, Inc.
10.9x
May, 2017
IAC/InterActiveCorp
Angies List, Inc.
14.9x
November, 2015
Expedia, Inc.
HomeAway, Inc.
21.1x
March, 2014
CoStar Group, Inc.
Apartments.com/Classified Ventures, LLC
16.6x
Based on the results of this analysis and other factors J.P. Morgan considered appropriate, J.P. Morgan selected a multiple reference range of 11.0x to 21.0x for FV / NTM Adj. EBITDA, and applied this reference range to the NTM Adj. EBITDA for Stamps.com, as provided by Stamps.com management in its management projections. This resulted in an implied equity value range of $178.25 to $310.00 per share (in each case, rounded to the nearest $0.25) for Stamps.com, compared to (i) the Unaffected Price and (ii) the merger consideration of $330.00 per share.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the implied fully diluted equity value per share for the common stock. J.P. Morgan calculated the unlevered free cash flows that Stamps.com is expected to generate from Q2 2021 to 2026 based upon financial projections prepared by the management of Stamps.com through the years ended 2026. J.P. Morgan also calculated a range of terminal asset values of Stamps.com at the end of the six-year period ending in 2026 by applying a perpetual growth rate ranging from 2.5% to 3.5% of the unlevered free cash flow of Stamps.com during the terminal year. The unlevered free cash flows and the range of terminal asset values were then discounted to present values
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using a range of discount rates from 9% to 10%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of Stamps.com. The present value of the unlevered free cash flows and the range of terminal asset values were then adjusted by adding Stamps.com’s net cash balance of approximately $550 million as of June 30, 2021. Based on the results of this analysis, J.P. Morgan arrived at a range of equity values of between $225.00 and $287.25 per share of the common stock on a stand-alone basis (i.e., without synergies).
Other Information
52-Week Historical Trading Range. For reference only and not as a component of its fairness analyses, J.P. Morgan reviewed the trading range for Stamps.com common stock for the 52-week period ended July 7, 2021. J.P. Morgan noted that the low and high closing share prices during this period were $159.22 and $325.13 per share of Stamps.com common stock, respectively.
Analyst Price Targets for Stamps.com. For reference only and not as a component of its fairness analyses, J.P. Morgan reviewed (i) certain publicly available equity research analyst share price targets for Stamps.com common stock, and noted that the range of such price targets, rounded to the nearest $0.25, was $245.00 per share of Stamps.com common stock to $378.00 per share of Stamps.com common stock, and (ii) certain publicly available equity research analyst share price targets for Stamps.com common stock discounted by twelve months at a cost of equity of 10%, and noted that the range of discounted values for such price targets, rounded to the nearest $0.25, was $223.00 per share of Stamps.com common stock to $344.00 per share of Stamps.com common stock, in each case, as compared to the merger consideration of $330.00 per share in cash and the closing price per share of Stamps.com common stock as of July 7, 2021 of $197.01.
Miscellaneous. The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Stamps.com. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Stamps.com, and none of the selected transactions reviewed was identical to the Merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Stamps.com. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the Merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Stamps.com and the transactions compared to the Merger.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Stamps.com with respect to the Merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Stamps.com and the industries in which it operates.
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For services rendered in connection with the Merger, Stamps.com has agreed to pay J.P. Morgan an aggregate fee of approximately $48 million, $4 million of which became payable to J.P. Morgan at the time J.P. Morgan delivered its opinion and the remainder of which is contingent and payable upon the consummation of the Merger.. Stamps.com. In addition, Stamps.com has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.
During the two years preceding the date of J.P. Morgan’s opinion, neither J.P. Morgan nor its affiliates had any material financial advisory or other material commercial or investment banking relationships with Parent. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with Stamps.com for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger and joint bookrunner on Stamps.com’s revolving credit facility in June 2020. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with certain affiliates of Thoma Bravo, LLC, an affiliate of Parent (“Thoma Bravo”) for which J.P. Morgan and such affiliates have received customary compensation. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of certain affiliates of Thoma Bravo, for which it receives customary compensation or other financial benefits. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock. During the two year period preceding delivery of J.P. Morgan’s opinion, the aggregate fees recognized by J.P. Morgan from Stamps.com were approximately $140,000 and from Thoma Bravo and certain of Thoma Bravo’s affiliates were approximately $96 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of Stamps.com for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.
Management Projections
Although Stamps.com has in the past publicly issued limited short-term guidance concerning certain aspects of its expected financial performance, Stamps.com does not, as a matter of course, publicly disclose long-term forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying long-term assumptions, estimates and projections. However, Stamps.com is including certain previously nonpublic, unaudited prospective financial information prepared by its management for the calendar years 2021 to 2026 in order to provide Stamps.com stockholders with access to information that was made available to the Board of Directors in connection with its evaluation of the Merger. The Management Projections were presented to the Board of Directors on June 9, 2021 in connection with the Board of Directors’ consideration of proposals received by Stamps.com from Thoma Bravo and Sponsor A.
The following table presents the Management Projections:
($mm)
2021E(1)
2022E
2023E
2024E
2025E
2026E
Revenue
$805
$936
$1,085
$1,226
$1,373
$1,497
Adj. EBITDA(2)
$244
$302
$369
$441
$508
$569
EBIT(3)
$240
$299
$366
$439
$506
$567
Taxes
$(72)
$(105)
$(101)
$(121)
$(139)
$(156)
EBIAT(4)
$168
$194
$265
$318
$367
$411
Depreciation and Amortization
$3
$3
$3
$3
$2
$2
Capital Expenditures
$(3)
$(2)
$(2)
$(2)
$(2)
$(2)
Change in Net Working Capital
$(8)
$3
$4
$3
$4
$3
Stock-based compensation net of tax
$(32)
$(35)
$(45)
$(51)
$(57)
$(62)
Other(5)
$(50)
$0
$0
$0
$0
$0
Free cash flow(5)
$79
$164
$225
$271
$314
$352
(1)
Represents actual results for the first quarter and projections for the balance of the year.
(2)
Adjusted EBITDA represents earnings before interest and other expense, net, interest and other income, net, income tax expense or benefit, depreciation and amortization and (a) excludes certain non-cash items, including stock-based compensation expense and contingent consideration charges and (b) excludes certain expenses and gains such as acquisition related expenses, litigation settlement expenses, executive consulting expenses, and insurance proceeds.
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(3)
EBIT represents earnings before interest and other expense, net, interest and other income, net, income tax expense or benefits, and subject to the exclusions in (a) and (b) of footnote (2).
(4)
EBIAT represents earnings before interest and other expense, net, interest and other income, net, after income tax expense or benefits, and subject to the exclusions in (a) and (b) of footnote (2).
(5)
Free cash flow represents EBIAT plus depreciation and amortization, minus capital expenditures, minus change in net working capital, minus stock-based compensation (which is treated as if it were a cash expense for this purpose) and, in 2021, minus estimated after-tax expenses relating to settlements of litigations, and subject to the exclusions in (a) (other than stock-based compensation) and (b) of footnote (2).
Management Projections were developed by Stamps.com management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement, or any changes to Stamps.com’s operations or strategy that may be implemented after the consummation of the Merger, including any costs incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. Management Projections are based on a number of assumptions which include, but are not limited to organic growth (i.e. no acquisitions); continued investments across Stamps.com’s businesses consistent with strategic initiatives; stable carrier economics and revenue sharing arrangements in the United States; anticipated carrier economics and revenue sharing arrangement in Stamps.com’s developing businesses outside of the United States; and no material fluctuations in interest rates and income taxes. Management Projections were based on information known to management as of May 16, 2021. In the view of Stamps.com management, the Management Projections have been reasonably prepared by Stamps.com management on bases reflecting the best currently available estimates and judgments of Stamps.com management of the future financial performance of Stamps.com at the time of the presentation to the Board of Directors and other matters covered thereby.
Although the Management Projections are presented with numerical specificity, they were based on numerous variables and assumptions made by Stamps.com management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Stamps.com’s business, all of which are difficult or impossible to predict accurately and many of which are beyond Stamps.com’s control. The Management Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Projections, including, but not limited to, Stamps.com’s performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in Stamps.com’s reports filed with the SEC. There can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than forecasted. The Management Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Management Projections will be affected by Stamps.com’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Management Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Management Projections should not be regarded as an indication that Stamps.com, J.P. Morgan, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that the Management Projections will be necessarily predictive of actual future events. No representation is made by Stamps.com or any other person regarding the Management Projections or Stamps.com’s ultimate performance compared to such information. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about Stamps.com contained in Stamps.com’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Management Projections, stockholders are cautioned not to place undue, if any, reliance on the Management Projections.
The Management Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. At the direction of Stamps.com management, the non-GAAP financial measures used in the Management Projections were relied upon by J.P. Morgan for purposes of
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its opinion and by the Board of Directors in connection with its evaluation of the Merger. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. Accordingly, Stamps.com has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. 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 Stamps.com may not be comparable to similarly titled amounts used by other companies. Neither Stamps.com’s independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Management Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.
The summary of the Management Projections is included solely to give stockholders access to the information that was made available to the Board of Directors, J.P. Morgan, Parent and Merger Sub, and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares of Stamps.com common stock.
In addition, the Management Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws, Stamps.com does not intend to update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.
Interests of Stamps.com’s Directors and Executive Officers in the Merger
When considering the recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. The Board of Directors was aware of and considered these interests, among other matters, to the extent that they existed at the time, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders. These interests are described in more detail and, where applicable, are quantified in the narrative below.
Arrangements with Parent
As of the date of this proxy statement, none of our executive officers has entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates or otherwise provide any financing with respect to the Merger. Except as approved by the Board of Directors, from the date of the Merger Agreement, to the earlier of the termination of the Merger Agreement or the Effective Time, pursuant to the terms of the Merger Agreement, Parent and Merger Sub covenant not to, and covenant to not permit any of their subsidiaries or respective controlled affiliates to, authorize, make or enter into, any arrangements or understandings (formal or informal, binding or otherwise) with any executive officer of Stamps.com (1) regarding any continuing employment or consulting relationship with the Surviving Corporation; (2) pursuant to which any such executive officer would be entitled to receive consideration of a different amount or nature than Stamps.com stockholders; or (3) pursuant to which any such executive officer (directly or indirectly) would agree to provide equity investment to finance any portion of the Merger.
Continued Employment of Executive Officers
The Company’s executive officers as of the Effective Time are expected to continue to serve as officers of the Surviving Corporation and to continue to receive their salary and benefits. Under the Merger Agreement, for a period of 12 months after the Effective Time, Parent has agreed to provide each employee who continues with the Surviving Corporation salary, bonuses and certain benefits at least as favorable as provided prior to the Effective Time.
Insurance and Indemnification of Directors and Executive Officers
For a period of six years after the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) indemnify, defend and hold harmless, and advance expenses to current or former directors, officers and employees of Stamps.com with respect to all acts or omissions by them in their capacities as such at any time
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prior to the Effective Time (including any matters arising in connection with the Merger Agreement or the transactions contemplated thereby), to the fullest extent that Stamps.com would be permitted by applicable law and to the fullest extent required by the organizational documents of Stamps.com and as provided in any indemnification agreements as in effect prior to the Effective Time. For a period of six years after the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) cause the certificate of incorporation, bylaws or other organizational documents of the Surviving Corporation to contain provisions with respect to indemnification, advancement of expenses and limitation of director, officer and employee liability that are no less favorable to the current or former directors, officers and employees of Stamps.com than those set forth in Stamps.com’s organizational documents as of the date of the Merger Agreement. The Surviving Corporation will not, for a period of six years from the Effective Time, amend, repeal or otherwise modify these provisions in the organizational documents in any manner that would adversely affect the rights of the current or former directors, officers and employees of Stamps.com.
The Merger Agreement also provides that, prior to the Effective Time, Stamps.com may purchase a six-year prepaid “tail” policy on the same terms and conditions as Parent would be required to cause the Surviving Corporation to purchase as discussed below. Stamps.com’s ability to purchase a “tail” policy is subject to a cap on the premium equal to 300% of the aggregate annual premiums currently paid by Stamps.com for its existing directors’ and officers’ liability insurance and fiduciary insurance for its last full fiscal year. If Stamps.com does not purchase a “tail” policy prior to the Effective Time, for at least six years after the Effective Time, Parent will cause the Surviving Corporation to maintain in full force and effect, on terms and conditions no less advantageous to the current or former directors, officers and employees of Stamps.com, the existing directors’ and officers’ liability insurance and fiduciary insurance maintained by Stamps.com as of the date of the Merger Agreement. The “tail” policy will cover claims arising from facts, events, acts or omissions that occurred at or prior to the Effective Time, including the transactions contemplated in the Merger Agreement. The obligation of Parent or the Surviving Corporation, as applicable, is subject to an annual premium cap of 300% of the aggregate annual premiums currently paid by Stamps.com for such insurance, but if the costs exceed such cap, Parent or the Surviving Corporation will purchase as much of such insurance coverage as possible for such amount. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”
Potential Payments At or Following Change in Control
Treatment of Company Options and Company RSU Awards
The Company from time to time has granted Company Options and Company RSU Awards under its 2010 Equity Incentive Plan, as amended, 2016 ShippingEasy Equity Inducement Plan, February 26, 2018 Equity Inducement Award, 2018 Metapack Equity Inducement Award and 1999 Employee Stock Purchase Plan (as amended from time to time through October 24, 2018) (collectively, the “Company Equity Plans”).
At the Effective Time, each Company Option (whether vested or unvested) will be cancelled and automatically converted into the right to receive an amount in cash without interest, equal to the product of (A) the aggregate number of shares of Stamps.com common stock subject to such Company Option, multiplied by (B) the excess, if any, of the Per Share Price over the applicable per share exercise price under such Company Option, subject to any required withholding of Taxes.
No new purchase intervals will begin or be extended under the ESPP after July 8, 2021, and the ESPP will terminate immediately prior to, and effective as of, the Effective Time. In addition, no new participants will be permitted in the ESPP following July 8, 2021, or as soon as administratively practicable thereafter, and with respect to any purchase intervals in effect on July 8, 2021, as of and following such date, existing participants in the ESPP will not be allowed to increase payroll contribution rates or make separate non-payroll contributions to the ESPP, except as required by applicable law.
Any Company Option (whether vested or unvested) with a per share exercise price equal to or greater than $330.00 will be cancelled immediately upon the Effective Time without payment or consideration.
Each Company RSU Award (whether vested or unvested) that is outstanding as of immediately prior to the Effective Time shall accelerate and become fully vested effective immediately prior to, and contingent upon, the Effective Time, and shall be cancelled and automatically converted into the right to receive an amount in cash, without interest, equal to the product of (A) the aggregate number of shares of Stamps.com common stock subject to the Company RSU Award multiplied by (B) the Per Share Price, subject to any required withholding of Taxes.
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The Company Equity Plans will terminate as of the Effective Time and the provisions in any other employee plan or contract providing for the issuance or grant of any other interest in respect of the capital stock of Stamps.com will be cancelled as of the Effective Time.
Executive Agreements with Named Executive Officers
We have entered into an agreement with Mr. McBride that could result in the payment of compensation and benefits to Mr. McBride following a change in control. Mr. McBride and the Company have agreed that, in the event of (i) an involuntary termination by us without cause following a change in control or (ii) a resignation by Mr. McBride within two to nine months following the change in control, he will receive a lump sum payment equal to six months of his then-current base salary and Company-provided health and welfare benefits for a period of six months following his termination. Except in the event of a change of control, no amounts would be due to any of our named executive officers in the event of a resignation or a termination with cause.
Section 280G Mitigation Actions
In connection with the Merger, the Company may take certain actions to mitigate any potential adverse tax consequences to the Company and certain employees of the Company under the “golden parachute” provisions of Sections 280G and 4999 of the Code that could arise in connection with the completion of the Merger. Specifically, the Company is permitted to enter into agreements with any “disqualified person” (as defined under Section 280G of the Code and the regulations thereunder, and which includes our executive officers) containing a “net best” provision such that in the event that a disqualified person becomes subject to the excise tax imposed under Section 4999 of the Code, any parachute payments will be reduced to the safe harbor limit so that the excise tax is not triggered, unless the net after tax value of the amounts due to the disqualified person after imposition of the excise tax would be greater than the net after tax value of the reduced amount (in which case no reduction will apply). The Company does not expect that any of our executive officers will be subject to the excise tax imposed under Section 4999 of the Code.
Quantification of Potential Payments to Stamps.com Named Executive Officers in Connection with the Merger
This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of Stamps.com’s named executive officers 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. The amounts set forth in the table below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement and in the footnotes to the table. As a result, the actual amounts, if any, that a named executive officer receives may materially differ from the amounts set forth in the table.
The table below assumes that: (i) the Effective Time of the Merger will occur on October 4, 2021; (ii) the employment of Mr. McBride will be terminated immediately following the Effective Time of the Merger in a manner entitling him to receive the severance benefits described in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control”; and (iii) no named executive officer becomes entitled to additional compensation or benefits or equity awards prior to the Effective Time of the Merger. Pursuant to applicable proxy disclosure rules, the value of the equity award vesting acceleration below is equal to the number of shares covered by the applicable Company Option or Company RSU Award that are accelerating multiplied by the Per Share Price. The amounts shown in the table below do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that would vest pursuant to their terms, on or prior to the Effective Time of the Merger, or the value of payments or benefits that are not based on or otherwise related to the Merger.
As described in the footnotes to the amounts shown in the table below, the cash payments to Mr. McBride and the benefits that may be provided to Mr. McBride are conditioned on the occurrence of both the Merger, as well as his qualifying termination of employment (a “double-trigger” basis), and the other amounts in the table are conditioned only upon the occurrence of the Merger (a “single-trigger” basis).
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Golden Parachute Compensation
Name
Cash ($)(2)
Equity ($)(3)
Perquisites/
Benefits ($)(4)
Total ($)
Ken McBride
466,200
9,892,958
9,282
10,386,440
Jeff Carberry
0
5,606,010
0
5,606,010
Sebastian Buerba
0
5,935,775
0
5,935,775
John Clem
0
6,595,306
0
6,595,306
Nathan Jones
0
5,664,157
0
5,664,157
(1)
The conditions under which each of these payments and benefits are to be provided are described in more detail above in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”
(2)
The amounts in the cash column for Mr. McBride assumes involuntary termination of Mr. McBride's employment following the closing of the Merger or his resignation within two to nine months following the closing of the Merger, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”
(3)
The amounts listed in this column represent the accelerated vesting that each named executive officer may become entitled to receive with respect to his or her equity awards as a result of accelerated vesting of their respective equity awards, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”
(4)
The amounts listed above include the following components:
Name
Health and Welfare
Benefits ($)(1)
Ken McBride
9,282
(1)
The amounts in the health and welfare benefits column for Mr. McBride assumes involuntary termination of Mr. McBride's employment following the closing of the Merger or his resignation within two to nine months following the Merger and a benefit value of $1,547 per month, as described in more detail in the section of this proxy statement captioned “—Potential Payments At or Following Change in Control.”
Equity Awards Held by Stamps.com’s Executive Officers and Non-Employee Directors
At the Effective Time of the Merger, each Company Option and Company RSU Award held by our executive officers and non-employee directors will receive the treatment described in the section of this proxy statement captioned “Treatment of Company Options and Company RSU Awards.”
Each of our executive officers is eligible to receive the applicable vesting acceleration benefits with respect to his or her equity awards described above under the heading “—Potential Payments At or Following Change in Control.”
At the Effective Time each unvested equity award held by Stamps.com’s non-employee directors will become fully vested and, as applicable, exercisable pursuant to the terms of Stamps.com’s Non-Employee Director Compensation Policy.
Equity Interests of Stamps.com’s Executive Officers and Non-Employee Directors
The following table sets forth the number of shares of common stock and the number of shares of common stock underlying equity awards held by each of Stamps.com’s executive officers and non-employee directors that are outstanding as of August 26, 2021, the latest practicable date to determine such amounts before the filing of this proxy statement. Such numbers do not forecast any grants, additional issuances, dividends, additional deferrals or forfeitures of equity-based awards following the date of this proxy statement. However, such numbers take into account the vesting of equity awards that may become vested on or prior to October 4, 2021. The table also sets forth the values of these shares and equity awards, determined as the number of shares multiplied by the Per Share Price (minus the applicable per share exercise price for any Company Options). No additional shares of common stock or equity awards were granted to any executive officer or non-employee director in contemplation of the Merger.
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Equity Interests of Stamps.com’s Executive Officers and Non-Employee Directors
Name
Shares
(#)(1)
Shares ($)
Company
Options
(#)(2)
Company
Options ($)
Total ($)
Kenneth McBride
898
296,340
150,000
44,244,000
44,540,340
Jeff Carberry
2,112
696,960
52,207
15,398,977
16,095,937
Jonathan Bourgoine
25,662
6,324,398
6,324,398
Sebastian Buerba
25,146
7,417,064
7,417,064
John Clem
884
291,720
58,992
17,113,143
17,404,863
Nathan Jones
637
210,210
28,248
7,185,498
7,395,708
Amine Khechfe
99
32,670
12,292
3,625,648
3,658,318
Matthew Lipson
1,358
448,140
68,216
18,719,088
19,167,228
Steve Rifai
63,000
16,914,500
16,914,500
Mohan P. Ananda
637,524
210,382,920
30,000
5,315,300
215,698,220
David C. Habiger
572
188,760
30,000
5,302,300
5,491,060
G. Bradford Jones
40,286
13,294,380
25,000
4,118,700
17,413,080
Katie May
42,957
7,738,776
7,738,776
Theodore R. Samuels II
1,000
330,000
30,000
5,189,200
5,519,200
(1)
This number includes shares of common stock beneficially owned, excluding shares issuable upon exercise of Company Options or settlement of Company RSU Awards.
(2)
For our directors, all of their Company Options are vested and are included in the table above. For our executive officers, the number of shares of common stock subject to Company Options includes both vested and unvested Company Options. The number of shares subject to the vested and unvested portions of the Company Options and the value (determined as the aggregate number of underlying shares multiplied by the Per Share Price minus the aggregate exercise price with respect to such shares) of those portions of the Company Options are as follows:
Name
Vested
Company
Options (#)
Vested
Company
Options ($)
Unvested
Company
Options (#)
Unvested
Company
Options ($)
Kenneth McBride
116,460
34,351,042
33,540
9,892,958
Jeff Carberry
33,201
9,792,967
19,006
5,606,010
Jonathan Bourgoine
4,877
1,231,070
20,785
5,093,328
Sebastian Buerba
5,022
1,481,289
20,124
5,935,775
John Clem
36,632
10,517,837
22,360
6,595,306
Nathan Jones
6,268
1,521,341
21,980
5,664,157
Amine Khechfe
3,348
987,526
8,944
2,638,122
Matthew Lipson
51,446
13,772,609
16,770
4,946,479
Steve Rifai
54,056
14,276,378
8,944
2,638,122
Financing of the Merger
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition.
We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $6.6 billion. This amount includes the funds needed to: (1) pay stockholders the amounts due under the Merger Agreement and (2) make payments in respect of our outstanding equity-based awards pursuant to the Merger Agreement.
Equity Financing
Pursuant to the Equity Commitment Letter, the Thoma Bravo Fund has agreed to provide Parent with an equity commitment which, when taken together with the proceeds from the debt financing, is sufficient to fund the aggregate purchase price required to be paid at the closing of the Merger, including (A) the aggregate consideration to which the holders of Stamps.com common stock become entitled pursuant to the Merger Agreement, (B) the cash consideration to be paid in connection with the Company RSU Awards and (C) the cash consideration to be paid in connection with the Company Options. The Equity Commitment Letter provides, among other things, that:
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(1) Stamps.com is an express third party beneficiary thereof with respect to enforcing Parent’s right to cause the equity commitment under the Equity Commitment Letter by the Thoma Bravo Fund to be funded to Parent in order to consummate the Merger, if, and only if, (a) all conditions in Article VII of the Merger Agreement have been satisfied or waived (other than any conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the prior or substantially concurrent satisfaction of such conditions), (b) the Debt Financing (as defined below) has been funded in accordance with the terms and conditions thereof or will be funded in accordance with the terms and conditions thereof if the Equity Financing is funded and (c) Stamps.com has irrevocably confirmed in writing that if the Equity Financing and Debt Financing are funded, then Stamps.com shall take such actions that are required of it by the Merger Agreement to consummate the closing of the Merger pursuant to the terms of the Merger Agreement; and (2) Parent and the Thoma Bravo Fund each waive any defenses to the enforceability of remedies, subject to enforceability limitations, and will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that (x) there is adequate remedy at law or (y) an award of specific performance is not an appropriate remedy for any reason at law or in equity. The Equity Commitment Letter may not be amended or otherwise modified without the prior written consent of Parent, the Thoma Bravo Fund and Stamps.com.
Debt Financing
In addition, in connection with the Merger Agreement, Parent entered into the Debt Commitment Letter with the Debt Commitment Parties, pursuant to which the Debt Commitment Parties have committed to provide, upon certain terms and subject to certain conditions, Merger Sub with certain debt financing.
A portion of the proceeds under this debt financing will be used for all fees and expenses to be paid at the closing of the Merger by Stamps.com, Parent or Merger Sub, including any amounts required to terminate Stamps.com’s credit facility, contemplated by, and subject to the terms and conditions of, the Merger Agreement. In addition, the proceeds under this debt financing will be used (i) to provide ongoing working capital, and (ii) for other general corporate purposes.
The obligations of the Debt Commitment Parties to provide the debt financing under the Debt Commitment Letter are subject to a number of customary conditions, including, but not limited to (as applicable):
that a Company Material Adverse Effect (as defined in the Merger Agreement) will not have occurred after July 8, 2021 and be continuing;
the Merger shall have been consummated in accordance with the terms of the Merger Agreement in all material respects (without any amendment, modification or waiver of any of the provisions thereof that would be materially adverse to the Lenders in their capacity as such without the approval of the Debt Commitment Parties);
subject to certain limitations and exceptions, the accuracy in all material respects as of the closing of the Merger of certain specified representations and warranties in the Merger Agreement and certain specified representations and warranties in the loan documents; and
the Equity Financing and the refinancing of the Credit Facility shall have occurred or, substantially concurrently with the initial borrowing, shall occur.
Guaranty
Pursuant to the Guaranty, the Thoma Bravo Fund has agreed to guarantee the due, punctual and complete payment and performance of all of the liabilities and obligations of Parent under the Merger Agreement, including, but not limited to: (1) the aggregate amount of the Parent Termination Fee (as defined under the caption “The Merger—Termination Fee”) solely if and when any of the Parent Termination Fee is payable pursuant to the Merger Agreement; (2) any amounts due by Parent pursuant to legal proceedings as a result of default under the Merger Agreement; and (3) the reimbursement obligations of Parent pursuant to the indemnification obligations to Stamps.com and its representatives in connection with any debt financing. We refer to the obligations set forth in the preceding sentence as the “Guaranteed Obligations.” The obligations of the Thoma Bravo Fund under the Guaranty are subject to a cap equal to $397,000,000.
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Subject to specified exceptions, the Guaranty will terminate upon the earliest of:
the closing of the Merger;
the valid termination of the Merger Agreement in accordance with its terms in circumstances where the Parent Termination Fee is not payable under the Merger Agreement;
the valid termination of the Merger Agreement in accordance with its terms, other than a termination pursuant to which Stamps.com would be entitled to a Parent Termination Fee under the Merger Agreement, in which case the Guaranty shall terminate 90 days after such termination unless Stamps.com shall have delivered a written notice with respect to the Guaranteed Obligations prior to such 90th day; provided that if the Merger Agreement has been so terminated and such notice has been provided, the Thoma Bravo Fund, as the guarantor entity under the Guaranty, shall have no further liability or obligation under the Guaranty from and after the earliest of (x) the closing of the Merger, including payment of the aggregate merger consideration payable at the closing of the Merger in accordance with the Merger Agreement, (y) a final, non-appealable order of a court of competent jurisdiction determining that the Thoma Bravo Fund, as the guarantor entity under the Guaranty, does not owe any amount under the Guaranty and (z) a written agreement among the Thoma Bravo Fund, as the guarantor entity under the Guaranty, and Stamps.com terminating the obligations and liabilities of the Thoma Bravo Fund, as the guarantor entity under the Guaranty, pursuant to the Guaranty; and
payment of the Guaranteed Obligations by the Thoma Bravo Fund, as the guarantor entity under the Guaranty, Parent and/or Merger Sub to Stamps.com.
Closing and Effective Time
The closing of the Merger will take place no later than the second business day following the satisfaction or waiver in accordance with the Merger Agreement of all of the conditions to closing of the Merger (as described under the caption, “Proposal 1: Adoption of the Merger Agreement— Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing but subject to the satisfaction or waiver of such conditions, or such other time agreed to in writing by Parent, Stamps.com and Merger Sub.
Appraisal Rights
If the Merger is consummated, stockholders who continuously hold shares of Stamps.com common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw or waive their demands or otherwise lose their rights of appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262. The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in Section 262 and in this summary to a “stockholder” are to the record holder of shares of Stamps.com common stock unless otherwise expressly noted herein. Only a holder of record of shares of Stamps.com common stock is entitled to demand appraisal of the shares registered in that holder’s name. A person having a beneficial interest in shares of Stamps.com common stock held of record in the name of another person, such as a bank, broker, trust or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of Stamps.com common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.
Under Section 262, if the Merger is completed, holders of shares of Stamps.com common stock who: (1) submit a written demand for appraisal of their shares prior to the vote to adopt the Merger Agreement at the Special Meeting, (2) do not vote in favor of the adoption of the Merger Agreement; (3) continuously are the record holders of such shares through the Effective Time; and (4) otherwise exactly follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Stamps.com common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. However, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights unless (a) the
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total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Stamps.com common stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Per Share Price in respect of such shares exceeds $1 million (conditions (a) and (b) referred to as the “ownership thresholds”). Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may voluntarily pay to each stockholder entitled to appraisal an amount in cash pursuant to subsection (h) of Section 262, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary cash payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.
Under Section 262, where a Merger Agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Stamps.com’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the Merger, any holder of shares of Stamps.com common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Per Share Price described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Stamps.com common stock, Stamps.com believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.
Stockholders wishing to exercise the right to seek an appraisal of their shares of Stamps.com common stock must do ALL of the following:
the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;
the stockholder must deliver to Stamps.com a written demand for appraisal before the vote on the Merger Agreement at the Special Meeting; and
the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time).
In addition:
at least one stockholder (or any person who is the beneficial owner of shares of Stamps.com common stock held either in a voting trust or by a nominee on behalf of such person, for which appraisal has been demanded) or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so; and
one of the ownership thresholds must be met.
Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement or abstain.
Filing Written Demand
Any holder of shares of Stamps.com common stock wishing to exercise appraisal rights must deliver to Stamps.com, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to stockholders, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of Stamps.com common stock exercising appraisal rights must hold of record the shares on the date the written
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demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Stamps.com stockholders will constitute a waiver of appraisal rights.
Only a holder of record of shares of Stamps.com common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Stamps.com common stock must be executed by or on behalf of the holder of record, and must reasonably inform Stamps.com of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners. If a stockholder holds shares of Stamps.com common stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder.
STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.
All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:
Stamps.com Inc.
Attention: Investor Relations
1990 E. Grand Avenue
El Segundo, CA 90245
Any holder of shares of Stamps.com common stock who has delivered a written demand to Stamps.com and who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Stamps.com a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require the consent of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the consideration offered pursuant to the Merger Agreement within 60 days after the Effective Time. If no petition for appraisal is filed with the Delaware Court within 120 days after the Effective Time, stockholders' rights to appraisal shall cease, and all holders of shares of Stamps.com common stock will be entitled to receive the consideration offered pursuant to the Merger Agreement. If an appraisal proceeding is commenced and Stamps.com, as the Surviving Corporation, does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s
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demand in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a stockholder, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the per share merger consideration being offered pursuant to the Merger Agreement.
Notice by the Surviving Corporation
If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of Stamps.com common stock who has properly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.
Filing a Petition for Appraisal
Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Stamps.com common stock who has complied with Section 262 and is entitled to seek appraisal under Section 262 (including for this purpose any beneficial owner of the relevant shares) may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder (or beneficial owner), demanding a determination of the fair value of the shares held by all dissenting stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and stockholders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Stamps.com common stock. Accordingly, any holders of shares of Stamps.com common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Stamps.com common stock within the time and in the manner prescribed in Section 262. The failure of a holder of Stamps.com common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.
Within 120 days after the Effective Time, any holder of shares of Stamps.com common stock who has complied with the requirements of Section 262 and who is entitled to appraisal rights thereunder will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Stamps.com has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt by the Surviving Corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of Stamps.com common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above, however, the demand for appraisal can only be made by a stockholder of record.
If a petition for an appraisal is duly filed by a holder of shares of Stamps.com common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on such list at the addresses stated therein. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the court. The costs of these notices are borne by the Surviving Corporation. After notice to stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates (if any) to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings and, if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights if neither of the ownership thresholds is met.
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Determination of Fair Value
After determining the holders of Stamps.com common stock entitled to appraisal and that at least one of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Stamps.com common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary payment, unless paid at such time.
In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the Merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.”
Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Per Share Price. Neither Stamps.com nor Parent anticipates offering more than the Per Share Price to any stockholder exercising appraisal rights, and each of Stamps.com and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Stamps.com common stock is less than the Per Share Price. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised. In the absence of such determination or assessment, each party bears its own expenses.
If any stockholder who demands appraisal of his, her or its shares of Stamps.com common stock under Section 262 fails to perfect, or effectively loses or withdraws, such holder’s right to appraisal, such stockholder will be entitled to receive only the consideration offered pursuant to the Merger Agreement. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds described above has been satisfied as to stockholders
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seeking appraisal rights or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Per Share Price in accordance with Section 262.
From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of Stamps.com common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of Stamps.com common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds described above has been satisfied as to the stockholders seeking appraisal rights, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder without the approval of the court, and such approval may be conditioned upon such terms as the court deems just; provided, however, that the foregoing shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the Merger within 60 days after the Effective Time.
Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.
Litigation Related to the Merger
Between August 23 and August 27, 2021, three lawsuits have been filed in the United States District Court for the Southern District of New York against Stamps.com and its directors: Stein v. Stamps.com Inc. et al., 1:21-cv-7108 (S.D.N.Y.); Hejazi v. Stamps.com Inc. et al., 1:21-cv-07227 (S.D.N.Y.); and Ciccotelli v. Stamps.com Inc. et al., 1:21-cv-07246 (S.D.N.Y.). The complaints name Stamps.com and the Stamps.com directors as defendants. The complaints each allege that the Preliminary Proxy Statement filed on August 19, 2021 relating to the Merger omitted material information that rendered it false and misleading. As a result of the alleged omissions, the lawsuits seek to hold Stamps.com and its directors liable for violating Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and additionally seeks to hold Stamps.com’s directors liable as control persons pursuant to Section 20(a) of the Exchange Act.
Stamps.com has not yet responded to the complaints filed in any of the above lawsuits. Each complaint seeks, among other relief, an injunction preventing the closing of the merger, rescission of the merger agreement or any of its terms to the extent already implemented or awarding of rescissory damages, damages, and an award of attorneys’ and experts’ fees. While Stamps.com believes the complaints are without merit, there can be no assurance that it will ultimately prevail in any or all such lawsuits. Additionally, additional lawsuits may be filed before the stockholder meeting and/or the consummation of the Merger.
Accounting Treatment
The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.
Material U.S. Federal Income Tax Consequences of the Merger
The following discussion is a summary of material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders (each as defined below) of shares of Stamps.com common stock whose shares are converted into the right to receive cash pursuant to the Merger. This summary does not describe any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. This discussion is limited to Stamps.com stockholders who hold their shares of Stamps.com common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes).
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This discussion is for general information only and does not address all of the tax consequences that may be relevant to Stamps.com stockholders in light of their particular circumstances. For example, this discussion does not address:
tax consequences that may be relevant to Stamps.com stockholders who may be subject to special treatment under U.S. federal income tax laws, such as banks or other financial institutions; tax-exempt organizations; retirement or other tax deferred accounts; S corporations, partnerships or any other entities or arrangements treated as partnerships or pass-through or disregarded entities for U.S. federal income tax purposes (or an investor in a partnership, S corporation or other pass-through or disregarded entity); insurance companies; mutual funds; governmental organizations; dealers or brokers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; controlled foreign corporations; passive foreign investment companies; corporations that accumulate earnings to avoid U.S. federal income tax; foreign pension funds and their affiliates; entities subject to the U.S. anti-inversion rules; certain U.S. expatriates or former citizens or long-term residents of the United States; or, except as noted below, holders that own or have owned (directly, indirectly or constructively) five percent or more of Stamps.com common stock (by vote or value);
tax consequences to Stamps.com stockholders holding their shares of Stamps.com common stock through an “individual retirement account” (IRA), “Roth IRA,” or other tax-deferred account;
tax consequences to Stamps.com stockholders holding their shares of Stamps.com common stock as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;
tax consequences to Stamps.com stockholders whose shares of Stamps.com common stock constitute qualified small business stock within the meaning of Section 1202 of the Code;
tax consequences to Stamps.com stockholders that received their shares of Stamps.com common stock in a compensatory transaction, through a tax qualified retirement plan or pursuant to the exercise of options or warrants;
tax consequences to Stamps.com stockholders who own an equity interest in Parent following the Merger;
tax consequences to U.S. Holders whose “functional currency” is not the U.S. dollar;
tax consequences to Stamps.com stockholders who hold their Stamps.com common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;
tax consequences arising from the Medicare tax on net investment income;
tax consequences to Stamps.com stockholders subject to special tax accounting rules as a result of any item of gross income with respect to the shares of Stamps.com common stock being taken into account in an “applicable financial statement” (as defined in Section 451(b) of the Code);
the U.S. federal estate, gift or alternative minimum tax consequences, if any, as a result of the Merger;
any state, local or non-U.S. tax consequences as a result of the Merger; or
tax consequences to Stamps.com stockholders that do not vote in favor of the Merger and that properly demand appraisal of their shares under Section 262.
We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation.
THE FOLLOWING SUMMARY IS FOR GENERAL INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING FEDERAL ESTATE, GIFT AND OTHER NON-INCOME TAX CONSEQUENCES, AND TAX CONSEQUENCES UNDER STATE, LOCAL OR NON-U.S. TAX LAWS.
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U.S. Holders
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of Stamps.com 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 thereof 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 (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code; or (2) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
The receipt of cash by a U.S. Holder in exchange for shares of Stamps.com common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Stamps.com common stock surrendered pursuant to the Merger. Gain or loss must be determined separately for each block of shares (that is, shares of Stamps.com common stock acquired at the same cost in a single transaction). A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Stamps.com common stock. A U.S. Holder’s gain or loss on the disposition of shares of Stamps.com common stock will generally be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations.
Non-U.S. Holders
The following is a summary of the material U.S. federal income tax consequences that will apply to you if you are a Non-U.S. Holder. The term “Non-U.S. Holder” means a beneficial owner of Stamps.com common stock that is, for U.S. federal income tax purposes, not a U.S. Holder.
Any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:
the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable income tax treaty);
such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition of shares of Stamps.com common stock pursuant to the Merger, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a flat rate of 30% (or a lower rate under an applicable income tax treaty), which gain may be offset by certain U.S. source capital losses of such Non-U.S. Holder, provided that the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses; or
Stamps.com is or has been a “United States real property holding corporation” as such term is defined in Section 897(c) of the Code (“USRPHC”), at any time within the shorter of the five-year period preceding the Merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of Stamps.com common stock (the “Relevant Period”) and, if shares of Stamps.com common stock are regularly traded on an established securities market (within the meaning of Section 897(c)(3) of the Code), such Non-U.S. Holder owns directly or is deemed to own pursuant to attribution rules more than 5% of Stamps.com common stock at any time during the Relevant Period, in which case such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Although there can be no assurances in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the Merger.
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Information Reporting and Backup Withholding
Information reporting and backup withholding (currently, at a rate of 24%) may apply to the proceeds received by a Stamps.com stockholder pursuant to the Merger. Backup withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form) or (2) a Non-U.S. Holder that (i) provides a certification of such holder’s foreign status on the appropriate series of IRS Form W-8 (or a substitute or successor form) or (ii) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
Withholding on Foreign Entities
Sections 1471 through 1474 of the Code (“FATCA”), impose a U.S. federal withholding tax of 30% on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally will impose a U.S. federal withholding tax of 30% on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Although the Code provides that FATCA withholding generally also will apply to payments of gross proceeds from sales or other dispositions of Stamps.com common stock, the U.S. Treasury Department released proposed regulations which, if finalized in their present form, would eliminate the federal withholding tax of 30% applicable to such gross proceeds. In its preamble to such proposed regulations, the U.S. Treasury Department stated that taxpayers may generally rely on the proposed regulations until final regulations are issued.
You are encouraged to consult with your own tax advisors regarding the possible implications of FATCA on the disposition of Stamps.com common stock pursuant to the Merger.
You are urged to consult your tax advisor with respect to the application of U.S. federal income tax laws to your particular circumstances as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local or foreign tax laws.
Regulatory Approvals Required for the Merger
General
Stamps.com and Parent have agreed to take all action necessary to comply with all regulatory notification requirements, and, subject to certain limitations, to obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement. These approvals include approval under the HSR Act and any other applicable antitrust laws (whether domestic or foreign).
HSR Act, U.S. and non-U.S. Antitrust Matters
Under the HSR Act and the Austrian Cartel Act, and the rules promulgated thereunder, certain acquisitions may not be completed until information has been furnished to the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), the applicable waiting periods for the HSR Act and Federal Cartel Authority and the Federal Cartel Attorney Competition Authority have expired or been terminated, and in the case of an application to the Cartel Court, clearance obtained or the application for an in-depth review rejected or withdrawn. The waiting periods under the HSR Act and Austrian Cartel Act are 30 calendar days for the HSR Act unless the waiting period is terminated earlier or extended by a request for additional information and documentary material, and four calendar weeks from the date of notification of the merger filing in Austria for the Austrian Cartel Act, The Merger is subject to the provisions of the HSR Act and the Austrian Cartel Act, and therefore cannot be completed until Stamps.com and Parent file a notification and report form with the FTC and the DOJ under the HSR Act and Thoma Bravo files a merger filing notification with the Austrian Cartel Act and the applicable waiting period has expired or been terminated in the U.S., and the Austrian competition authority has issued a clearance decision in Austria. Stamps.com and Thoma Bravo Fund made the necessary filings with the FTC and the Antitrust Division
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of the DOJ on July 21, 2021, and the waiting period has expired. The Austrian filing was made on July 29, 2021, and declaratory clearance confirmation has been received under the Austrian Cartel Act. Stamps.com and Thoma Bravo Fund may also file pre-merger or post-merger notification filings, forms and submissions with other Governmental Authorities (as defined in the Merger Agreement) pursuant to other applicable antitrust laws in connection with the Merger to the extent required in the reasonable judgement of counsel to Parent and Stamps.com. The Merger Agreement provides that Stamps.com, Parent and Merger Sub will use reasonable best efforts to obtain regulatory clearance, including, to the extent necessary to obtain clearance of the Merger pursuant to the HSR Act and any other antitrust laws applicable to the Merger; provided, however, that no party is required to (x) offer, commit to or effect, by consent decree, hold separate order or otherwise, the sale, divestiture, license or other disposition of any capital stock or other equity or voting interest, assets (whether tangible or intangible), rights, products or businesses of any person, or any other restrictions on the activities of any Person; or (y) contest, defend or appeal any Legal Proceedings (as defined in the Merger Agreement).
At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting periods under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, any state or foreign jurisdiction could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.
Other Regulatory Approvals
One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by stockholders and the completion of the Merger.
Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.
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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.
The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Stamps.com, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk between Stamps.com, Parent and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Stamps.com, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Stamps.com, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Stamps.com, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Stamps.com and our business.
Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws
The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time: (1) Merger Sub will be merged with and into Stamps.com, with Stamps.com becoming a wholly owned subsidiary of Parent; and (2) the separate corporate existence of Merger Sub will thereupon cease. From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, powers and franchises of Stamps.com and Merger Sub, and all of the debts, liabilities and duties of Stamps.com and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub as of immediately prior to the Effective Time, to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified. At the Effective Time, the officers of Stamps.com as of immediately prior to the Effective Time will be the officers of the Surviving Corporation, until their successors are duly appointed. At the Effective Time, the certificate of incorporation of Stamps.com as the Surviving Corporation will be amended to read substantially identically to the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended.
Closing and Effective Time
The closing of the Merger will take place no later than the second business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption, “—Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger) or such other time agreed to in writing by Parent, Stamps.com and Merger Sub. On the Closing Date (as defined in the Merger Agreement), the
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parties will file a certificate of merger with the Secretary of State of the State of Delaware as provided under the DGCL. The Effective Time of the Merger will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the DGCL.
Merger Consideration
Stamps.com Common Stock
At the Effective Time, and without any action required by any stockholder, each share of Stamps.com common stock (other than Owned Company Shares or Dissenting Company Shares, which include, for example, shares of Stamps.com common stock owned by stockholders who have properly and validly exercised their statutory rights of appraisal under Section 262) outstanding as of immediately prior to the Effective Time will be cancelled and extinguished, and automatically converted into the right to receive the Per Share Price, less any applicable withholding of taxes.
Outstanding Company Options and Company RSU Awards
Each Company Option (whether vested or unvested) that is outstanding as of immediately prior to the Effective Time shall accelerate and become fully vested and exercisable effective immediately prior to, and contingent upon, the Effective Time and shall be cancelled and automatically converted into the right to receive an amount in cash, without interest, equal to the product of (A) the aggregate number of shares of Stamps.com common stock subject to such Company Option, multiplied by (B) the excess, if any, of the Per Share Price over the applicable per share exercise price under such Company Option, subject to any required withholding of taxes.
Any Company Option that is unexpired, unexercised, and outstanding as of immediately prior to the Effective Time with a per share exercise price equal to or greater than $330.00 will be cancelled immediately upon the Effective Time without payment or consideration.
Each Company RSU Award (whether vested or unvested) that is outstanding as of immediately prior to the Effective Time shall accelerate and become fully vested effective immediately prior to, and contingent upon, the Effective Time, and shall be cancelled and automatically converted into the right to receive an amount in cash, without interest, equal to the product of (A) the aggregate number of shares of Stamps.com common stock subject to the Company RSU Award multiplied by (B) the Per Share Price, subject to any required withholding of taxes.
The Company Equity Plans will terminate as of the Effective Time and the provisions in any other employee plan or contract providing for the issuance or grant of any other interest in respect of the capital stock of Stamps.com will be cancelled as of the Effective Time.
Treatment of Stamps.com Employee Stock Purchase Plan
The Merger Agreement generally provides that no new offering periods or purchase periods will begin under the ESPP after July 8, 2021, no new participants will be allowed to begin participating in the ESPP after July 8, 2021 or as soon as administratively practicable thereafter, and no new Purchase Interval (as defined in the ESPP) will commence or be extended pursuant to the ESPP, in each case, after July 8, 2021. After July 8, 2021, except to the extent necessary to maintain the status of the ESPP as an “employee stock purchase plan” within the meaning of Section 423 of the Code and the Treasury Regulations thereunder, each ESPP participant will not be allowed to increase his or her payroll contribution rate from the rate in effect as of July 8, 2021, or make separate non-payroll contributions to the ESPP, except as required by applicable law. Each share of Stamps.com common stock purchased under the ESPP that remains outstanding as of immediately before the Effective Time shall be cancelled at the Effective Time and converted into the right to receive the Per Share Price less any applicable withholding taxes.
Exchange and Payment Procedures
Prior to the Closing, Parent will designate Stamps.com’s transfer agent or such other bank or trust company, reasonably acceptable to Stamps.com (the “Payment Agent”) to act as the payment agent for the Merger. At or prior to the Closing, Parent will deposit (or cause to be deposited) with the Payment Agent cash sufficient to pay the aggregate consideration to Stamps.com’s stockholders.
Promptly following the Effective Time (and in any event within five business days), the Payment Agent will mail to each holder of record (as of immediately prior to the Effective Time) of (i) a certificate or certificates that
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immediately prior to the Effective Time represented outstanding shares of Stamps.com common stock (other than Dissenting Company Shares and Owned Company Shares) (collectively, the “Certificates”); and (ii) uncertificated shares of Stamps.com common stock that represented outstanding shares of Stamps.com common stock (other than Dissenting Company Shares and Owned Company Shares) (collectively, the “Uncertificated Shares”) a letter of transmittal in customary form (or effective affidavits of loss in lieu of such Certificates) and instructions for use in effecting the surrender of such holder’s shares of Stamps.com common stock represented by such holder’s Certificate(s) or Uncertificated Shares in exchange for the Per Share Price payable in respect of such shares. The amount of any Per Share Price paid to stockholders may be reduced by any applicable withholding of taxes.
If any cash deposited with the Payment Agent is not claimed within one year following the Effective Time, such cash will be returned to Parent upon demand, and any holders of Stamps.com common stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Parent as general creditor for payment of the Per Share Price. To the extent permitted by applicable laws, any cash deposited with the Payment Agent that remains unclaimed two years following the Effective Time, or at such earlier date as is immediately prior to the time at which such amounts would otherwise escheat to or become property of any governmental authority, will become the property of the Surviving Corporation free and clear of any claims or interest of any person previously entitled thereto.
Representations and Warranties
The Merger Agreement contains representations and warranties of Stamps.com, Parent and Merger Sub.
Some of the representations and warranties in the Merger Agreement made by Stamps.com are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any change, event, violation, effect, occurrence, development, circumstance or other matter (each, an “Effect”) that (x) had, individually or in the aggregate, a material adverse effect on the business, assets or financial condition of the Company Group, taken as a whole, or (y) would reasonably be expected to prevent, materially impair or materially delay the consummation by Stamps.com of the Merger prior to the Termination Date, except that, solely with respect to clause (x), none of the following, or any Effects related thereto or arising therefrom, shall be deemed in and of themselves (and subject to the limitations expressly set forth below with respect thereto), either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there is, or would reasonably be expected to have, a Company Material Adverse Effect on the Company Group:
any change in the economy generally or other general business, financial, political or market conditions, including any suspension of trading in securities generally on any securities exchange or over-the-counter market operated in the United States or any other country or region of the world;
any changes in conditions in the financial markets, credit markets, capital markets or international trade, including (i) changes in interest rates or credit ratings; (ii) changes in exchange rates for the currencies of any country; or (iii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market;
any changes in conditions in the industries (including, for the avoidance of doubt, each of the software and shipping industries) in which the Company Group operates;
any changes in any regulatory, legislative or political conditions in the United States or any other country or region in the world, including changes to United States Postal Service regulations or commercial programs, in each case after July 8, 2021;
any act of terrorism, war (whether or not declared), geopolitical conditions, outbreaks of hostilities, cyber-attacks, national or international calamity, earthquakes, hurricanes, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions or other force majeure events (including epidemics, pandemics or disease outbreaks, including COVID-19, or COVID-19 Measures (each, as defined in the Merger Agreement) or any change in COVID-19 Measures or interpretations thereof) anywhere in the world;
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any Effect resulting from the execution, announcement or pendency, or the performance, of the Merger Agreement or the transactions (including the Merger), including any impact thereof on relationships, contractual or otherwise, of the Company Group with, or any actions taken or threatened to be taken by any, employees, suppliers, customers, business partners, vendors or any other third Person (including Governmental Authorities);
any Legal Proceedings made or brought by any of the current or former stockholders of Stamps.com (on their own behalf or on behalf of Stamps.com) against Stamps.com arising out of the Merger or in connection with the transactions (including any Transaction Litigation (as defined in the Merger Agreement));
any change or prospective change in GAAP, or any compliance with or action taken for the purpose of complying with, any Law or GAAP (or interpretations of any Law or GAAP, in each case, after the date of the Merger Agreement (and including any action taken or not taken as required by any Law, Governmental Authority or otherwise to respond to the impact, presence, outbreak or spread of any pandemic (including COVID-19));
any change in the market price or trading volume of Stamps.com’s stock (including Stamps.com’s common stock) (it being understood that any cause of such change may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);
the failure of Stamps.com to meet internal or analysts’ expectations or projections or the results of operations of Stamps.com for any period (including (i) any public estimates or expectations of Stamps.com’s revenue, earnings or other financial performance or results of operations for any period; or (ii) any internal budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that any cause of any such failure may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred, except to the extent otherwise excluded in the definition of Company Material Adverse Effect));
any action taken (or refrained from being taken) by Stamps.com at the express direction of (including if requested or approved in writing by) Parent or any action expressly required to be taken by Parent, Merger Sub or Stamps.com pursuant to the terms of the Merger Agreement, or the failure of Stamps.com to take any action that Stamps.com is prohibited by the terms of the Merger Agreement from taking to the extent Parent fails to give its consent to such action after a written request therefor pursuant to the Merger Agreement;
the identity of, or any facts or circumstances relating to, Parent, Merger Sub, or the respective affiliates of the foregoing, the respective financing sources of or investors in the foregoing; or
the availability or cost of equity, debt or other financing (including the Debt Financing or any Alternate Debt Financing (as defined in the Merger Agreement)) to Parent or Merger Sub.
In the Merger Agreement, Stamps.com has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due organization, valid existence, good standing and authority and qualification to conduct business with respect to Stamps.com;
Stamps.com’s corporate power and authority to enter into and perform the Merger Agreement, the enforceability of the Merger Agreement and the absence of conflicts with laws, Stamps.com’s organizational documents and Stamps.com’s contracts;
the organizational documents of Stamps.com;
the necessary approval of the Board of Directors;
the rendering of J.P. Morgan’s opinion to the Board of Directors;
the inapplicability of anti-takeover statutes to the Merger;
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the necessary vote of stockholders in connection with the Merger Agreement;
the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, or laws applicable to Stamps.com;
required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;
the capital structure of Stamps.com;
the absence of any undisclosed exchangeable security, option, warrant or other right convertible into Stamps.com common stock;
other than the Voting Agreements (as defined below), the absence of any contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any of Stamps.com’s securities;
the subsidiaries of Stamps.com;
the accuracy and required filings of Stamps.com’s SEC filings and financial statements;
Stamps.com’s disclosure controls and procedures;
Stamps.com’s internal accounting controls and procedures;
certain indebtedness of Stamps.com;
the absence of specified undisclosed liabilities;
(i) the conduct of the business of the Company Group in the ordinary course of business in all material respects, from March 31, 2021 through July 8, 2021, except as a result of the Company’s sale process, including the transactions (as well as the execution, delivery and performance of the Merger Agreement and the discussions, negotiations and transactions related to the sale process conducted by Stamps.com in connection with the Merger Agreement), and any actions taken in good faith to respond to COVID-19 Measures), and (ii) from March 31, 2021 through July 8, 2021, no occurrence of a Company Material Adverse Effect;
the existence and validity of specified categories of Stamps.com’s material contracts and government contracts;
certain real property owned, leased or subleased by Stamps.com;
environmental matters;
trademarks, patents, copyrights and other intellectual property matters including data security requirements and privacy;
tax matters;
employee benefit plans;
labor matters;
Stamps.com’s compliance with laws, standards and requirements and possession of necessary permits;
litigation matters;
insurance matters;
absence of any transactions, relations or understandings between Stamps.com or any of its subsidiaries, on the one hand, and any affiliate or related person thereof, on the other hand;
payment of fees to brokers in connection with the Merger Agreement;
trade controls matters and compliance with the Foreign Corrupt Practices Act of 1977; and
the exclusivity and terms of the representations and warranties made by Parent and Merger Sub.
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In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Stamps.com that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due organization, good standing and authority and qualification to conduct business with respect to Parent and Merger Sub;
Parent’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement, the enforceability of the Merger Agreement and the absence of conflicts with laws, Parent’s or Merger Sub’s organizational documents and Parent’s or Merger Sub’s contracts;
the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws or the resulting creation of any lien upon Parent or Merger Sub’s assets due to the performance of the Merger Agreement;
required consents and regulatory filings in connection with the Merger Agreement;
the absence of litigation, orders and investigations;
ownership of equity interests of any Company Group Member (as defined in the Merger Agreement), including Stamps.com common stock;
payment of fees to brokers in connection with the Merger Agreement;
operations of Parent and Merger Sub;
the absence of any required consent of holders of voting interests and/or equity interests in Parent or Merger Sub;
no untrue statement of a material fact or omissions in the information supplied by Parent or Merger Sub for purposes of this proxy statement;
delivery and enforceability of each of the Equity Commitment Letter, Guaranty, and the Debt Commitment Letter and Redacted Fee Letter (each as defined in the Merger Agreement);
the commitments to provide financing to Parent, the availability of Parent’s financing and sufficiency of funds;
the absence of agreements between Parent and members of the Board of Directors or Stamps.com management;
the absence of any stockholder or management arrangements related to the Merger, other than the Voting Agreements;
the absence of agreements among Guarantor, Parent, Merger Sub and any agent, broker, investment banker or financial advisor;
the solvency of Parent and the Surviving Corporation following the consummation of the Merger and the transactions contemplated by the Merger Agreement;
no ownership by Parent, Merger Sub or their respective Affiliates of more than ten percent (10%) of the voting equity interests of (or instruments convertible into voting equity interests of), or control or operation by any of them of, any business engaged in, or that otherwise competes in any material respect with, any of the material lines of business in which any Company Group Member is engaged; and
the exclusivity and terms of the representations and warranties made by Stamps.com.
The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.
Conduct of Business Pending the Merger
The Merger Agreement provides that, except as: (1) expressly contemplated by the Merger Agreement; (2) disclosed in the confidential disclosure letter to the Merger Agreement; (3) expressly prohibited by the Merger Agreement; (4) required by applicable law or required, or in Stamps.com’s reasonable, good faith discretion, advisable, in connection with any COVID-19 Measures; or (5) approved in writing in advance by Parent (which approval will not be unreasonably withheld, conditioned or delayed (provided, that Parent shall be deemed to have approved in writing
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if it provides no written response within five (5) Business Days after a written request by Stamps.com for such approval)); during the period of time between the date of the signing of the Merger Agreement and the first to occur of the Effective Time and the termination of the Merger Agreement (the “Interim Period”), Stamps.com will and will cause each of its subsidiaries to:
maintain its existence in good standing pursuant to applicable law (to the extent that the concept of “good standing” is applicable in the case of any jurisdiction outside the United States);
subject to the restrictions and exceptions in the Merger Agreement, conduct its business and operations in the ordinary course of business; and
use its commercially reasonable efforts to preserve intact its current material assets, properties, contracts or other legally binding understandings, licenses and business organization, to keep available the services of its current officers and senior management-level employees, and to preserve its current relationships with its material third party business relations.
In addition, Stamps.com has also agreed that, except as (1) disclosed in the confidential disclosure letter to the Merger Agreement; (2) approved in writing in advance by Parent (which approval will not be unreasonably withheld, conditioned or delayed (provided, that Parent shall be deemed to have approved in writing if it provides no written response within five (5) Business Days after a written request by Stamps.com for such approval)); (3) to the extent necessary to comply with the express obligations set forth in any Material Contract in effect on the date of the Merger Agreement expressly contemplated by the Merger Agreement; (4) as required by applicable law or required, or in Stamps.com’s reasonable, good faith discretion, advisable in connection with any COVID-19 Measures; or (5) expressly contemplated by the Merger Agreement during the Interim Period, Stamps.com will not, among other things
amend the organizational documents of any member of the Company Group;
liquidate, dissolve, merge, consolidate, restructure, recapitalize or effect any other reorganization, other than the Merger as contemplated by the Merger Agreement and other than as between Stamps.com and any of its direct or indirect subsidiaries or solely among Stamps.com’s subsidiaries;
issue, sell, deliver or grant (or commit to issue, sell, deliver or grant) any shares of capital stock or any options, warrants, commitments, subscriptions or rights to purchase any similar capital stock or securities of Stamps.com other than as provided in the Merger Agreement;
directly or indirectly acquire, repurchase or redeem any of the securities of a Company Group Member (as defined in the Merger Agreement), except pursuant to Company Equity Awards (as defined in the Merger Agreement) outstanding as of the date of the Merger Agreement, transactions between Stamps.com and any of its subsidiaries, or in accordance with Stamps.com’s then-existing 10b5-1 stock repurchase plan;
adjust, split, combine, pledge, encumber or modify the terms of capital stock of Stamps.com (except for permitted liens);
declare, set aside or pay any dividend or other distribution;
incur, assume or suffer any indebtedness for borrowed money or issue any debt securities;
assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person;
mortgage, pledge or create or suffer to exist any lien on any Company Group Member’s assets;
make any loans, advances or capital contributions to, or investments in, any other person;
acquire, lease, license, sell, abandon, transfer, assign, guarantee or exchange any assets, in each case, in excess of $2,000,000 individually or $5,000,000 in the aggregate or constituting material Company intellectual property;
(A) enter into, adopt, amend (including accelerating the vesting of), modify or terminate any compensation or benefit plan or arrangement of any director, officer, individual consultant or employee, (B) materially increase the compensation or benefits payable to or pay any bonus or remuneration or pay any compensation or benefit not required by (or accelerate the time of payment or vesting of any payment
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becoming due under) any existing employee plan as in effect as of the date of the Merger Agreement to directors, officers, employees or individual consultant or other individual service providers of Stamps.com (other than, in each case of (A) and (B): (1) as may be required by applicable law or the terms of the applicable employee plan or any change in control, severance or similar agreement or any retention or similar agreement disclosed in the confidential disclosure letter to the Merger Agreement and in effect as of the date of the Merger Agreement; (2) making employee plans available to any new employee hires or any employees who are newly eligible as a result of a promotion, each in the ordinary course of business and consistent with past practice; (3) renewing existing employee plans in the ordinary course of business; or (4) for increases in or payment of compensation, bonus, retention or severance arrangements for employees at the vice president level or below in the ordinary course of business and consistent with past practice); or (C) enter into any change in control, severance or similar arrangement or any retention, transaction or similar agreement with any officer, employee, director or independent contractor or other individual service provider (except such agreements entered into in the ordinary course of business with any such individual service provider of the Company Group at the vice president level or below); provided that in each case of (A) through (C), the Company Group may (1) change the title of its employees, provided that such changes do not involve material increases in compensation or benefits, acceleration of vesting or acceleration of payment and (2) make bonus, sales or commission payments in the ordinary course of business as required by the terms of any employee plans disclosed in the confidential disclosure letter to the Merger Agreement and payments of continued base salary or wages to employees and set targets and metrics therefor in the ordinary course of business or in accordance with any employee plan;
settle, release, waive or compromise litigation involving Stamps.com;
change accounting practices;
change tax elections or settle any tax claims;
incur or commit to incur capital expenditures (excluding internal and external capitalized labor costs) in excess of $10 million in the aggregate, other than to the extent that such capital expenditures are otherwise reflected in Stamps.com’s capital expenditure budget set forth on the confidential disclosure letter to the Merger Agreement;
enter into, materially modify or amend or terminate any (i) Contract (other than any Material Contracts (as defined in the Merger Agreement)) that would have a material adverse effect or (ii) Material Contract set forth in the confidential disclosure letter;
engage in any transaction with, or enter into any agreement, arrangement or understanding with, any affiliate of Stamps.com or other person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404;
effect certain layoffs without complying with applicable laws;
hire, engage, terminate (without cause), furlough, or temporarily layoff any employee or independent contractor with annual base compensation in excess of $350,000;
make any acquisitions by merger, consolidation or acquisition of stock or assets or enter into any joint ventures or similar arrangements other than investment in equity securities held in the ordinary course of business for cash management purposes, or acquisitions or investments which the Company Group is obligated to pay aggregate consideration of less than $5 million, individually, or $10 million, in the aggregate;
negotiate, modify, extend or enter into any collective bargaining agreement, or recognize or certify any labor group; or
enter into agreements to do any of the foregoing.
The “Go Shop” Period—Solicitation of Other Offers
Under the Merger Agreement, from the date of the Merger Agreement until the No-Shop Period Start Date, Stamps.com and its representatives have the right to, directly or indirectly, among other things: (1) solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any inquiries regarding any proposal or inquiry that constitutes, could constitute or could reasonably be expected to lead to, an Acquisition Proposal (as defined below),
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(2) continue, enter into, maintain, participate or otherwise engage in discussions with any third person (and its representatives and financing sources) with respect to any proposal or inquiry that constitutes, could constitute or could reasonably be expected to lead to, an Acquisition Proposal and cooperate with, assist or participate in, or facilitate in any way, such proposals or inquiries or any effort or attempt to make any proposal or inquiry that constitutes, could constitute or could reasonably be expected to lead to, an Acquisition Proposal, or (3) subject to entering into and solely in accordance with an Acceptable Confidentiality Agreement (as defined below), furnish to any third person (and its representatives, prospective debt and equity financing sources and their respective representatives) any information (including nonpublic information and data) relating to the Company Group or afford to any such third person (and its representatives, prospective debt and equity financing sources and their respective representatives) access to the business, properties, assets, books, records or other non-public information and data, or to any personnel, of the Company Group, in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, any proposal or inquiry that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal or any inquiries or the making of any proposal or inquiry that could constitute or could reasonably be expected to lead to an Acquisition Proposal, provided that Stamps.com must, within 24 hours, provide to Parent, or provide Parent access to, any such non-public information that has not been previously provided to Parent or its representatives, and the Company Group must not provide any competitively sensitive non-public information except in accordance with customary “clean room” or other similar procedures; and Stamps.com may grant a waiver, amendment or release under any “standstill provision” or similar obligation to allow such third person to submit or amend an Acquisition Proposal on a confidential basis to the Board of Directors.
Stamps.com is not entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal (as defined below), unless it complies with certain procedures in the Merger Agreement, including, but not limited to, providing at least two (2) Business Days prior written notice to Parent and negotiating with Parent in good faith in an effort to amend the terms and conditions of the Merger Agreement, so that such Acquisition Proposal no longer constitutes a Superior Proposal relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.
If Stamps.com terminates the Merger Agreement for the purpose of entering into an agreement with any Excluded Party prior to the No-Shop Period Start Date, then Stamps.com would be required to pay a termination fee of $99,500,000 to Parent. For more information, please see the section of this proxy statement captioned “—The Board of Directors’ Recommendation; Company Board Recommendation Change.
For purposes of this proxy statement and the Merger Agreement:
“Acceptable Confidentiality Agreement” means a confidentiality agreement with Stamps.com that contains customary provisions requiring the counterparty thereto (and any of its affiliates and representatives named therein) that receive non-public information of or with respect to Stamps.com to keep such information confidential (subject to customary exceptions), provided that with respect to agreements executed and delivered after the Merger Agreement, the provisions contained therein are not materially less favorable, in the aggregate, to Stamps.com than the terms of the confidentiality agreement entered into between Stamps.com and Thoma Bravo (except that such agreement need not contain any “standstill” or similar provision or otherwise prohibit the making of any Acquisition Proposal). A joinder to an Acceptable Confidentiality Agreement pursuant to which a third party agrees to be bound by the confidentiality and use provisions of an Acceptable Confidentiality Agreement is an Acceptable Confidentiality Agreement.
“Acquisition Proposal” means any offer, proposal or indication of interest by a Third Person to engage in an Acquisition Transaction.
“Acquisition Transaction” means any transaction or series of related transactions (other than the Merger) involving:
(1)
any direct or indirect purchase or other acquisition by any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons, whether from Stamps.com or any other person(s), of securities representing more than 20% of the total outstanding voting power of Stamps.com after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any person or “group” of persons that, if consummated in accordance with its terms, would result in such person or “group” of persons beneficially owning more than 20% of the total outstanding voting power of Stamps.com after giving effect to the consummation of such tender or exchange offer;
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(2)
any direct or indirect purchase, exclusive license or other acquisition by any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons of assets constituting or accounting for more than 20% of the consolidated assets, revenue or net income of the Company Group, taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition); or
(3)
any merger, consolidation, business combination, recapitalization, amalgamation, share exchange, reorganization, liquidation, dissolution or other transaction involving Stamps.com pursuant to which any Third Person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons would hold Equity Interests representing more than 20% of the total outstanding voting power of Stamps.com outstanding after giving effect to the consummation of such transaction.
“Excluded Party” means any Third Person (or if a group, includes any Third Person, so long as such Third Person, together with all other members of such group, if any, who were members of such group or another group that included such Person immediately prior to the No-Shop Period Start Date, represent at least 50% of the equity financing of such group at all times following the No-Shop Period Start Date and prior to the closing of the transactions contemplated by the applicable Acquisition Proposal), (a) who submits a written bona fide Acquisition Proposal to Stamps.com or any of its representatives after the date of the Merger Agreement and prior to the No-Shop Period Start Date, (b) whose Acquisition Proposal is determined by the Board of Directors, in good faith, (after consultation with its outside counsel and its financial advisor) to be, or would reasonably be expected to lead to, a Superior Proposal and (c) who did not submit an Acquisition Proposal in writing to the Company Group, the Board of Directors or their respective representatives within six (6) months prior to the date of the Merger Agreement (it being understood that with respect to a group, each member of such group must meet the criteria set forth in this clause (c) at all times (including following any termination of the Merger Agreement) prior to the closing of the transactions contemplated by the applicable Acquisition Proposal) in order for such group to qualify as an Excluded Party; provided, however, that a Third Person shall immediately cease to be an Excluded Party (and the provisions of the Merger Agreement applicable to Excluded Parties shall cease to apply with respect to such Person) if such Acquisition Proposal is withdrawn by such Third Person (or group, if applicable) after the date of the Merger Agreement; it being understood that a modification of an Acquisition Proposal submitted by a Third Person (or group) shall not be deemed a withdrawal or termination of an Acquisition Proposal by such Third Person (or group).
“Superior Proposal” means any bona fide written Acquisition Proposal for an Acquisition Transaction that is on terms that the Board of Directors (or a committee thereof) determines in its good faith judgment, after consultation with its financial advisor and outside legal counsel, is reasonably likely to be consummated in accordance with its terms, taking into account all legal, regulatory and financing aspects (including certainty of closing) of such Acquisition Proposal and the identity of the person making such Acquisition Proposal and other aspects of the Acquisition Proposal that the Board of Directors (or a committee thereof) deems relevant, and if consummated, would result in a transaction more favorable to Stamps.com’s stockholders (solely in their capacity as such) than the Merger (taking into account (i) any revisions to the Merger Agreement made or proposed in writing by Parent prior to the time of such determination and (ii) all legal, regulatory, financial (including any termination fee amounts and conditions), timing financing and other aspects of such Acquisition Proposal), except that for purposes of the definition of “Superior Proposal”, the references to “20%” in the definition of “Acquisition Transaction” shall be deemed to be references to “80%.”
“Third Person” means any person or “group” (within the meaning of Section 13(d) of the Exchange Act), other than (i) Stamps.com or any of its controlled affiliates or (ii) Parent, Merger Sub, the Thoma Bravo Fund or any of their respective affiliates or any “group” including Parent, Merger Sub, Guarantor or any of their respective affiliates.
The “No-Shop” Period—No Solicitation of Other Offers
From the date of the No-Shop Period Start Date until the earlier to occur of the termination of the Merger Agreement and the Effective Time, Stamps.com has agreed not to, and to cause its subsidiaries and its and their respective representatives not to:
solicit, initiate, propose or induce or knowingly encourage, facilitate or assist any proposal that constitutes or would reasonably be expected to lead to an Acquisition Proposal;
participate or engage in discussions, communications or negotiations with any Third Person, regarding an Acquisition Proposal;
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other than with respect to any Excluded Party which has reaffirmed its Acquisition Proposal to the Board of Directors within 24 hours of the No-Shop Period Start Date, and its Representatives (but only for so long as the applicable person remains an Excluded Party), furnish to any person (other than to Parent, Merger Sub or any designees of Parent or Merger Sub) any non-public information relating to the Company Group or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company Group (other than Parent, Merger Sub or any designees of Parent or Merger Sub), in any such case with the specific intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist an Acquisition Proposal or the making of any proposal or offer that would reasonably be expected to lead to an Acquisition Proposal;
approve, endorse or recommend any proposal that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal; or
enter into any letter of intent, agreement in principle, memorandum of understanding, Merger Agreement, acquisition agreement or other contract relating to an Acquisition Transaction, other than certain permitted confidentiality agreements.
In addition, Stamps.com has agreed to, other than with respect to any Excluded Party which has reaffirmed its Acquisition Proposal to the Board of Directors within 24 hours of the No-Shop Period Start Date, cease and cause to be terminated any discussions or negotiations with any person and its representatives, request the prompt return or destruction of all non-public information concerning the Company Group furnished to any person with whom a confidentiality agreement was entered into in connection with its consideration of making an Acquisition Proposal within the twelve-month period immediately preceding the No-Shop Period Start Date and will (i) cease providing any further information with respect to Stamps.com or any Acquisition Proposal to any such persons or their respective representatives and (ii) terminate all access granted to any such persons or their respective representatives to any physical data room, the virtual data room or any other diligence access to non-public information regarding the Company Group made available in connection with an Acquisition Proposal. Stamps.com will not be required to enforce, and will be permitted to waive, terminate or modify any provision of any standstill or confidentiality agreement that prohibits or purports to prohibit a proposal being made to the Board of Directors, if the Board of Directors has determined in good faith, after consultation with outside counsel, that failure to take such action would be inconsistent with its fiduciary duties under applicable law.
Notwithstanding these restrictions, under certain circumstances, prior to the adoption of the Merger Agreement by Stamps.com stockholders, Stamps.com may, among other things, provide information to, and engage or participate in negotiations or substantive discussions with, a person in respect of a bona fide Acquisition Proposal, and otherwise facilitate such Acquisition Proposal or assist such person (and its representatives, prospective debt and equity financing sources and/or their respective representatives) with such Acquisition Proposal (in each case, if requested by such person) and such Acquisition Proposal was not the result of a material breach of Stamps.com’s obligations, as described in the immediately preceding paragraph (provided that Stamps.com and its representatives may contact any Third Person to clarify any ambiguous terms and conditions of an Acquisition Proposal which are necessary to determine whether the Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal) if (and only if), subject to complying with certain procedures described in the subsequent paragraph, the Board of Directors (or a committee thereof) determines in good faith (after consultation with its financial advisor and its outside legal counsel) that (i) such Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal, and (ii) the failure to act in respect of such Acquisition Proposal would be reasonably likely to be inconsistent with the Board of Director’s fiduciary duties to stockholders under applicable law.
Stamps.com is not entitled to terminate the Merger Agreement after the No-Shop Period Start Date for the purpose of entering into an agreement in respect of a Superior Proposal unless it complies with certain procedures in the Merger Agreement, including, but not limited to, providing prior written notice to Parent of at least two (2) Business Days and negotiating with Parent in good faith in an effort to amend the terms and conditions of the Merger Agreement, so that such Superior Proposal no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.
If Stamps.com terminates the Merger Agreement prior to the adoption of the Merger Agreement by Stamps.com stockholders for the purpose of entering into an agreement in respect of a Superior Proposal, other than entering into an agreement in respect of a Superior Proposal with an Excluded Party prior to the No-Shop Period, then Stamps.com must pay a $199,000,000 termination fee to Parent.
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The Board of Directors’ Recommendation; Company Board Recommendation Change
As described above, and subject to the provisions described below, the Board of Directors has made the recommendation that the holders of shares of Stamps.com common stock vote “FOR” the proposal to adopt the Merger Agreement. The Merger Agreement provides that the Board of Directors will not effect a Company Board Recommendation Change except as described below.
Prior to the adoption of the Merger Agreement by stockholders (or in the case of a failure of the Board of Directors to publicly reaffirm its recommendation to approve the Merger within ten business days after Parent so requests in writing (it being understood that Stamps.com will have no obligation to make such reaffirmation on more than two occasions), after the No-Shop Period Start Date), the Board of Directors may not take any action described in the following (any such action, a “Company Board Recommendation Change”):
withhold, withdraw, amend, qualify or modify, or publicly propose to withhold, withdraw, amend, qualify or modify, the recommendation of the Board of Directors to approve the Merger, in each case, in a manner adverse to Parent in any material respect (it being understood that it will be considered a modification adverse to Parent that is material if (I) any Acquisition Proposal structured as a tender or exchange offer is commenced and the Board of Directors fails to publicly recommend against acceptance of such tender or exchange offer by stockholders within ten business days of commencement thereof pursuant to Rule 14d-2 of the Exchange Act or (II) any Acquisition Proposal is publicly announced (other than by the commencement of a tender or exchange offer) and the Board of Directors fails to issue a public press release within ten business days of such public announcement providing that the Board of Directors reaffirms its recommendation);
adopt, approve, endorse, recommend or otherwise publicly declare advisable to Stamps.com stockholders an Acquisition Proposal;
fail to publicly reaffirm the recommendation of the Board of Directors to approve the Merger within ten business days after Parent so requests in writing (it being understood that Stamps.com will have no obligation to make such reaffirmation on more than two occasions); or
fail to include the recommendation of the Board of Directors to approve the Merger in this proxy statement.
For the avoidance of doubt, none of the following, among other things, will constitute a Company Board Recommendation Change: (1) a “stop, look and listen” communication by the Board of Directors (or a committee thereof) to Stamps.com stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication), (2) the factually accurate public disclosure by Stamps.com of the receipt of an Acquisition Proposal, (3) the determination by the Board of Directors (or a committee thereof) that an Acquisition Proposal constitutes a Superior Proposal, or (4) delivery by the Company to Parent of any notice related to an Intervening Event (as defined below) or Superior Proposal as set forth below.
Notwithstanding the restrictions described above, prior to the adoption of the Merger Agreement by stockholders, the Board of Directors may effect a Company Board Recommendation Change if there has been an Intervening Event (as defined below), if the Board of Directors (or committee thereof) has concluded in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties pursuant to applicable law.
The Board of Directors may only effect a Company Board Recommendation Change for an Intervening Event if:
Stamps.com has provided prior written notice to Parent at least three business days in advance to the effect that the Board of Directors (or a committee thereof) intends to effect a Company Board Recommendation Change pursuant to the Merger Agreement, which notice must specify the basis for such Company Board Recommendation Change, including a description of the Intervening Event in reasonable detail;
prior to effecting such Company Board Recommendation Change, Stamps.com and its representatives, during such three-business-day period, must have (1) negotiated with Parent and its representatives in good faith (to the extent that Parent desires to so negotiate) to allow Parent to offer such adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the documentation related to any debt financing proposed to be entered into by Parent (the “Debt Documents”) to obviate the need to effect a Company Board Recommendation Change in response to such Intervening Event; and (2) taken into account any adjustments to the terms and conditions of the Merger Agreement,
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the Equity Commitment Letter, the Guaranty and/or the Debt Documents proposed by Parent and other information provided by Parent in response to the notice described in the foregoing clause (1), in each case that are offered in writing by Parent no later than 11:59 p.m. (Pacific time) on the last day of the three-business-day period, in a manner that would constitute a binding agreement between the parties if accepted by Stamps.com; and
following the three-business-day notice period described above, the Board of Directors (or a committee thereof) (after consultation with its financial advisor and outside legal counsel and taking into account Parent’s proposed revisions to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents) shall have determined that the failure of the Board of Directors (or a committee thereof) to make such a Company Board Recommendation Change to terminate the Merger Agreement would be reasonably likely to be inconsistent with its fiduciary duties pursuant to applicable law; provided, however, that each time material modifications to the Intervening Event occur, Stamps.com must notify Parent of such modification and the three-business-day period described above will recommence and be extended for two business days from the day of such notification.
In addition, the Board of Directors may only effect a Company Board Recommendation Change or authorize Stamps.com to terminate the Merger Agreement to enter into an agreement with respect to a Superior Proposal substantially concurrently with the termination of the Merger Agreement in response to a bona fide Acquisition Proposal that the Board of Directors has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal, in each case if and only if:
the Board of Directors (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties pursuant to applicable Law;
the Company Group and its representatives have complied in all material respects with their obligations under the Merger Agreement with respect to such Acquisition Proposal;
Stamps.com has provided prior written notice to Parent at least two business days in advance to the effect that the Board of Directors (or a committee thereof) has (1) received a bona fide Acquisition Proposal that has not been withdrawn; (2) concluded in good faith that such Acquisition Proposal constitutes a Superior Proposal; and (3) resolved to effect a Company Board Recommendation Change or to terminate the Merger Agreement absent any revision to the terms and conditions of the Merger Agreement, which notice will include the identity of the person or “group” of persons making such Acquisition Proposal (unless such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person or “group” of persons that was in effect on the date of the Merger Agreement), the material terms thereof and copies of all relevant documents relating to such Acquisition Proposal;
prior to effecting such Company Board Recommendation Change or termination, Stamps.com and its Representatives, during the two-business-day notice period described above, has: (1) negotiated with Parent and its Representatives in good faith (to the extent that Parent desires to so negotiate) to offer such adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents so that such Acquisition Proposal would cease to constitute a Superior Proposal; and (2) taken into account any adjustments to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents that are offered in writing by Parent in a manner that would constitute a binding agreement between the parties if accepted by Stamps.com, by no later than 11:59 p.m. Pacific Time on the last day of the two-business-day notice period described above, provided, (x) that neither Stamps.com, any of its Affiliates or any of their respective representatives may disclose to any person or “group” of persons making an Acquisition Proposal the specific price per share of any offer of Parent unless and until a definitive agreement with respect to such offer is executed by Stamps.com (provided, however, that, for the avoidance of doubt, this clause (x) shall not prevent or limit in any respect Stamps.com, its affiliates or their respective representatives from notifying any such person or “group” or persons that its Acquisition Proposal fails to constitute a Superior Proposal (including the general basis for such failure)), and (y) that in the event of any material modifications to any Acquisition Proposal (it being understood that any change to the material
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financial terms of such proposal shall be deemed a material modification (a “Material Revision”)), Stamps.com will be required to deliver a new written notice to Parent and to comply with the requirements of the foregoing clause (1) (it being understood that the “notice period” in respect of such new written notice will be two business days);
following the two-business-day notice period described above, including any subsequent notice period with respect to a Material Revision (as defined in the Merger Agreement), the Board of Directors (or a committee thereof) (after consultation with its financial advisor and outside legal counsel and taking into account Parent’s proposed revisions to the terms and conditions of the Merger Agreement, the Equity Commitment Letter, the Guaranty and/or the Debt Documents) shall have determined that the Acquisition Proposal continues to be a Superior Proposal, and in the case of a Company Board Recommendation Change, that failure to effect such Company Board Recommendation Change would be reasonably likely to be inconsistent with its fiduciary duties pursuant to applicable law; and
in the event of any termination of the Merger Agreement in order to cause or permit the Company Group to enter into an acquisition agreement with respect to such Acquisition Proposal, Stamps.com will have validly terminated the Merger Agreement in accordance with the terms of the Merger Agreement, including paying to Parent a termination fee of either (1) $99,500,000 if the Merger Agreement is terminated before the No-Shop Period Start Date for the purposes of entering into a definitive agreement in respect of a Superior Proposal with an Excluded Party, or (2) $199,000,000, in the case of any other such termination.
For purposes of this proxy statement and the Merger Agreement, an “Intervening Event” means any material change, event, effect or circumstance or material change in circumstances or facts (including any change in probability or magnitude of circumstances) that (a) was not known to or reasonably foreseeable by the Company Board on the date of the Merger Agreement (or if known by the Company Board, the consequences of which were not known to or reasonably foreseeable by the Company Board as of the date of the Merger Agreement) and becomes known to the Company Board prior to the receipt of the Requisite Stockholder Approval and (b) does not relate to (i) any Acquisition Proposal or (ii) the mere fact, in and of itself, that Stamps.com meets or exceeds any internal or published projections, forecasts, estimates or predictions of revenue, earnings, or other financial or operating metrics for any period ending on or after the date of the Merger Agreement, or changes after the date of the Merger Agreement in the market price or trading volume of Stamps.com common stock or the credit rating of Stamps.com (it being understood that the underlying cause of any of the foregoing in this clause (ii) may be considered and taken into account).
Employee Benefits
The Merger Agreement provides that from and after the Effective Time through one year following the Effective Time, Parent will cause the Surviving Corporation to honor all of the terms of Stamps.com’s employee plans and arrangements set forth in the confidential disclosure letter to the Merger Agreement following the Merger in accordance with their terms as in effect on the date of the Merger Agreement, subject to the Surviving Corporation’s right to amend or terminate any such benefit plan in accordance with its terms or if otherwise required pursuant to applicable law. In addition, for a period of one year following the Effective Time, each employee who continues employment following the Merger (a “Continuing Employee”) will be provided with (i) a base salary or wage rate at least as favorable as such Continuing Employee’s base salary or wage rate immediately prior to the Effective Time, (ii) short-term cash bonus or cash commission compensation opportunities that are substantially comparable in the aggregate to such compensation opportunities the Continuing Employee received as of immediately prior to the Effective Time under the applicable employee plans as set forth on the confidential disclosure letter, (iii) vacation, paid time off, qualified defined contribution retirement, health and welfare and other employee benefits (excluding any equity, equity-based benefits, defined benefit pension plans and/or nonqualified deferred compensation plans) that are substantially comparable in the aggregate to those provided to the Continuing Employee immediately prior to the Effective Time under the employee plans and arrangements as set forth on the confidential disclosure letter, and (iv) severance payments and benefits that are substantially comparable in the aggregate to the severance payments and benefits that each such Continuing Employee would have been eligible to receive immediately prior to the Effective Time under the employee plans as set forth on the confidential disclosure letter.
The Surviving Corporation will grant any Continuing Employee credit for service with the Company Group prior the Effective Time for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant (including for purposes of vacation accrual and severance pay entitlement, but not including for any
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purpose under equity or equity-based benefit or compensation arrangements) to the same extent and for the same purpose as such service was credited to such person under the corresponding employee benefit plan as of the Effective Time, except where the service credit would result in duplication of coverage or benefits. Each Continuing Employee will be immediately eligible to participate, without any waiting period, in any and all employee benefit plans sponsored by the Surviving Corporation (other than Stamps.com’s benefit plans and arrangements in existence immediately before the Effective Time) to the extent that coverage under any of the employee benefit plans sponsored by the Surviving Corporation replaces at the Effective Time coverage under a comparable Stamps.com benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time. For purposes of each employee benefit plan sponsored by the Surviving Corporation that provides medical, dental, pharmaceutical, vision or disability benefits to any Continuing Employee, the Surviving Corporation will use commercially reasonable efforts to cause all waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements of the plan to be waived for the Continuing Employee and his or her covered dependents to the same extent waived under the corresponding comparable Stamps.com benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time, and the Surviving Corporation will use commercially reasonable efforts to cause full credit to be given for any eligible expenses incurred by the Continuing Employee and his or her covered dependents during the portion of the plan year of the comparable Stamps.com benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time that ends on the date that the Continuing Employee’s participation in the corresponding employee benefit plan sponsored by the Surviving Corporation begins for purposes of satisfying the applicable deductible, coinsurance, co-pay, offsets and maximum out-of-pocket requirements applicable to the Continuing Employee and his or her covered dependents for the applicable plan year as if the amounts had been paid according to the employee benefit plan of the Surviving Corporation to the same extent as such amounts were credited for the same purpose under the corresponding comparable Stamps.com benefit plan or arrangement in which the Continuing Employee participates immediately before the Effective Time. The account of each Continuing Employee under any flexible spending plan sponsored will be credited by the Surviving Corporation with any unused balance in the account of the Continuing Employee. Any vacation or paid time off accrued but unused by a Continuing Employee as of immediately before the Effective Time will be credited to the Continuing Employee following the Effective Time, and will not be subject to accrual limits or other forfeiture and will not limit future accruals (except to the extent that the limits or forfeitures applied under Stamps.com’s benefit plans and arrangements in effect as of the date of the Merger Agreement).
From and after the Effective Time, Parent will cause the Surviving Corporation to honor in accordance with their terms the Annual Bonus Plans with respect to the 2021 calendar year and, to the extent the Effective Time occurs in calendar year 2022, in a manner consistent with past practice. In addition, Parent shall cause the Surviving Corporation to pay, at a time no later than the time customarily paid by the Company related to any Annual Bonus Plan, to each employee of Stamps.com or any of its subsidiaries actively employed on the applicable payment dates for the 2021 and 2022 bonuses who is then participating in any Annual Bonus Plan, respectively, a bonus based on actual performance, in a manner consistent with past practice and in accordance with the terms of such Annual Bonus Plan.
Efforts to Close the Merger
Under the Merger Agreement, Parent, Merger Sub and Stamps.com agreed to use reasonable best efforts to take all actions and assist and cooperate with the other parties, in each case as necessary, proper and advisable pursuant to applicable law or otherwise to consummate the Merger.
Cooperation with Debt Financing
Although the obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition (including, without limitation, consummation of any debt financing), Stamps.com has agreed that during the Interim Period, Stamps.com will use commercially reasonable efforts to, and will use its reasonable efforts to cause each of its subsidiaries and its and their respective representatives to, among other things:
participate (and cause senior management of Stamps.com and its representatives with appropriate seniority and expertise to participate) in a reasonable number of meetings and presentations with actual or prospective lenders, road shows and due diligence sessions, drafting sessions and sessions (upon reasonable request) with rating agencies to the extent customary for the Debt Financing contemplated by the Debt Commitment Letter at times and locations (which may include telephonic or video calls) to be mutually agreed upon reasonable advance notice and during normal business hours;
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provide reasonable and customary assistance to Parent and Parent’s financing sources in connection with the timely preparation of customary (A) rating agency presentations, bank information memoranda, confidential information memoranda, lender presentations and similar documents required in connection with the Debt Financing; and (B) pro forma financial statements and forecasts of financial statements of the Surviving Corporation for one (1) or more periods following the Effective Time, except that no member of the Company Group will be required to provide any information or assistance with respect to the preparation of pro forma financial statements and forecasts of financing statements relating to (I) the determination of the proposed aggregate amount of the Debt Financing, the interest rates thereunder or the fees and expenses relating thereto; (II) the determination of any post-closing or pro forma cost savings, synergies, capitalization, ownership or other pro forma adjustments desired to be incorporated into any information used in connection with the Debt Financing; or (III) any financial information related to Parent or any of its Subsidiaries or any adjustments that are not directly related to the acquisition of Stamps.com;
assist Parent in connection with the preparation, and, subject to the occurrence of the Effective Time, registration, execution and delivery of definitive financing documents and related documentation as may be reasonably requested by Parent or its financing sources and otherwise facilitate the pledging of collateral and the granting of security interests in respect of the Debt Financing;
furnish Parent, Merger Sub and their financing sources, as promptly as reasonably practicable, with regard to the extent customarily provided by companies of comparable size and comparable industry in transactions similar to the Debt Financing for a financing type being incurred, financial and other pertinent and customary information regarding the Company Group as may be reasonably requested by Parent, Merger Sub or Financing Sources to the extent that such information is of the type and form customarily included in a bank confidential information memorandum in connection with the arrangement of financing similar to the Debt Financing or in rating agency presentations, lender presentations or other customary marketing materials.
reasonably facilitate the granting of security interests (and perfection thereof) in collateral or the reaffirmation of the pledge of collateral on or after the Effective Time and obtain and deliver any pay-off letters and other cooperation in connection with the repayment or other retirement of existing indebtedness required to be repaid at the Effective Time and the release and termination of any and all related liens on or prior to the Effective Time;
deliver notices of prepayment within the time periods required by the relevant agreements governing indebtedness and obtain customary payoff letters, lien terminations and instruments of discharge to be delivered at the Effective Time, give any other necessary notices to allow for the payoff, discharge and termination in full of all indebtedness required to be repaid at the Effective Time and release all liens in connection therewith, and cooperate in the replacement, backstop or cash collateralization of any outstanding letters of credit;
provide customary authorization letters required for the syndication of the Debt Financing;
facilitate and assist in the preparation, execution and delivery of credit agreements, guarantees, certificates (including a customary solvency certificate) and other definitive financing documents;
take all corporate and other organizational actions, subject to the occurrence of the closing, reasonably requested by Parent or Merger Sub to (A) permit the consummation of the Debt Financing; and (B) cause the direct borrowing or incurrence of all of the proceeds of the Debt Financing by the Surviving Corporation concurrently with or immediately following the Effective Time, in each case of clauses (A) and (B), including, facilitating the execution and delivery of documents reasonably related to the debt financing on the terms contemplated by the Debt Commitment Letters, in connection with the authorization of the debt financing and debt documents and execution and delivery of the debt documents in anticipation of the closing;
promptly furnish (but in no event later than three (3) business days prior to the closing date) Parent, Merger Sub and Parent&#