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Form SC TO-T ConvergeOne Holdings, Filed by: PVKG Merger Sub, Inc.

November 21, 2018 9:16 AM EST

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE TO

Tender Offer Statement Under Section 14(d)(1) or 13(e)(1)

of the Securities Exchange Act of 1934

 

 

ConvergeOne Holdings, Inc.

(Name of Subject Company)

PVKG Merger Sub, Inc.

(Offeror)

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

(Parent of Offeror)

CVC Capital Partners VII (A) L.P.

(Other Person)

CVC Capital Partners Investment Europe VII L.P.

(Other Person)

CVC Capital Partners VII Associates L.P.

(Other Person)

(Names of Filing Persons (identifying status as Offeror, Issuer or Other Person))

 

 

Common stock, par value $0.0001 per share

(Title of Class of Securities)

212481105

(CUSIP Number of Class of Securities)

PVKG Merger Sub, Inc.

c/o CVC Advisors (U.S.) Inc.

Attention: Jennifer Gleeson

712 Fifth Avenue, 43rd Floor

New York, New York 10019

(212) 265-6222

(Name, address, and telephone numbers of person authorized to receive notices and communications on behalf of filing persons)

 

 

With copies to:

Oliver Brahmst, Esq.

Chang-Do Gong, Esq.

White & Case LLP

1221 Avenue of the Americas

New York, New York 10020

(212) 819-8200

 

 

CALCULATION OF FILING FEE

 

Transaction Valuation(1)   Amount Of Filing Fee(2)
$981,679,687.50   $118,979.58
 
(1) 

Estimated for purposes of calculating the amount of the filing fee only. The transaction valuation was calculated by adding the sum of (1) 77,905,500 Shares issued and outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc. (“ConvergeOne”) multiplied by the offer price of $12.50 per Share, (2) 1,237,500 Shares (including 112,500 Shares issuable pursuant to rights included in the Units (as defined below)) subject to issuance to EarlyBird Capital, Inc. and its distributees pursuant to a unit purchase option for 1,125,000 units (the “Units”) multiplied by the offer price of $12.50 per Share minus the exercise price for such Units of $10.00, (3) 137,990 Shares subject to issuance pursuant to ConvergeOne’s 2018 Employee Stock Purchase Plan multiplied by the offer price of $12.50 per Share and (4) 1,917,310 Shares subject to issuance pursuant to ConvergeOne warrants to acquire Shares multiplied by the offer price of $12.50 per Share minus the exercise price for such warrants of $11.50 per Share. The foregoing figures have been provided by ConvergeOne and are as of November 5, 2018, the most recent practicable date.

(2) 

The filing fee was calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, and Fee Rate Advisory #1 for Fiscal Year 2019, issued August 24, 2018, by multiplying the transaction value by 0.0001212.

 

☐ 

Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

Amount Previously Paid: N/A      Filing Party: N/A
Form or Registration No.: N/A      Date Filed: N/A

 

☐ 

Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

 

  ☒ 

third-party tender offer subject to Rule 14d-1.

  ☐ 

issuer tender offer subject to Rule 13e-4.

  ☐ 

going-private transaction subject to Rule 13e-3.

  ☐ 

amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:  ☐

If applicable, check the appropriate box(es) below to designate the appropriate rule provision(s) relied upon:

 

  ☐ 

Rule 13e-4(i) (Cross-Border Issuer Tender Offer)

  ☐ 

Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)

 

 


This Tender Offer Statement on Schedule TO (together with any amendments and supplements hereto, this “Schedule TO”) is filed by (i) PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and a wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), (ii) Parent and (iii) CVC Capital Partners VII (A) L.P., a Jersey limited partnership (“CVC VII (A)”), CVC Capital Partners Investment Europe VII L.P., a Jersey limited partnership (“CVC Investment Europe VII”), and CVC Capital Partners VII Associates L.P., a Jersey limited partnership (“CVC VII Associates” and, together with CVC VII (A) and CVC Investment Europe VII, “CVC VII”). Each of CVC VII (A), CVC Investment Europe VII and CVC VII Associates is an indirect stockholder of Parent. This Schedule TO relates to the offer by Offeror to purchase all of the issued and outstanding Shares for a price of $12.50 per Share (the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 21, 2018 (the “Offer to Purchase”), and in the related Letter of Transmittal (the “Letter of Transmittal” which, together with the Offer to Purchase, as each may be amended or supplemented from time to time in accordance with the Merger Agreement described below, collectively constitute the “Offer”), copies of which are annexed to and filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively. All the information set forth in the Offer to Purchase is incorporated herein by reference in response to Items 1 through 9 and Item 11 in this Schedule TO and is supplemented by the information specifically provided in this Schedule TO. The Agreement and Plan of Merger, dated as of November 6, 2018, by and among ConvergeOne, Parent and Offeror (the “Merger Agreement”), a copy of which is attached as Exhibit (d)(1) hereto, is incorporated herein by reference with respect to Items 4 through 11 of this Schedule TO. Unless otherwise indicated, references to sections in this Schedule TO are references to sections of the Offer to Purchase. Capitalized terms used and not defined herein have the meanings assigned to such terms in the Offer to Purchase.

 

Item 1.

Summary Term Sheet.

The information set forth in the section of the Offer to Purchase entitled “Summary Term Sheet” is incorporated herein by reference.

 

Item 2.

Subject Company Information.

(a) The name of the subject company and the issuer of the securities to which this Schedule TO relates is ConvergeOne Holdings, Inc. ConvergeOne’s principal executive office is located at 3344 Highway 149, Eagan, Minnesota 55121. ConvergeOne’s telephone number at such address is (888) 321-6227.

(b) This Schedule TO relates to Offeror’s offer to purchase all outstanding Shares. According to ConvergeOne, as of November 5, 2018, there were (i) 77,905,500 Shares issued and outstanding, (ii) 6,276,500 Shares subject to issuance pursuant to outstanding ConvergeOne Options to acquire Shares, including 1,237,500 Shares subject to issuance pursuant to a unit purchase option for 1,125,000 units (the “Units”) at an exercise price of $10.00 per Unit (including 112,500 Shares issuable pursuant to rights included in the Units) held by EarlyBird Capital, Inc. and its distributees (the “EarlyBird Option”), (iii) 85,287 Shares estimated to be subject to outstanding rights under the 2018 Employee Stock Purchase Plan (the “ConvergeOne ESPP”) (based on total employee contributions to the ConvergeOne ESPP from July 1, 2018 through October 31, 2018 and assuming the closing price per Share as reported on the Nasdaq Global Market on the purchase date for the current offering period was equal to the Offer Price) and (iv) 1,917,310 Shares subject to issuance pursuant to ConvergeOne Warrants to acquire Shares at an exercise price of $11.50 per share, including 562,500 Shares subject to issuance under warrants included in the Units that may be purchased pursuant to the EarlyBird Option. The information set forth in the section of the Offer to Purchase entitled “Introduction” is incorporated herein by reference.

(c) The information set forth in the section of the Offer to Purchase entitled “Price Range of Shares; Dividends” is incorporated herein by reference.

 

Item 3.

Identity and Background of Filing Person.


(a)-(c) This Schedule TO is filed by Offeror, Parent and CVC VII. The information set forth in the sections of the Offer to Purchase entitled “Summary Term Sheet” and “Certain Information Concerning Parent Offeror and CVC VII” and in Schedule I to the Offer to Purchase is incorporated herein by reference.

 

Item 4.

Terms of the Transaction.

(a) The information set forth in the Offer to Purchase is incorporated herein by reference.

 

Item 5.

Past Contacts, Transactions, Negotiations and Agreements.

(a), (b) The information set forth in the sections of the Offer to Purchase entitled “Summary Term Sheet,” “Introduction,” “Certain Information Concerning ConvergeOne,” “Certain Information Concerning Parent, Offeror and CVC VII,” “Background of the Offer; Past Contacts or Negotiations with ConvergeOne,” “The Transaction Agreements” and “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne” and in Schedule I to the Offer to Purchase is incorporated herein by reference.

 

Item 6.

Purposes of the Transaction and Plans or Proposals.

(a), (c)(1)-(7) The information set forth in the sections of the Offer to Purchase entitled “Summary Term Sheet,” “Introduction,” “Price Range of Shares; Dividends,” “Background of the Offer; Past Contacts or Negotiations with ConvergeOne,” “The Transaction Agreements,” “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne,” “Certain Effects of the Offer” and “Dividends and Distributions” is incorporated herein by reference.

 

Item 7.

Source and Amount of Funds or Other Consideration.

(a), (d) The information set forth in the section of the Offer to Purchase entitled “Source and Amount of Funds” is incorporated herein by reference.

(b) Not applicable.

 

Item 8.

Interest in Securities of the Subject Company.

The information set forth in the sections of the Offer to Purchase entitled “Certain Information Concerning ConvergeOne,” “Certain Information Concerning Parent, Offeror and CVC VII,” “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne” and “The Transaction Agreements” and in Schedule I to the Offer to Purchase is incorporated herein by reference.

 

Item 9.

Persons/Assets Retained, Employed, Compensated or Used.

(a) The information set forth in the section of the Offer to Purchase entitled “Background of the Offer; Past Contacts or Negotiations with ConvergeOne,” “The Transaction Agreements,” “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne” and “Fees and Expenses” is incorporated herein by reference.

 

Item 10.

Financial Statements.

Not applicable.

 

Item 11.

Additional Information.

(a)(1) The information set forth in the sections of the Offer to Purchase entitled “Certain Information Concerning ConvergeOne,” “Certain Information Concerning Parent, Offeror and CVC VII,” “Background of the Offer; Past Contacts or Negotiations with ConvergeOne,” “The Transaction Agreements” and “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne” is incorporated herein by reference.

(a)(2), (3) The information set forth in the sections of the Offer to Purchase entitled “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne,” “The Transaction Agreements,” “Certain Conditions of the Offer” and “Certain Legal Matters; Regulatory Approvals” is incorporated herein by reference.


(a)(4) The information set forth in the sections of the Offer to Purchase entitled “Certain Effects of the Offer” is incorporated herein by reference.

(a)(5) Not applicable.

(c) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference.

 

Item 12.

Exhibits.

 

(a)(1)(A)   Offer to Purchase, dated November 21, 2018.*
(a)(1)(B)   Form of Letter of Transmittal (including Internal Revenue Service Form W-9 and instructions for completing the form).*
(a)(1)(C)   Form of Notice of Guaranteed Delivery.*
(a)(1)(D)   Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
(a)(1)(E)   Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
(a)(1)(F)   Summary Newspaper Advertisement as published in The New York Times on November 21, 2018.*
(a)(2)   Not applicable.
(a)(3)   Not applicable.
(a)(4)   Not applicable.
(a)(5)(A)   Joint Press Release issued by CVC Capital Partners and ConvergeOne on November 6, 2018, originally filed as Exhibit I to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by ConvergeOne with the Securities and Exchange Commission on November 6, 2018, which is incorporated herein by reference.
(a)(5)(B)   Current Report on Form-8K filed by ConvergeOne with the Securities and Exchange Commission on November 7, 2018, which is incorporated herein by reference.
(b)(1)   Debt Commitment Letter, dated as of November 6, 2018, by and among Offeror, Wells Fargo Bank, National Association, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, UBS AG, Stamford Branch and UBS Securities LLC.*
(b)(2)   Joinder Agreement to Debt Commitment Letter, dated as of November 20, 2018, by and among Offeror, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, UBS AG, Stamford Branch, UBS Securities LLC, Wells Fargo Bank, National Association, Citigroup Global Markets Inc., Macquarie Capital (USA) Inc., Macquarie Capital Funding LLC, SG America Securities, LLC and Societé Generale.*
(d)(1)   Agreement and Plan of Merger, dated as of November 6, 2018, by and among Parent, Offeror and ConvergeOne, originally filed as Exhibit 2.1 to the Current Report on Form 8-K filed by ConvergeOne with the Securities and Exchange Commission on November 7, 2018, which is incorporated herein by reference.
(d)(2)   Confidentiality Agreement, dated as of August 31, 2018, by and between CVC Advisors (U.S.) Inc. and ConvergeOne.*
(d)(3)   Exclusivity Agreement, dated as of November 3, 2018, by and between CVC Advisors (U.S.) Inc. and ConvergeOne.*
(d)(4)   Rollover Agreement, dated as of November 6, 2018, by and between PVKG Investment Holdings, Inc. and certain stockholders of ConvergeOne.*
(d)(5)   Equity Commitment Letter, dated as of November 6, 2018, by and among Parent and CVC VII.*


(d)(6)    Limited Guarantee, dated as of November 6, 2018, by and among CVC VII and ConvergeOne.*
(d)(7)    Form of Tender and Support Agreement, dated as of November 6, 2018, by and among Parent and the stockholders named therein, originally filed as Exhibit 99.1 to the Current Report on Form 8-K filed by ConvergeOne with the Securities and Exchange Commission on November 7, 2018, which is incorporated herein by reference.
(g)    Not applicable.
(h)    Not applicable.

 

*

Filed herewith.

 

Item 13.

Information Required by Schedule 13E-3.

Not applicable.


SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: November 21, 2018

 

PVKG MERGER SUB, INC.
By:  

/s/ James Christopoulos

Name:   James Christopoulos
Title:   Secretary

 

PVKG INTERMEDIATE HOLDINGS INC.
By:  

/s/ James Christopoulos

Name:   James Christopoulos
Title:   Secretary

 

CVC CAPITAL PARTNERS VII (A) L.P.
By:  CVC CAPITAL PARTNERS VII LIMITED, its General Partner
By:  

/s/ W. Brian Scholfield

  Name: W. Brian Scholfield
  Title:   Director

 

CVC CAPITAL PARTNERS INVESTMENT EUROPE VII L.P.
By:  CVC CAPITAL PARTNERS VII LIMITED, its General Partner
By:  

/s/ W. Brian Scholfield

  Name: W. Brian Scholfield
  Title:   Director

 

CVC CAPITAL PARTNERS VII ASSOCIATES L.P.
By:  CVC CAPITAL PARTNERS VII LIMITED, its General Partner
By:  

/s/ W. Brian Scholfield

  Name: W. Brian Scholfield
  Title:   Director


EXHIBIT INDEX

 

(a)(1)(A)   Offer to Purchase, dated November 21, 2018.*
(a)(1)(B)   Form of Letter of Transmittal (including Internal Revenue Service Form W-9 and instructions for completing the form).*
(a)(1)(C)   Form of Notice of Guaranteed Delivery.*
(a)(1)(D)   Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
(a)(1)(E)   Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
(a)(1)(F)   Summary Newspaper Advertisement as published in The New York Times on November 21, 2018.*
(a)(2)   Not applicable.
(a)(3)   Not applicable.
(a)(4)   Not applicable.
(a)(5)(A)   Joint Press Release issued by CVC Capital Partners and ConvergeOne on November 6, 2018, originally filed as Exhibit I to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by ConvergeOne with the Securities and Exchange Commission on November 6, 2018, which is incorporated herein by reference.
(a)(5)(B)   Current Report on Form-8K filed by ConvergeOne with the Securities and Exchange Commission on November 7, 2018, which is incorporated herein by reference.
(b)(1)   Debt Commitment Letter, dated as of November 6, 2018, by and among Offeror, Wells Fargo Bank, National Association, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, UBS AG, Stamford Branch and UBS Securities LLC.*
(b)(2)   Joinder Agreement to Debt Commitment Letter, dated as of November 20, 2018, by and among Offeror, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, UBS AG, Stamford Branch, UBS Securities LLC, Wells Fargo Bank, National Association, Citigroup Global Markets Inc., Macquarie Capital (USA) Inc., Macquarie Capital Funding LLC, SG America Securities, LLC and Societé Generale.*
(d)(1)   Agreement and Plan of Merger, dated as of November 6, 2018, by and among Parent, Offeror and ConvergeOne, originally filed as Exhibit 2.1 to the Current Report on Form 8-K filed by ConvergeOne with the Securities and Exchange Commission on November 7, 2018, which is incorporated herein by reference.
(d)(2)   Confidentiality Agreement, dated as of August 31, 2018, by and between CVC Advisors (U.S.) Inc. and ConvergeOne.*
(d)(3)   Exclusivity Agreement, dated as of November 3, 2018, by and between CVC Advisors (U.S.) Inc. and ConvergeOne.*
(d)(4)   Rollover Agreement, dated as of November 6, 2018, by and between PVKG Investment Holdings, Inc. and certain stockholders of ConvergeOne.*
(d)(5)   Equity Commitment Letter, dated as of November 6, 2018, by and among Parent and CVC VII.*
(d)(6)   Limited Guarantee, dated as of November 6, 2018, by and among CVC VII and ConvergeOne.*
(d)(7)   Form of Tender and Support Agreement, dated as of November 6, 2018, by and among Parent and the stockholders named therein, originally filed as Exhibit 99.1 to the Current Report on Form 8-K filed by ConvergeOne with the Securities and Exchange Commission on November 7, 2018, which is incorporated herein by reference.
(g)   Not applicable.
(h)   Not applicable.

 

*

Filed herewith.

Table of Contents

Exhibit (a)(1)(A)

 

Offer to Purchase for Cash

All Outstanding Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 per Share, Net in Cash,

by

PVKG Merger Sub, Inc.

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

 

The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one

minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

The Offer (as defined herein) is being made pursuant to the Agreement and Plan of Merger, dated as of November 6, 2018 (the “Merger Agreement”), by and among PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and wholly owned subsidiary of Parent, and ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”). Offeror is offering to purchase all outstanding shares of common stock of ConvergeOne, par value $0.0001 per share (“Shares”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement, the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in this Offer to Purchase, and the related letter of transmittal that accompanies this Offer to Purchase (the “Letter of Transmittal” which, together with this Offer to Purchase, as each may be amended or supplemented from time to time in accordance with the Merger Agreement described below, collectively constitute the “Offer”). Each of CVC Capital Partners VII (A) L.P., a Jersey limited partnership (“CVC VII (A)”), CVC Capital Partners Investment Europe VII L.P., a Jersey limited partnership (“CVC Investment Europe VII”) and CVC Capital Partners VII Associates L.P., a Jersey limited partnership (together with CVC VII (A) and CVC Investment Europe VII, “CVC VII”), is an indirect stockholder of Parent.

Pursuant to the Merger Agreement, following consummation of the Offer and the satisfaction or waiver of each of the applicable conditions set forth in the Merger Agreement, Offeror will merge with and into ConvergeOne (the “Merger”) without a meeting of holders of Shares in accordance with Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), with ConvergeOne continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Parent (the “Surviving Corporation”). At the effective time of the Merger (the “Merger Effective Time”), each Share outstanding immediately prior to the Merger Effective Time (other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares (as defined below) or any Shares held by any person who is entitled to and properly demands statutory appraisal of his, her or its Shares under Section 262 of the DGCL in connection with the Merger) will be converted into the right to receive an amount in cash equal to the Offer Price, without interest and less any withholding of taxes required by applicable law. Under no circumstances will interest be paid with respect to the purchase of Shares pursuant to the Offer, regardless of any extension of the Offer or any delay in making payment for Shares.

Certain holders of Shares (the “Rollover Stockholders”), including John A. McKenna, Jr., Jeffrey Nachbor, Paul Maier and John F. Lyons, have agreed to exchange a portion of their Shares (the “Rollover Shares”), pursuant to the Rollover Agreement, dated as of November 6, 2018 (the “Rollover Agreement”), by and among the Rollover Stockholders and PVKG Investment Holdings Inc., a Delaware corporation and the direct parent of Parent (“PVKG Investment Holdings”), for equity interests in PVKG Investment Holdings and have agreed not to tender the Rollover Shares pursuant to the Offer. As of November 5, 2018, the Rollover Shares represented approximately 3.2% of the outstanding Shares.

The Offer is not subject to any financing condition. The Offer is conditioned upon, among other things, the satisfaction of the “Minimum Condition” and other conditions described in Section 15 — “Certain Conditions of the Offer.

The ConvergeOne board of directors (the “ConvergeOne Board”), acting upon the unanimous recommendation of the Special Transaction Committee of the ConvergeOne Board, has unanimously adopted resolutions (1) determining that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interest of, ConvergeOne and the holders of Shares, (2) resolving that the Merger Agreement and the Merger will be governed by and effected under Section 251(h) and other relevant provisions of the DGCL, (3) declaring it advisable for ConvergeOne to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, (4) authorizing and approving the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Offer and the Merger and (5) resolving to recommend that the holders of Shares accept the Offer and tender their Shares to Offeror pursuant to the Offer.

A summary of the principal terms of the Offer appears under the heading “Summary Term Sheet”. You should read this entire Offer to Purchase carefully before deciding whether to tender your Shares pursuant to the Offer.

November 21, 2018


Table of Contents

IMPORTANT

Any stockholder of ConvergeOne wishing to tender Shares pursuant to the Offer must, prior to the expiration of the Offer, (1) complete and sign the Letter of Transmittal that accompanies this Offer to Purchase in accordance with the instructions in the Letter of Transmittal and mail or deliver the Letter of Transmittal and all other required documents to Continental Stock Transfer & Trust Company, in its capacity as depositary and paying agent for the Offer (the “Depositary and Paying Agent”), (2) follow the procedure for book-entry transfer described in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” or (3) request that such stockholder’s broker, dealer, commercial bank, trust company or other nominee effect the transaction for the stockholder. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person if such stockholder wishes to tender his, her or its Shares.

Beneficial owners should be aware that their broker, dealer, commercial bank, trust company or other nominee may establish its own earlier deadline for participation in the Offer. Accordingly, beneficial owners wishing to participate in the Offer should contact their broker, dealer, commercial bank, trust company or other nominee as soon as possible in order to determine the times by which such owner must take action in order to participate in the Offer.

Any stockholder of ConvergeOne wishing to tender Shares pursuant to the Offer and who cannot deliver all required documents to the Depositary and Paying Agent prior to the expiration of the Offer, may also tender Shares pursuant to the guaranteed delivery procedure described in Section 3 — “Procedures for Accepting the Offer and Tendering Shares.”

Questions and requests for assistance should be directed to Innisfree M&A Incorporated, the information agent for the Offer (the “Information Agent”), at its address and telephone number set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery (as defined herein) and other related materials may also be obtained from the Information Agent. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for copies of these documents or assistance with the Offer. Additionally, copies of this Offer to Purchase, the Letter of Transmittal and any other material related to the Offer may be obtained at the website maintained by the U.S. Securities and Exchange Commission (the “SEC”) at http://www.sec.gov.

This Offer has not been approved or disapproved by the SEC or any state securities commission, nor has the SEC or any state securities commission passed upon the fairness or merits of this transaction or upon the accuracy or adequacy of the information contained in this Offer to Purchase or the Letter of Transmittal. Any representation to the contrary is unlawful.

No person has been authorized to give any information or to make any representation on behalf of Parent or Offeror not contained herein or in the Letter of Transmittal, and, if given or made, such information or representation must not be relied upon as having been authorized. No broker, dealer, commercial bank, trust company, fiduciary or other person shall be deemed to be the agent of Parent, Offeror, the Depositary and Paying Agent or the Information Agent for purposes of the Offer.

THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD READ BOTH CAREFULLY AND IN THEIR ENTIRETY BEFORE MAKING A DECISION WITH RESPECT TO THE OFFER.

The Information Agent for the Offer is:

 

LOGO

 

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders may call toll free: (888) 750-5834

Banks and brokers may call collect: (212) 750-5833


Table of Contents

TABLE OF CONTENTS

 

SUMMARY TERM SHEET

     1  

INTRODUCTION

     12  

THE TENDER OFFER

     16  

1. Terms of the Offer

     16  

2. Acceptance for Payment and Payment for Shares

     18  

3. Procedures for Accepting the Offer and Tendering Shares

     19  

4. Withdrawal Rights

     22  

5. Material United States Federal Income Tax Consequences

     23  

6. Price Range of Shares; Dividends

     26  

7. Certain Information Concerning ConvergeOne

     27  

8. Certain Information Concerning Parent, Offeror and CVC VII

     29  

9. Source and Amount of Funds

     30  

10. Background of the Offer; Past Contacts or Negotiations with ConvergeOne

     35  

11. The Transaction Agreements

     37  

12. Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne

     66  

13. Certain Effects of the Offer

     68  

14. Dividends and Distributions

     70  

15. Certain Conditions of the Offer

     70  

16. Adjustments to Prevent Dilution

     72  

17. Certain Legal Matters; Regulatory Approvals

     72  

18. Fees and Expenses

     75  

19. Miscellaneous

     75  

SCHEDULE I

     I-1  


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SUMMARY TERM SHEET

The information contained in this Summary Term Sheet is a summary only and is not meant to be a substitute for the more detailed description and information contained in this Offer to Purchase or the Letter of Transmittal. We have included cross-references in this Summary Term Sheet to other sections of this Offer to Purchase where you will find more complete descriptions of the topics mentioned below. The information concerning ConvergeOne (as defined below), contained herein and elsewhere in this Offer to Purchase has been provided to Parent (as defined below) and Offeror (as defined below) by ConvergeOne or has been taken from or is based upon publicly available documents or records of ConvergeOne on file with the U.S. Securities and Exchange Commission (the “SEC”) or other public sources at the time of the Offer (as defined below). Parent and Offeror have not independently verified the accuracy and completeness of such information. Parent and Offeror have no knowledge that would indicate that any statements contained herein relating to ConvergeOne provided to Parent and Offeror or taken from or based upon such documents and records filed with the SEC are untrue or incomplete in any material respect. The following are some questions you, as a stockholder of ConvergeOne, may have and answers to those questions. You should carefully read this entire Offer to Purchase and the other documents to which this Offer to Purchase refers to understand fully the Offer, the Merger (as defined below) and the other Transactions (as defined below) because the information in this summary term sheet is not complete. References to “we,” “us,” or “our,” unless the context otherwise requires, are references to Offeror.

 

Securities Sought    All of the issued and outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc. (“ConvergeOne”), a Delaware corporation.
Price Offered per Share    $12.50 per Share, in cash, without interest and less any withholding of taxes required by applicable law (the “Offer Price”).
Scheduled Expiration of Offer    One minute after 11:59 p.m., Eastern time, on December 19, 2018, unless the Offer is extended or terminated. See Section 1 — “Terms of the Offer.”
Offeror    PVKG Merger Sub, Inc. (“Offeror”), a Delaware corporation and wholly owned subsidiary of PVKG Intermediate Holdings Inc. (“Parent”), a Delaware corporation.
The ConvergeOne Board of Directors’ Recommendation    Acting upon the unanimous recommendation of the Special Transaction Committee of the board of directors of ConvergeOne, the ConvergeOne Board of Directors (the “ConvergeOne Board”) recommends that the holders of Shares tender their Shares in the Offer.

Certain holders of Shares (the “Rollover Stockholders”), including John A. McKenna, Jr., Jeffrey Nachbor, Paul Maier and John F. Lyons, have agreed to exchange a portion of their Shares (the “Rollover Shares”) pursuant to the Rollover Agreement, dated as of November 6, 2018 (the “Rollover Agreement”), by and among the Rollover Stockholders and PVKG Investment Holdings Inc., a Delaware corporation and the direct parent of Parent (“PVKG Investment Holdings”), for equity interests in PVKG Investment Holdings and have agreed not to tender the Rollover Shares pursuant to the Offer. As of November 5, 2018, the Rollover Shares represented approximately 3.2% of the outstanding Shares.

Who is offering to buy my securities?

Our name is PVKG Merger Sub, Inc., a Delaware corporation that was formed for the purpose of acquiring all of the outstanding Shares of ConvergeOne. We are a wholly owned subsidiary of Parent. Offeror has not

 

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conducted any activities to date other than activities incidental to its formation or in connection with the transactions contemplated by the Merger Agreement. Each of CVC Capital Partners VII (A) L.P., a Jersey limited partnership (“CVC VII (A)”), CVC Capital Partners Investment Europe VII L.P., a Jersey limited partnership (“CVC Investment Europe VII”), and CVC Capital Partners VII Associates L.P., a Jersey limited partnership (“CVC VII Associates” and, together with CVC VII (A) and CVC Investment Europe VII, “CVC VII”), is an indirect stockholder of Parent. See the “Introduction” to this Offer to Purchase and Section 8 — “Certain Information Concerning Parent, Offeror and CVC VII.”

What are the classes and amounts of securities sought in the Offer?

We are seeking to purchase all of the outstanding Shares upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal. See the “Introduction” to this Offer to Purchase and Section 1 — “Terms of the Offer.”

Why are you making the Offer?

We are making the Offer because we want to acquire control of, and ultimately the entire equity interest in, ConvergeOne, while allowing holders of Shares an opportunity to receive the Offer Price promptly by tendering Shares pursuant to the Offer. If the Offer is consummated, we and Parent are required, upon the terms and subject to conditions set forth in the Merger Agreement, to consummate the Merger either (1) on the same date as the date on which the Offer is consummated or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of such Offer consummation date, then on the first business day on which such condition is satisfied or waived. Upon consummation of the Merger, ConvergeOne will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent.

How much are you offering to pay? What is the form of payment? Will I have to pay any fees or commission?

We are offering to purchase Shares for a price per Share of $12.50, net to the seller in cash, without interest (subject to adjustments from time to time upon the terms and subject to the conditions set forth in the Merger Agreement) and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal. If you are the record holder of Shares and you tender your Shares directly to Continental Stock Transfer & Trust Company, the depositary and paying agent for the Offer (the “Depositary and Paying Agent”), you will not be obligated to pay brokerage fees or commissions. If you own your Shares through a broker, dealer, commercial bank, trust company or other nominee, and such person tenders your Shares on your behalf, your broker, dealer, commercial bank, trust company or other nominee may charge you a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply. See the “Introduction” to this Offer to Purchase and Section 2 — “Acceptance for Payment and Payment for Shares.”

Do you have the financial resources to make payment?

Yes. Consummation of the Offer is not subject to any financing condition. The total amount of funds required by Offeror and Parent to consummate the Offer and to provide funding for the Merger is approximately $1.9 billion, plus related fees and expenses. Offeror and Parent expect to fund such cash requirements from the proceeds from (1) debt facilities contemplated by a debt commitment letter dated November 6, 2018 that Parent has entered into in connection with the execution of the Merger Agreement (the “Debt Commitment Letter”), which provides for up to $1.6 billion of debt financing (including a $250 million senior secured ABL facility, a $925 million senior secured first lien term loan facility, a $75 million senior secured delayed draw term loan facility and a $350 million senior secured second lien term loan facility), (2) an equity investment contemplated pursuant to an equity commitment letter dated November 6, 2018 that Parent has entered into in connection with

 

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the execution of the Merger Agreement (the “Equity Commitment Letter”) which provides for up to $750 million in aggregate of cash equity financing and (3) ConvergeOne’s available cash following the Merger. Funding of the debt facilities contemplated by the Debt Commitment Letter and the equity financing contemplated by the Equity Commitment Letter is subject to the satisfaction of various customary conditions. See Section 9 — “Source and Amount of Funds”.

Is there an agreement governing the Offer?

Yes. Parent, Offeror and ConvergeOne have entered into the Merger Agreement, which provides, among other things, for the terms and conditions of the Offer and the subsequent merger of Offeror with and into ConvergeOne (the “Merger”), with ConvergeOne surviving the Merger as a wholly owned subsidiary of Parent (the “Surviving Corporation”). If the Minimum Condition (as defined herein) is satisfied and we consummate the Offer, we intend to effect the Merger without any action by the holders of Shares pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”). See Section 11 — “The Transaction Agreements” and Section 15 — “Certain Conditions of the Offer.”

Is your financial condition relevant to my decision to tender my Shares in the Offer?

No. We do not think our financial condition is relevant to your decision whether to tender Shares pursuant to the Offer because:

 

   

we were organized solely in connection with the Offer and the Merger and, prior to the Expiration Date (as defined below), will not carry on any activities other than activities incidental to its formation or in connection with the Offer and the Merger. The term “Expiration Date” means 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless Offeror, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event the expiration date of the Offer is the latest date at which the Offer, as so extended, expires;

 

   

the Offer is being made for all outstanding Shares solely for cash;

 

   

the Offer is made for all issued and outstanding Shares;

 

   

if we consummate the Offer, we expect to acquire in the Merger all Shares that remain outstanding (other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares or any Shares held by any person who is entitled to and properly demands statutory appraisal of his, her or its Shares under Section 262 of the DGCL in connection with the Merger) for the same cash price in the Merger as we paid in the Offer (i.e. the Offer Price);

 

   

the Offer is not subject to any financing condition; and

 

   

we have all of the financial resources, including committed debt and equity financing, sufficient to finance the Offer and the Merger.

See Section 9 — “Source and Amount of Funds”.

What percentage of Shares do you or your affiliates currently own?

None of Parent or Offeror or any of their respective controlled affiliates currently own any Shares.

How long do I have to decide whether to tender my Shares in the Offer?

Unless we extend the Offer in accordance with the Merger Agreement, you will have until 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), to

 

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tender your Shares pursuant the Offer. Furthermore, if you cannot deliver everything that is required to make a valid tender in accordance with the terms of the Offer by that time, you may still participate in the Offer by using the guaranteed delivery procedure that is described in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of this Offer to Purchase prior to that time. See Section 1 — “Terms of the Offer” and Section 3 — “Procedures for Accepting the Offer and Tendering Shares.” Please give your broker, dealer, commercial bank, trust company or other nominee instructions with sufficient time to permit such broker, dealer, commercial bank, trust company or other nominee to tender your Shares. Beneficial owners should be aware that their broker, dealer, commercial bank, trust company or other nominee may establish its own earlier deadline for participation in the Offer. Accordingly, beneficial owners wishing to participate in the Offer should contact their broker, dealer, commercial bank, trust company or other nominee as soon as possible in order to determine the times by which such owner must take action in order to participate in the Offer.

Can the Offer be extended and, if so, under what circumstances?

Yes, the Offer can be extended. We have agreed in the Merger Agreement that, so long as neither ConvergeOne nor Parent has terminated the Merger Agreement in accordance with its terms:

 

   

if, as of the scheduled Expiration Date, any of the conditions of the Offer are not satisfied and has not been waived, Offeror may, in its discretion (and without the consent of ConvergeOne or any other person), extend the Offer on one or more occasions, for an additional period of up to ten business days per extension (or such other duration as may be agreed to by Parent and ConvergeOne), to permit such condition to be satisfied;

 

   

we are required to extend the Offer for any period required by any period required by any legal requirement, any interpretation or position of the SEC or its staff or the Nasdaq Global Market (“Nasdaq”) applicable to the Offer;

 

   

we are required to extend the Offer for periods of up to ten business days per extension until any waiting period (and any extension thereof) applicable to the consummation of the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated;

 

   

we are required to extend the Offer, at the request of ConvergeOne, for one or more successive periods of up to ten business days each (or such other duration as may be agreed to by Parent and ConvergeOne) to permit such Offer Condition to be satisfied if, at any then-scheduled Expiration Date, any of the conditions to the Offer are not satisfied or waived by Parent or Offeror; and

 

   

we will not, however, (1) be required to extend the Offer beyond the earliest to occur of (A) the valid termination of the Merger Agreement and (B) February 4, 2019 (the “End Date”) or (2) be permitted to extend the Offer beyond the earliest of such deadlines without the prior written consent of ConvergeOne.

If we extend the Offer, such extension will extend the time that you will have to tender Shares. See Section 1 — “Terms of the Offer.”

Will you provide a subsequent offering period?

No. Pursuant to Section 251(h) of the DGCL and due to our obligations and the obligations of Parent and ConvergeOne under the Merger Agreement, we expect the Merger to occur either (1) the date on which the Offer is consummated or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of such Offer consummation date, one business day after such condition is satisfied or waived, without a subsequent offering period. See Section 1 — “Terms of the Offer.”

 

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How will I be notified if the Offer is extended?

Any extension of the Offer will be followed by a public announcement of the extension no later than 9:00 a.m., Eastern time, on the next business day after the day on which the Offer was otherwise scheduled to expire. See Section 1 — “Terms of the Offer.”

What are the most significant conditions to the Offer?

The Offer is conditioned upon, among other things:

 

   

there being validly tendered (and not properly withdrawn) that number of Shares (excluding Shares tendered pursuant to notices of guaranteed delivery that have not yet been “received” (as such term is defined in Section 251(h)(6)(f) of the DGCL)) that, considered together with the Rollover Shares and all other Shares (if any) otherwise beneficially owned by Parent or any of its wholly owned subsidiaries (including Offeror), would represent one Share more than 50% of the total number of Shares outstanding at the time of the expiration of the Offer (the “Minimum Condition”). For purposes of calculating whether the Minimum Condition has been satisfied, the number of Shares outstanding at the time of the expiration of the Offer will (1) include, without duplication, (A) Shares issuable in respect of ConvergeOne Options (as defined below) for which the holders have validly exercised such ConvergeOne Options and satisfied all of the requirements for their exercise prior to the expiration of the Offer, even if the ConvergeOne Option holders do not receive Shares resulting from such exercise prior to the expiration of the Offer and (B) Shares issuable in respect of ConvergeOne Warrants (as defined below) that have been validly exercised and the holders of such ConvergeOne Warrants have satisfied all of the requirements for such exercise prior to the expiration of the Offer, even if the ConvergeOne Warrant holders do not receive Shares resulting from such exercise prior to the expiration of the Offer and (2) exclude Shares held in treasury by ConvergeOne as of the expiration of the Offer or any other Shares acquired by ConvergeOne prior to the expiration of the Offer (including any such Shares acquired in connection with tax withholding or payment of the exercise price for the exercise of ConvergeOne Options), even if ConvergeOne does not receive the Shares so acquired prior to the expiration of the Offer);

 

   

there not having been issued by any court of competent jurisdiction and remaining in effect any temporary restraining order, preliminary or permanent injunction or other order preventing the acquisition of or payment for Shares pursuant to the Offer and there not being any action taken, or any legal requirement or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger by any governmental body directly or indirectly prohibiting, or making illegal, the acquisition of, or payment for, Shares pursuant to the Offer, or the consummation of the Merger;

 

   

any consent, approval or clearance with respect to, or termination or expiration of any applicable mandatory waiting period (or any extension thereof) imposed under the HSR Act having being obtained, received or terminated or expired;

 

   

since the date of the Merger Agreement, there not having occurred and been continuing any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on ConvergeOne; and

 

   

the occurrence of the date that is 45 days after the date on which the parties submit to the Committee on Foreign Investment in the United States, a declaration pursuant to 31 C.F.R. § 801.401.

The Offer is also subject to other conditions set forth in this Offer to Purchase. The Offer is not subject to a financing condition. We can waive any condition of the Offer, in whole or in part, other than the Minimum Condition, at any time and from time to time. However, unless otherwise provided by the Merger Agreement, we may not, without the prior written consent of ConvergeOne, (1) decrease the Offer Price, (2) change the form of consideration payable in the Offer, (3) decrease the maximum number of Shares sought to be purchased in the

 

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Offer, (4) impose conditions or requirements to the Offer in addition to the conditions of the Offer, (5) amend or modify any of the conditions of the Offer in a manner that adversely affects, or could reasonably be expected to adversely affect, any holder of Shares or that would, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the Offer or prevent, materially delay or materially impair the ability of Parent or Offeror to consummate the Offer, the Merger or the other transactions contemplated by the Merger Agreement (the “Transactions”), (6) change or waive the Minimum Condition, (7) extend or otherwise change the Expiration Date in a manner other than as required or permitted by the Merger Agreement or (8) provide any “subsequent offering period” within the meaning of Rule 14d-11 promulgated under the Exchange Act. See Section 15 — “Certain Conditions of the Offer.”

Have any stockholders already agreed to tender or not to tender their Shares in the Offer?

Concurrently with the execution of the Merger Agreement, certain stockholders of ConvergeOne have entered into a Tender and Support Agreement, dated as of November 6, 2018 (the “Support Agreement”), with Parent and Offeror, which requires Clearlake Capital Partners III (Master), L.P. (“ Clearlake”) and the other stockholders who are parties thereto (the “Significant Stockholders”), subject to the terms of the Support Agreement discussed in Section 11—“The Transaction Agreements,” among other things, to tender all of the Shares (other than the Rollover Shares) owned by such Significant Stockholder as of the date of the Support Agreement or otherwise acquired prior to the termination of the Support Agreement, within ten business days after the commencement of the Offer. The Significant Stockholders collectively beneficially owned approximately 68% of the Shares (with such tender and support obligations subject to reduction to 39.99% upon an adverse recommendation change by the ConvergeOne Board (as defined below)) outstanding as of November 5, 2018, inclusive of the issuance of 2,574,137 Shares to certain of such stockholders (including Clearlake) following ConvergeOne’s achievement of the “Earnings Target” for fiscal year 2020 pursuant to the Forum Merger Agreement (as defined below) as described in the ConvergeOne’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. The Support Agreement terminates upon certain events, including the valid termination of the Merger Agreement in accordance with its terms. See also Section 11—“The Transaction Agreements.”

Additionally, the Rollover Stockholders have agreed to exchange the Rollover Shares, pursuant to the Rollover Agreement, for equity interests in PVKG Investment Holdings and have agreed not to tender the Rollover Shares pursuant to the Offer. As of November 5, 2018, the Rollover Shares represented approximately 3.2% of the outstanding Shares. See also Section 11—“The Transaction Agreements.”

How do I tender my Shares?

In order for Shares to be validly tendered pursuant to the Offer, you must follow these instructions:

 

   

If you hold Shares through a broker, dealer, commercial bank, trust company or other nominee, you must contact your broker, dealer, commercial bank, trust company or other nominee and give instructions that your Shares be tendered.

 

   

If you are a record holder (i.e., a stock certificate has been issued to you and registered in your name or your Shares are registered in book-entry form in your name on the books of ConvergeOne’s transfer agent), the following must be received by the Depositary and Paying Agent at one of its addresses set forth in the Letter of Transmittal before the Offer expires: (1) stock certificate(s) representing your Shares (or follow the procedures described in this Offer to Purchase for book-entry transfer), (2) the Letter of Transmittal, properly completed and duly executed (or, with respect to a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program, a manually executed facsimile thereof) with any required signature guarantees, or an Agent’s Message (as defined in Section 2 — “Procedures for Accepting the

 

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Offer and Tendering Shares” below) in connection with a book-entry delivery of Shares and (3) any other documents required by the Letter of Transmittal.

 

   

If you are a record holder but your stock certificate(s) is not available, you cannot deliver such stock certificate(s) to the Depositary and Paying Agent, you cannot complete the procedure for delivery by book-entry transfer on a timely basis, or you otherwise cannot deliver all required documents to the Depositary and Paying Agent, in any case before the Offer expires, you may be able to tender your Shares using the enclosed Notice of Guaranteed Delivery. For the tender to be valid, however, the Depositary and Paying Agent must receive the certificate(s) for all tendered Shares, in proper form for transfer (or a confirmation of a book-entry transfer of such Shares with respect to all those Shares), together with a properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message (as defined below) in lieu of the Letter of Transmittal), and any other required documents, within two Nasdaq trading days after the date of execution of the Notice of Guaranteed Delivery. Please contact Innisfree M&A Incorporated (the “Information Agent”) for assistance.

See Section 3 — “Procedures for Accepting the Offer and Tendering Shares”.

Until what time may I withdraw previously tendered Shares?

You may withdraw your previously tendered Shares at any time until the Offer has expired and, if we have not accepted your Shares for payment pursuant to the Offer by January 20, 2019, you may withdraw them at any time after that date until we accept Shares for payment pursuant to the Offer. Once we accept your tendered Shares for payment upon expiration of the Offer, however, you will no longer be able to withdraw them. See Section 4 — “Withdrawal Rights.”

How do I properly withdraw my previously tendered Shares?

To properly withdraw previously tendered Shares, you must deliver a written notice of withdrawal with the required information (as specified in this Offer to Purchase and in the related Letter of Transmittal) to the Depositary and Paying Agent at any time at which you have the right to withdraw Shares. If you tendered Shares by giving instructions to a broker, dealer, commercial bank, trust company or other nominee, you must instruct such broker, dealer, commercial bank, trust company or other nominee to arrange for the withdrawal of your Shares and such broker, dealer, commercial bank, trust company or other nominee must effectively withdraw such Shares at any time at which you have the right to withdraw your Shares. See Section 4 — “Withdrawal Rights.”

If I accept the Offer, how will I get paid?

If the conditions of the Offer as set forth in Section 15 — “Certain Conditions of the Offer” are satisfied or waived by Parent and Offeror and we consummate the Offer and accept your validly tendered Shares for payment, you will be entitled to receive, as soon as practicable, an amount equal to the number of Shares you tendered pursuant to the Offer multiplied by the Offer Price. Payment will be made by deposit of the aggregate purchase price for the Shares with the Depositary and Paying Agent, which will act as agent for tendering holders of Shares for the purpose of receiving payments from Parent and transmitting payments, less tax withholding required by applicable law, to tendering stockholders whose Shares have been accepted for payment. See Section 2 — “Acceptance for Payment and Payment for Shares” and Section 3 — “Procedure for Tendering Shares.”

What will happen to my ConvergeOne Options in the Offer?

Options to purchase Shares (each, a “ConvergeOne Option”) are not sought in the Offer. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each ConvergeOne Option, other

 

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than options to purchase Shares pursuant to that certain Unit Purchase Option issued in April 2017 (the “EBC Option Agreement”), in favor of EarlyBird Capital, Inc., that is then outstanding and unexercised as of immediately before the Effective Time, whether vested or unvested, will be canceled, extinguished and terminated for no consideration or payment. Each ConvergeOne Option granted pursuant to the EBC Option Agreement that is then outstanding and unexercised as of immediately before the Effective Time will be canceled and EarlyBird Capital, Inc. will then become entitled to receive solely, in full satisfaction of its rights with respect thereto, a lump-sum cash payment equal to the product of (1) the excess, if any, of the aggregate Merger Consideration payable on the number of Shares for which such ConvergeOne Option would have converted to had it been exercised, minus (2) the aggregate exercise price of such ConvergeOne Option (including, for the avoidance of doubt, the aggregate exercise price for any warrants issuable upon exercise of such ConvergeOne Option).

See Section 11 — “The Transaction Agreements — The Merger Agreement — Treatment of Equity Awards.”

What will happen to my ConvergeOne Warrants in the Offer?

Warrants to purchase Shares (each, a “ConvergeOne Warrant”) pursuant to the warrant agreements entered into between ConvergeOne and Continental Stock Transfer and Trust Company, in its capacity as warrant agent, are not sought in the Offer. Pursuant to the Merger Agreement, at the Effective Time, each ConvergeOne Warrant that is outstanding and unexercised as of immediately before the Effective Time will be canceled and the holder of such ConvergeOne Warrant will be entitled to receive, in full satisfaction of the rights of such holder with respect thereto, a lump-sum cash payment equal to the product of (1) the number of Shares for which such ConvergeOne Warrant would have converted to had it been exercised and (2) the excess, if any, of the Merger Consideration over the exercise price per share of such ConvergeOne Warrant. Any ConvergeOne Warrant that has an exercise price that is greater than or equal to the Merger Consideration will be canceled at the Effective Time for no consideration or payment).

See Section 11 — “The Transaction Agreements — The Merger Agreement — Treatment of Equity Awards.”

What will happen to Shares that may be acquired under the ESPP and what happens to the ESPP program?

If you currently participate in the ESPP, then if the transactions close prior to the end of the current ongoing offering under the ESPP (which began on July 1, 2018, and ends on December 31, 2018), the last business day immediately before the Offer acceptance date will be treated as the purchase date for the current ESPP offering. Your accumulated contributions under the ESPP will be contributed to the purchase of Shares on that date, and those shares will be eligible to receive the cash proceeds from the Merger but will not be eligible for tender pursuant to the Offer. You may elect to withdraw from the ESPP offering period and receive a refund of your contributions to date prior to the Acceptance Time.

What is the recommendation of the ConvergeOne Board with respect to the Offer?

The ConvergeOne Board, acting upon the unanimous recommendation of the Special Transaction Committee of the ConvergeOne Board, has unanimously adopted resolutions (1) determining that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interest of, ConvergeOne and the holders of Shares, (2) resolving that the Merger Agreement and the Merger will be governed by and effected under Section 251(h) and other relevant provisions of the DGCL, (3) declaring it advisable for ConvergeOne to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, (4) authorizing and approving the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Offer and the Merger and (5) resolving to recommend that the holders of Shares accept the Offer and tender their Shares to Offeror pursuant to the Offer.

 

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A more complete description of the reasons for the ConvergeOne Board’s approval of the Offer and the Merger is set forth in ConvergeOne’s Solicitation/Recommendation Statement on Schedule 14D-9 that is being mailed to holders of Shares together with this Offer to Purchase. See the “Introduction” to this Offer to Purchase.

If the Offer is completed, will ConvergeOne continue as a public company?

No. We are required, upon the terms and subject to the conditions set forth in the Merger Agreement, to consummate the Merger either (1) on the same date as the date on which the Offer is consummated or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of the such Offer consummation date, then on the first business day on which such condition is satisfied or waived. If the Merger takes place, ConvergeOne will no longer be publicly traded and we intend to cause ConvergeOne to be delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”). See Section 13 — “Certain Effects of the Offer.”

Will the Offer be followed by the Merger if all Shares are not tendered in the Offer?

Yes, so long as the conditions to the Merger are satisfied or waived by Parent and Offeror. Pursuant to the Merger Agreement, if the Minimum Condition is not satisfied, we are not required (nor are we permitted) to accept the Shares for purchase in the Offer nor will we consummate the Merger. If we accept for payment all Shares validly tendered and not properly withdrawn pursuant to the Offer, and the other conditions to the Merger are satisfied or waived by Parent and Offeror, Offeror will merge with and into ConvergeOne, with ConvergeOne surviving the Merger as a wholly owned subsidiary of Parent. If the Merger takes place, Parent will own 100% of ConvergeOne, and all of the remaining holders of Shares, other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares or any Shares held by any person who is entitled to and properly demands statutory appraisal of his, her or its Shares under Section 262 of the DGCL in connection with the Merger, will have the right to receive an amount in cash equal to the Offer Price, without interest and less any withholding of taxes required by applicable law. See the “Introduction” to this Offer to Purchase. See also Section 11 — “The Transaction Agreements” and Section 15 — “Certain Conditions of the Offer” for a description of the conditions to the Merger and the Offer.

Because the Merger will be governed by Section 251(h) of the DGCL, no stockholder vote will be required to consummate the Merger following the purchase of Shares in the Offer. We are required, upon the terms and subject to the conditions set forth in the Merger Agreement, to consummate the Merger either (1) on the same date as the date on which the Offer is consummated or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of such Offer consummation date, then on the first business day on which such condition is satisfied or waived. As such, we do not expect there to be a significant period of time between consummation of the Offer and consummation of the Merger. See also Section 11 — “The Transaction Agreements” and Section 12 — “Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne.”

If you do not consummate the Offer, will you nevertheless consummate the Merger?

No. None of us, Parent or ConvergeOne are under any obligation to pursue or consummate the Merger if the Offer has not been first consummated.

If I decide not to tender, how will the Offer and the Merger affect my Shares?

Other than with respect to the Rollover Shares, if you decide not to tender your Shares in the Offer and the Merger occurs, each of your Shares will be converted into the right to receive an amount in cash equal to the

 

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Offer Price, without interest and less any withholding of taxes required by applicable law. Other than with respect to the Rollover Shares, you will have the right to receive the same amount of cash per Share in the Merger that you would have received had you tendered your Shares in the Offer or you will have the right to exercise your appraisal rights in connection with the Merger as more fully described below. Therefore, if the Merger takes place (and you do not properly exercise your appraisal rights), the only difference to you between tendering your Shares and not tendering your Shares is that you will be paid earlier, and no appraisal rights will be available, if you tender your Shares. No interest will be paid for Shares acquired in the Merger. Because the Merger will be governed by Section 251(h) of the DGCL, no stockholders vote will be required to consummate the Merger. See the “Introduction” to this Offer to Purchase, Section 11 — “The Transaction Agreements” and Section 13 — “Certain Effects of the Offer.”

What is the market value of my Shares as of a recent date?

On November 5, 2018, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the closing sale price per Share reported on Nasdaq was $9.43, to which the Offer Price of $12.50 per Share represents an approximate 32% premium. The Offer Price represents a 35% premium to the 30-day volume-weighted average trading price per Share as of October 25, 2018.

On November 20, 2018, the last trading day prior to commencement of the Offer, the closing sale price per Share reported on Nasdaq was $12.47. Before deciding whether to tender your Shares, you should obtain a current market quotation for Shares. See Section 6 — “Price Range of Shares; Dividends.”

Will I be paid a dividend on my Shares during the pendency of the Offer?

The Merger Agreement provides that from the date of the Merger Agreement to the Merger Effective Time, without the prior written consent of Parent, ConvergeOne may not declare, set aside, make or pay any dividend or distribution (whether in cash, stock or property) on any shares of any ConvergeOne securities (including the Shares), other than with respect to a quarterly dividend of $0.02 per Share in respect of ConvergeOne’s third quarter earnings. See Section 6 — “Price Range of Shares; Dividends.”

What are the U.S. federal income tax consequences of having my Shares accepted for payment in the Offer or receiving cash in exchange for my Shares in the Merger?

The exchange of Shares for cash pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes. If you are a U.S. Holder (as defined in Section 5 — “Material United States Federal Income Tax Consequences”), you will generally recognize gain or loss on a sale of Shares for cash pursuant to the Offer or an exchange of Shares for cash pursuant to the Merger, in either case in an amount equal to the difference, if any, between the U.S. dollar amount received for Shares you tender pursuant to the Offer or exchange in the Merger and your adjusted tax basis in such Shares. If you are a U.S. Holder and you hold your Shares as a capital asset, the gain or loss that you recognize will be capital gain or loss and will generally be treated as long-term capital gain or loss if you have held such Shares for more than one year at the time of disposition, subject to certain exceptions. If you are a Non-U.S. Holder (as defined in Section 5 — “Material United States Federal Income Tax Consequences”), you will generally not be subject to U.S. federal income tax on gain recognized on Shares you tender pursuant to the Offer or exchange in the Merger, subject to certain conditions (as described in Section 5 — “Material United States Federal Income Tax Consequences” in more detail). See Section 5 — “Material United States Federal Income Tax Consequences” for a discussion of certain material U.S. federal income tax consequences of tendering Shares pursuant to the Offer or exchanging Shares in the Merger.

Stockholders are urged to consult their tax advisors to determine the particular tax consequences to them (including the application and effect of any U.S. federal estate or gift tax rules, or any state, local or non-U.S. income and other tax laws) of tendering their Shares pursuant to the Offer, exchanging their Shares in the Merger or exercising appraisal rights.

 

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Will I have the right to have my Shares appraised?

Appraisal rights are not available to the holders of Shares in connection with the Offer, and holders of Shares who tender Shares pursuant to the Offer will not have appraisal rights in connection with the Merger. However, if we accept Shares in the Offer and the Merger is completed, holders of Shares who (1) did not tender such Shares in the Offer, (2) timely demand appraisal and otherwise follow the procedures set forth in Section 262 of the DGCL and (3) do not thereafter withdraw their demand for appraisal of such Shares or otherwise lose, waive or fail to perfect their appraisal rights, will be entitled to exercise appraisal rights in connection with the Merger, subject to and in accordance with applicable provisions of the DGCL. Stockholders who comply with the applicable statutory procedures under the DGCL will be entitled to receive a judicial determination of the “fair value” of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, as determined by the Delaware Court of Chancery, and to receive payment of such “fair value” in cash. Any such judicial determination of the “fair value” of Shares could be based upon considerations other than, or in addition to, the price paid in the Offer and the market value of Shares. The value so determined could be higher or lower than the price per Share paid by us pursuant to the Offer and the Merger. You should be aware that opinions of investment banking firms as to the fairness from a financial point of view of the consideration payable in a sale transaction, such as the Offer and the Merger, are not opinions as to “fair value” under applicable Delaware law.

The foregoing summary of the rights of dissenting stockholders under the DGCL does not purport to be a complete statement of the procedures to be followed by holders of Shares desiring to exercise any available appraisal rights under Section 262 of the DGCL, and is qualified in its entirety by the full text of Section 262 of the DGCL. See Section 16 — “Certain Legal Matters; Regulatory Approvals.”

Who should I call if I have questions about the Offer?

You may call Innisfree M&A Incorporated, the Information Agent, toll free at (888) 750-5834 (for stockholders) or collect at (212) 750-5833 (for banks and brokers). See the back cover of this Offer to Purchase.

 

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To the Holders of Shares of

Common Stock of ConvergeOne:

INTRODUCTION

PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), hereby offers to purchase (the “Offer”) all outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined herein), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in this Offer to Purchase (the “Offer to Purchase”), and the related letter of transmittal that accompanies this Offer to Purchase (the “Letter of Transmittal”). Each of CVC Capital Partners VII (A) L.P., a Jersey limited partnership (“CVC VII (A)”), CVC Capital Partners Investment Europe VII L.P., a Jersey limited partnership (“CVC Investment Europe VII”), and CVC Capital Partners VII Associates L.P., a Jersey limited partnership (“CVC VII Associates” and, together with CVC VII (A) and CVC Investment Europe VII, “CVC VII”), is an indirect stockholder of Parent.

The Offer is being made pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of November 6, 2018, by and among Parent, Offeror and ConvergeOne. The Offer is conditioned upon, among other things, (1) the satisfaction of the Minimum Condition (as defined in Section 15 — “Certain Conditions of the Offer”), (2) there not having been issued by any court of competent jurisdiction and remaining in effect in effect any temporary restraining order, preliminary or permanent injunction or other order preventing the acquisition of or payment for Shares pursuant to the Offer and there not being any action taken, or any legal requirement or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger (as defined below) by any governmental body directly or indirectly prohibiting, or making illegal, the acquisition of, or payment for, Shares pursuant to the Offer, or the consummation of the Merger (the “Restraints Condition”), (3) any consent, approval or clearance with respect to, or termination or expiration of any applicable mandatory waiting period (or any extension thereof) imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) having been obtained, received or terminated or expired (the “HSR Condition”), (4) since the date of the Merger Agreement, there not having occurred and been continuing any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (as defined below) on ConvergeOne (the “MAE Condition”) and (5) the occurrence of the date that is 45 days after the date on which the parties submit to the Committee on Foreign Investment in the United States, a declaration pursuant to 31 C.F.R. § 801.401 (the “Inside Date Condition”). The Offer is also subject to other conditions set forth in this Offer to Purchase. See Section 15 — “Certain Conditions of the Offer”. The Offer is not subject to a financing condition.

ConvergeOne has advised Parent that, as of November 5, 2018, there were (1) 77,905,500 Shares issued and outstanding, (2) 6,276,500 Shares subject to issuance pursuant to outstanding ConvergeOne Options to acquire Shares, including 1,237,500 Shares subject to issuance pursuant to a unit purchase option for 1,125,000 units (the “Units”) at an exercise price of $10.00 per Unit (including 112,500 Shares issuable pursuant to rights included in the Units) held by EarlyBird Capital, Inc. and its distributees (the “EarlyBird Option”) pursuant to that certain Unit Purchase Option issued in April 2017 (the “EBC Option Agreement”), (3) 85,287 Shares estimated to be subject to outstanding rights under the 2018 Employee Stock Purchase Plan (the “ConvergeOne ESPP”) (based on total employee contributions to the ConvergeOne ESPP from July 1, 2018 through October 31, 2018 and assuming the closing price per Share as reported on the Nasdaq Global Market (“Nasdaq”) on the purchase date for the current offering period was equal to the Offer Price (as defined below)) and (4) 1,917,310 Shares subject to issuance pursuant to ConvergeOne Warrants to acquire Shares at an exercise price of $11.50 per share, including 562,500 Shares subject to issuance under warrants included in the Units that may be purchased pursuant to the EarlyBird Option.

 

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Certain holders of Shares (the “Rollover Stockholders”), including John A. McKenna, Jr., Jeffrey Nachbor, Paul Maier and John F. Lyons, have agreed to exchange a portion of their Shares (the “Rollover Shares”) pursuant to the Rollover Agreement dated as of November 6, 2018 (the “Rollover Agreement”), by and among the Rollover Stockholders and PVKG Investment Holdings Inc., a Delaware corporation and the direct parent of Parent (“PVKG Investment Holdings”), for equity interests in PVKG Investment Holdings and have agreed not to tender the Rollover Shares pursuant to the Offer. As of November 5, 2018, the Rollover Shares represented approximately 3.2% of the outstanding Shares. The Rollover Agreement is more fully described in Section 11 — “The Transaction Agreements”.

In addition, concurrently with the execution of the Merger Agreement, certain stockholders of ConvergeOne have entered into a Tender and Support Agreement (the “Support Agreement”) that requires Clearlake Capital Partners III (Master), L.P. (“Clearlake”), and the other holders of Shares party thereto (the “Significant Stockholders”), subject to the terms of the Support Agreement discussed in Section 11—“The Transaction Agreements,” among other things, to tender all of the Shares (other than the Rollover Shares) owned by such Significant Stockholder as of the date of the Support Agreement or otherwise acquired prior to the termination of the Support Agreement, within ten business days after the commencement of the Offer. Clearlake and the other signatories collectively beneficially owned approximately 68% of the Shares (with such tender and support obligations subject to reduction to 39.99% upon an adverse recommendation change by the ConvergeOne Board (as defined below)) outstanding as of November 5, 2018, inclusive of the issuance of 2,574,137 Shares to certain stockholders (including Clearlake and certain of the other signatories) following ConvergeOne’s achievement of the “Earnings Target” for fiscal year 2020 pursuant to the Forum Merger Agreement as described in the ConvergeOne’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. The Support Agreement is more fully described in Section 11 — “The Transaction Agreements”.

Assuming that, prior to the Merger Effective Time (as defined below), (1) all ConvergeOne Warrants (as defined below) are validly exercised for the number of shares of ConvergeOne capital stock issuable pursuant to the terms of such ConvergeOne Warrants and the holders of such ConvergeOne Warrants have satisfied all of the requirements for such exercise prior to the expiration of the Offer (even if the ConvergeOne Warrant holders do not receive the Shares resulting from such exercise prior to the expiration of the Offer) and (2) all ConvergeOne Options (as defined below) are validly exercised for the number of shares of ConvergeOne capital stock issuable pursuant to the terms of such ConvergeOne Options and the holders of such ConvergeOne Options have satisfied all of the requirements for such exercise prior to the expiration of the Offer (even if the ConvergeOne Options holders do not receive the Shares resulting from such exercise prior to the expiration of the Offer), and that all other equity interests remain outstanding and that no other Shares are issued, the Minimum Condition (as defined in Section 15 — “Certain Conditions of the Offer”) will be satisfied if at least 39,267,189 Shares (inclusive of the Rollover Shares) are validly tendered and not properly withdrawn prior to the expiration of the Offer. The actual number and percentage of outstanding Shares that are required to be tendered to satisfy the Minimum Condition (as defined in Section 15 — “Certain Conditions of the Offer”) will depend on the actual number of Shares outstanding at the time of the expiration of the Offer.

The Merger Agreement is more fully described in Section 11 — “The Transaction Agreements”. Certain material U.S. federal income tax consequences of the sale of Shares pursuant to the Offer and the exchange of Shares pursuant to the Merger are described in Section 5 — “Material United States Federal Income Tax Consequences.”

Tendering stockholders who are record holders of their Shares and tender directly to Continental Stock Transfer & Trust Company, the depositary and paying agent for the Offer (the “Depositary and Paying Agent”), will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Offeror pursuant to the Offer. Holders of Shares who hold their Shares through a broker, dealer, commercial bank, trust company or other nominee should consult such broker, dealer, commercial bank, trust company or other nominee as to whether it charges any service fees or commissions.

 

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The ConvergeOne board of directors (the “ConvergeOne Board”) acting upon the unanimous recommendation of the Special Transaction Committee of the ConvergeOne Board (the “ConvergeOne Special Transaction Committee”), has unanimously adopted resolutions (1) determining that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interest of, ConvergeOne and the holders of Shares, (2) resolving that the Merger Agreement and the Merger will be governed by and effected under Section 251(h) and other relevant provisions of the DGCL, (3) declaring it advisable for ConvergeOne to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, (4) authorizing and approving the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Offer and the Merger and (5) resolving to recommend that the holders of Shares accept the Offer and tender their Shares to Offeror pursuant to the Offer.

A complete description of the reasons for the ConvergeOne Board’s approval of the Offer and the Merger (as defined below) will be set forth in ConvergeOne’s Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”), which is being mailed to you with this Offer to Purchase.

The Merger Agreement provides that, subject to the conditions described in Section 11 — “The Transaction Agreements,” Offeror will be merged with and into ConvergeOne, with ConvergeOne surviving the Merger as a wholly owned subsidiary of Parent (the “Merger”). Pursuant to the Merger Agreement, the Merger will become effective at the time (such time, the “Merger Effective Time”) the certificate of merger (the “Certificate of Merger”) is filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by the parties and specified in the Certificate of Merger. At the Merger Effective Time, each Share outstanding immediately prior to the Merger Effective Time (other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares or any Shares held by any person who is entitled to and properly demands statutory appraisal of his, her or its Shares under Section 262 of the DGCL in connection with the Merger) will be converted into the right to receive an amount in cash equal to $12.50 per Share, without interest and less any withholding of taxes required by applicable law. As a result of the Merger, ConvergeOne will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent. Under no circumstances will interest be paid on the purchase price for Shares, regardless of any extension of the Offer or any delay in making payment for Shares.

Appraisal rights are not available to the holders of Shares in connection with the Offer, and holders of Shares who tender Shares pursuant to the Offer will not have appraisal rights in connection with the Merger. However, if we accept Shares in the Offer and the Merger is completed, holders of Shares who (1) did not tender such Shares in the Offer, (2) timely demand appraisal and otherwise follow the procedures set forth in Section 262 of the DGCL and (3) do not thereafter withdraw their demand for appraisal of such Shares or otherwise lose, waive or fail to perfect their appraisal rights, will be entitled to exercise appraisal rights in connection with the Merger, subject to and in accordance with applicable provisions of the DGCL. Stockholders who comply with the applicable statutory procedures under the DGCL will be entitled to receive a judicial determination of the “fair value” of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, as determined by the Delaware Court of Chancery, and to receive payment of such “fair value” in cash.

Because the Merger will be consummated in accordance with Section 251(h) of the DGCL, approval of the Merger following consummation of the Offer will not require a vote of holders of Shares. Section 251(h) of the DGCL provides that stockholder approval of a merger is not required if certain requirements are met, including that (1) the acquiring company consummates a tender offer for any and all of the outstanding stock of the company to be acquired that, absent Section 251(h) of the DGCL, would be entitled to vote on the merger, and (2) following consummation of such tender offer, the acquiring company owns at least such percentage of the stock of the company to be acquired that, absent Section 251(h) of the DGCL, would be required to adopt the

 

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Merger Agreement. If the Minimum Condition (as defined in Section 15 — “Certain Conditions of the Offer”) is satisfied and we accept Shares for payment pursuant to the Offer, we will own at least the amount of Shares that would, absent Section 251(h) of the DGCL, be required to approve the Merger. Following consummation of the Offer and subject to the satisfaction of the conditions to the Merger, Offeror, Parent and ConvergeOne will take all necessary and appropriate action to effect the Merger as promptly as practicable without a meeting of holders of Shares in accordance with Section 251(h) of the DGCL. See Section 11 — “The Transaction Agreements”.

Offeror has engaged Innisfree M&A Incorporated to act as information agent for the Offer (the “Information Agent”). Parent and Offeror will pay all charges and expenses of the Depositary and Paying Agent, and the Information Agent. Questions and requests for assistance should be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery (as defined herein) and other related materials may also be obtained from the Information Agent. Such copies will be furnished promptly at Offeror’s expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for copies of these documents or assistance with the Offer.

THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND CONVERGEONE’S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (WHICH CONTAINS THE RECOMMENDATION OF THE CONVERGEONE BOARD AND THE REASONS FOR ITS RECOMMENDATION) CONTAIN IMPORTANT INFORMATION. CONVERGEONE STOCKHOLDERS SHOULD CAREFULLY READ THESE DOCUMENTS IN THEIR ENTIRETY BEFORE MAKING A DECISION WITH RESPECT TO THE OFFER.

 

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THE TENDER OFFER

1. Terms of the Offer.

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Offeror will accept for payment and pay for all Shares validly tendered prior to the expiration date of the Offer and not properly withdrawn as permitted under Section 4 — “Withdrawal Rights”, and as promptly as practicable after the Acceptance Time, pay for all such Shares. The time, if any, at which Offeror accepts for payment all Shares validly tendered and not properly withdrawn, pursuant to and subject to the conditions of the Offer, which shall occur promptly after the expiration of the Offer, is referred to as the “Acceptance Time”. The Offer will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless Offeror, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event the expiration date of the Offer is the latest date at which the Offer, as so extended, expires (such time and date, including any such extensions, the “Expiration Date”).

The Offer is conditioned upon the satisfaction (or, in the cases of clauses (2) and (3) below, the waiver) of (1) the Minimum Condition, (2) the Restraints Condition, (3) the HSR Condition, (4) the MAE Condition and (5) the Inside Date Condition. The Offer is also subject to other conditions set forth in this Offer to Purchase. See Section 15 — “Certain Conditions of the Offer”. The Minimum Condition requires that there be validly tendered (and not properly withdrawn) that number of Shares (excluding Shares tendered pursuant to notices of guaranteed delivery that have not yet been “received” (as such term is defined in Section 251(h)(6)(f) of the DGCL)) that, considered together with the Rollover Shares and all other Shares (if any) otherwise beneficially owned by Parent or any of its wholly owned subsidiaries (including Offeror), would represent one Share more than 50% of the total number of Shares outstanding at the time of the expiration of the Offer. For purposes of calculating whether the Minimum Condition has been satisfied, the number of Shares outstanding at the time of the expiration of the Offer will (1) include, without duplication, (A) Shares issuable in respect of ConvergeOne Options for which the holders have validly exercised such ConvergeOne Options and satisfied all of the requirements for their exercise prior to the expiration of the Offer, even if the ConvergeOne Option holders do not receive the Shares resulting from such exercise prior to the expiration of the Offer and (B) Shares issuable in respect of ConvergeOne Warrants that have been validly exercised and the holders of such ConvergeOne Warrants have satisfied all of the requirements for such exercise prior to the expiration of the Offer, even if the ConvergeOne Warrant holders do not receive the Shares resulting from such exercise prior to the expiration of the Offer and (2) exclude Shares held in treasury by ConvergeOne as of the expiration of the Offer or any other Shares acquired by ConvergeOne prior to the expiration of the Offer (including any such Shares acquired in connection with tax withholding or payment of the exercise price for the exercise of ConvergeOne Options), even if ConvergeOne does not receive the Shares so acquired prior to the expiration of the Offer).

The Merger Agreement provides that, so long as neither ConvergeOne nor Parent has terminated the Merger Agreement in accordance with its terms:

 

   

if, as of the scheduled Expiration Date, any Offer Condition is not satisfied and has not been waived, Offeror may, in its discretion (and without the consent of ConvergeOne or any other Person), extend the Offer on one or more occasions, for an additional period of up to ten business days per extension (or such other duration as may be agreed to by Parent and ConvergeOne), to permit such Offer Condition to be satisfied;

 

   

Offeror must extend the Offer from time to time for (1) for any period required by any legal requirement, any interpretation or position of the Securities and Exchange Commission (the “SEC”) or its staff or Nasdaq applicable to the Offer, (2) for periods of up to ten business days per extension, until any waiting period (and any extension thereof) applicable to the consummation of the Offer under the HSR Act has expired or been terminated, and (3) if, at any then-scheduled Expiration Date, any Offer Condition is not satisfied and has not been waived, at the request of ConvergeOne, Offeror must extend

 

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the Offer on one or more occasions for an additional period specified by ConvergeOne of up to ten business days per extension (or such other duration as may be agreed to by Parent and ConvergeOne) to permit such Offer Condition to be satisfied;

 

   

if, as of the scheduled Expiration Date, any Offer Condition is not satisfied and has not been waived, Offeror must extend the offer, at the request of ConvergeOne, for one or more successive periods of up to ten business days each (or such other duration as may be agreed to by Parent and ConvergeOne), to permit such Offer Condition to be satisfied; and

 

   

we will not, however, (1) be required to extend the Offer beyond the earliest to occur of (the “Extension Deadline”) (A) the valid termination of the Merger Agreement and (B) the End Date and (2) be permitted to extend the Offer beyond the Extension Deadline without the prior written consent of ConvergeOne. We are prohibited from terminating the Offer prior to any scheduled Expiration Date without the prior written consent of ConvergeOne except in the event that the Merger Agreement is terminated pursuant to its terms.

For purposes of the Offer, as provided under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), a “business day” means any day other than a Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

There can be no assurance that Offeror will exercise any right to extend the Offer or that Offeror will be required under the Merger Agreement to extend the Offer. During any extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder’s Shares. See Section 4—“Withdrawal Rights.”

Subject to the applicable rules and regulations of the SEC and the provisions of the Merger Agreement, Offeror expressly reserves the right to (1) increase the Offer Price, (2) waive any Offer Conditions and (3) make any other changes in the terms and conditions of the Offer. However, unless otherwise provided by the Merger Agreement, Offeror will not, without the prior written consent of ConvergeOne, (1) decrease the Offer Price, (2) change the form of consideration payable in the Offer, (3) decrease the maximum number of Shares sought to be purchased in the Offer, (4) impose conditions or requirements to the Offer in addition to the Offer Conditions, (5) amend or modify any of the Offer Conditions in a manner that adversely affects, or could reasonably be expected to adversely affect, any holder of Shares that would, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the Offer or prevent, materially delay or materially impair the ability of Parent or Offeror to consummate the Offer, the Merger or the other transactions contemplated by the Merger Agreement (the “Transactions”), (6) change or waive the Minimum Condition, (7) extend or otherwise change the Expiration Date in a manner other than as required or permitted by the Merger Agreement or (8) provide any “subsequent offering period” within the meaning of Rule 14d-11 promulgated under the Exchange Act. The rights reserved by Offeror as described in the preceding paragraph are in addition to Offeror’s rights as described in Section 15 — “Certain Conditions of the Offer”.

Offeror expressly reserves the right, in its sole discretion, subject to the terms and conditions of the Merger Agreement and the applicable rules and regulations of the SEC, not to accept for payment any Shares if, at the expiration of the Offer, any of the Offer Conditions set forth in Section 15 — “Certain Conditions of the Offer” have not been satisfied or upon the occurrence of any of the events set forth in Section 11—“The Transaction Agreements — The Merger Agreement — Termination.” Under certain circumstances, Parent and Offeror may terminate the Merger Agreement and the Offer, but Offeror is prohibited from terminating the Offer prior to any then-scheduled Expiration Date unless the Merger Agreement has been terminated in accordance with its terms.

Any extension of the Offer, waiver, amendment of the Offer, delay in acceptance for payment or termination of the Offer will be followed, as promptly as practicable, by public announcement thereof, the announcement in the case of an extension to be issued not later than 9:00 a.m., New York City time, on the next business day after

 

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the previously scheduled Expiration Date in accordance with the public announcement requirements of Rules 14d-4(d), 14d-6(c) and l4e-1(d) under the Exchange Act. Without limiting the obligations of the Offeror under those rules or the manner in which the Offeror may choose to make any public announcement, the Offeror currently intends to make announcements by issuing a press release to a national news service and making any appropriate filings with the SEC.

If, subject to the terms of the Merger Agreement, we make a material change in the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we will disseminate additional tender offer materials and extend the Offer if and to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following a material change in the terms of such offer or the information concerning such offer, other than a change in the consideration offered, a change in the percentage of securities sought or inclusion of or changes to a dealer’s soliciting fee, will depend upon the facts and circumstances, including the relative materiality of the changes to the terms or information. We understand that in the SEC’s view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and with respect to a change in the consideration offered or a change in percentage of securities sought, a minimum ten business day period generally is required to allow for adequate dissemination to stockholders and investor response. In accordance with the foregoing view of the SEC and applicable law, if, prior to the Expiration Date, and subject to the limitations of the Merger Agreement, we change the number of Shares being sought or the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the tenth business day from the date that notice of such change is first published, sent or given to stockholders, the Offer will be extended at least until the expiration of such tenth business day.

If, prior to the Expiration Date, we increase the consideration being paid for Shares, such increased consideration will be paid to all stockholders whose Shares are purchased in the Offer, whether or not such Shares were tendered before the announcement of such increase in consideration.

ConvergeOne has provided Offeror with ConvergeOne’s stockholder list and security position listings for the purpose of disseminating this Offer to Purchase and related documents to holders of Shares. This Offer to Purchase and the related Letter of Transmittal, together with the Schedule 14D-9, will be mailed to record holders of Shares whose names appear on ConvergeOne’s stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and other nominees whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing.

There will not be a subsequent offering period for the Offer. Following the purchase of Shares tendered, we expect to consummate the Merger in accordance with Section 251(h) of the DGCL, and no stockholder vote to adopt the Merger Agreement (or any other action by the holders of Shares) will be required in connection with the Merger. We are required, upon the terms and subject to the conditions set forth in the Merger Agreement, to consummate the Merger either (1) on the same date as the Acceptance Time or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of the Acceptance Time, then on the first business day on which such condition is satisfied or waived. As such, we do not expect there to be a significant period of time between the purchase of Shares in the Offer and consummation of the Merger.

2. Acceptance for Payment and Payment for Shares.

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Offeror will, as soon as practicable following the Expiration Date, accept for payment all Shares validly tendered and not properly withdrawn pursuant to the Offer, and upon the closing of the Merger, pay for all such Shares. See Section 1 — “Terms of the Offer”.

 

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In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary and Paying Agent of (1) certificate(s) representing those Shares or confirmation of a book-entry transfer of such Shares (a “Book-Entry Confirmation”) into the Depositary and Paying Agent’s account at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” (2) the Letter of Transmittal, properly completed and duly executed (or, with respect to a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program (each, an “Eligible Institution”), a manually executed facsimile thereof, with any required signature guarantees), or an Agent’s message in connection with a book-entry transfer of shares, and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when the foregoing documents with respect to Shares are actually received by the Depositary and Paying Agent. Under no circumstances will Offeror pay interest on the Offer Price to be paid for any Shares, regardless of any extension of the Offer or delay in making payment.

The term “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and Paying Agent and forming a part of a Book-Entry Confirmation, stating that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering Shares that are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Offeror may enforce such agreement against such participant. The term “Agent’s Message” also includes any hard copy printout evidencing such message generated by a computer terminal maintained at the Depositary and Paying Agent’s office.

For purposes of the Offer, Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Offeror gives oral or written notice to the Depositary and Paying Agent of Offeror’s acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price for such Shares with the Depositary and Paying Agent, which will act as agent for tendering stockholders for the purpose of receiving payments from Offeror and transmitting such payments to tendering stockholders whose Shares have been accepted for payment.

Shares tendered by a Notice of Guaranteed Delivery (as defined below) will not be deemed validly tendered for purposes of satisfying the Minimum Condition unless and until the Shares to which such Notice of Guaranteed Delivery (as defined below) relates are delivered to the Depositary and Paying Agent.

If any tendered Shares are not accepted for payment pursuant to the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for those unpurchased Shares will be returned (or new certificates for the Shares not tendered will be sent), without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary and Paying Agent’s account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3—“Procedures for Accepting the Offer and Tendering Shares,” those Shares will be credited to an account maintained with the Book-Entry Transfer Facility) promptly following expiration or termination of the Offer.

3. Procedures for Accepting the Offer and Tendering Shares.

Valid Tender of Shares. In order for Shares to be validly tendered pursuant to the Offer, you must follow these instructions:

 

   

If you hold Shares through a broker, dealer, commercial bank, trust company or other nominee, you must contact your broker, dealer, commercial bank, trust company or other nominee and give instructions that your Shares be tendered.

 

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If you are a record holder (i.e., a stock certificate has been issued to you and registered in your name or your Shares are registered in book-entry form in your name on the books of ConvergeOne’s transfer agent), the following must be received by the Depositary and Paying Agent at one of its addresses set forth in the Letter of Transmittal before the Offer expires: (1) stock certificate(s) representing your Shares (or follow the procedures described in this Offer to Purchase for book-entry transfer), (2) the Letter of Transmittal, properly completed and duly executed (or, with respect to a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program, a manually executed facsimile thereof), with any required signature guarantees, or an Agent’s Message in connection with a book-entry delivery of Shares, and (3) any other documents required by the Letter of Transmittal.

 

   

If you are a record holder but your stock certificate(s) is not available, you cannot deliver such stock certificate(s) to the Depositary and Paying Agent, you cannot complete the procedure for delivery by book-entry transfer on a timely basis, or you otherwise cannot deliver all required documents to the Depositary and Paying Agent, in any case before the Offer expires, you may be able to tender your Shares using the enclosed Notice of Guaranteed Delivery. For the tender to be valid, however, the Depositary and Paying Agent must receive the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all those Shares), together with a properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message in lieu of the Letter of Transmittal), and any other required documents, within two Nasdaq trading days after the date of execution of the Notice of Guaranteed Delivery. Please contact Innisfree M&A Incorporated (the “Information Agent”) for assistance.

Book-Entry Transfer. The Depositary and Paying Agent will establish an account with respect to Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary and Paying Agent’s account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility’s procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, either the Letter of Transmittal, properly completed and duly executed, together with any required signature guarantees, or an Agent’s Message, and any other required documents, must, in any case, be received by the Depositary and Paying Agent at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary and Paying Agent.

Signature Guarantees. No signature guarantee is required for the Letter of Transmittal if:

 

   

the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section 3, includes any participant in the Book-Entry Transfer Facility’s systems whose name appears on a security position listing as the owner of Shares) of Shares tendered therewith, unless such registered holder has completed either the box entitled “Special Delivery Instructions” or the box entitled “Special Payment Instructions” on the Letter of Transmittal; or

 

   

Shares are tendered for the account of an Eligible Institution.

In all other cases, all signatures on a Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal.

Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder is a record holder but such stockholder’s stock certificate(s) is not available, such stockholder cannot deliver such

 

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stock certificate(s) to the Depositary and Paying Agent, such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, or such stockholder otherwise cannot deliver all required documents to the Depositary and Paying Agent, in any case before the Offer expires, such Shares may nevertheless be tendered, if all of the following conditions are satisfied:

 

   

such tender is made by or through an Eligible Institution;

 

   

a properly completed and duly executed notice of guaranteed delivery (the “Notice of Guaranteed Delivery”), substantially in the form made available by Offeror, must be received by the Depositary and Paying Agent at one of its addresses set forth in the Letter of Transmittal before the Offer expires; and

 

   

the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all those Shares), together with a properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message in lieu of the Letter of Transmittal), and any other required documents, are received by the Depositary and Paying Agent within two Nasdaq trading days after the date of execution of the Notice of Guaranteed Delivery.

The Notice of Guaranteed Delivery may be delivered by overnight courier or mailed to the Depositary and Paying Agent and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Offeror.

Shares tendered by a Notice of Guaranteed Delivery will not be deemed validly tendered for purposes of satisfying the Minimum Condition unless and until the Shares to which such Notice of Guaranteed Delivery relates are delivered to the Depositary and Paying Agent.

The method of delivery of the Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the option and the risk of the tendering stockholder, and delivery will be deemed made only when actually received by the Depositary and Paying Agent (including, in the case of book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, then registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.

The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder’s acceptance of the terms and conditions of the Offer, as well as the tendering stockholder’s representation and warranty that such stockholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal, and that when such Shares are accepted for payment, we will acquire good and unencumbered title, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The valid tender of Shares pursuant to any of the procedures described herein and in the instructions to the Letter of Transmittal will constitute a binding agreement between the tendering stockholder and Offeror upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, upon the terms and subject to the conditions of any such extension or amendment).

Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Offeror, in its sole discretion, which determination will be final and binding upon the tendering party. Offeror reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of Offeror’s counsel, be unlawful. Offeror also reserves the absolute right to waive any defect or irregularity in the tender of any Shares by any particular stockholder, regardless of whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived to the satisfaction of Offeror. None of Parent, Offeror, ConvergeOne, the Depositary and Paying Agent, Information Agent, or any other person is or will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

 

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Appointment as Proxy. By executing the Letter of Transmittal (or in the case of a book-entry transfer, by delivery of an Agent’s Message in lieu of a Letter of Transmittal) as set forth above, unless Shares relating to such Letter of Transmittal or Agent’s Message are properly withdrawn pursuant to the Offer, the tendering stockholder irrevocably appoints designees of Offeror, and each of them, as such stockholder’s attorneys-in-fact and proxies, each with full power of substitution, to the full extent of such stockholder’s rights with respect to Shares tendered by such stockholder and accepted for payment by Offeror, and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares. Such appointment will be effective if and when, and only to the extent that, Offeror accepts for payment Shares tendered by such stockholder as provided herein. Upon such appointment:

 

   

all such powers of attorney and proxies will be considered irrevocable and coupled with an interest in the tendered Shares;

 

   

all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked;

 

   

no subsequent powers of attorney, proxies, consents or revocations may be given by such stockholder with respect to such Shares (and, if given, will not be deemed effective); and

 

   

each of the designees of Offeror will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights, including, without limitation, in respect of any annual, special or adjourned meeting of holders of Shares or otherwise, as such designee in its sole discretion deems proper.

Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Offeror’s acceptance for payment of such Shares, Offeror must be able to exercise full voting and other rights with respect to such Shares and other related securities or rights, including voting at any meeting of stockholders.

The foregoing powers of attorney and proxies are effective only upon acceptance for payment of Shares pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of holders of Shares.

ConvergeOne Options and ConvergeOne Warrants. The Offer is made only for outstanding Shares that are not subject to vesting restrictions and is not made for any ConvergeOne Options or ConvergeOne Warrants. See Section 11 — “The Transaction Agreements — The Merger Agreement — Treatment of Equity Awards” for a description of the treatment of the ConvergeOne Options and ConvergeOne Warrants.

Backup Withholding, FATCA. To avoid backup withholding of U.S. federal income tax on payments of the Offer Price of Shares made pursuant to the Offer, each eligible tendering U.S. Holder (as defined in Section 5 — “Material United States Federal Income Tax Consequences”) should complete and return the Internal Revenue Service (“IRS”) Form W-9 included with the Letter of Transmittal. Eligible tendering Non-U.S. Holders (as defined in Section 5 — “Material United States Federal Income Tax Consequences”) should complete and submit IRS Form W-8BEN, W-8BEN-E or W-8ECI (or other applicable IRS Form W-8), which can be obtained from the Depositary and Paying Agent or at http://www.irs.gov. If a Non-U.S. Holder tenders its Shares pursuant to the Offer or exchanges its Shares pursuant to the Merger after December 31, 2018, a Non-U.S. Holder may be subject to withholding tax pursuant to FATCA (as defined in Section 5 — “Material United States Federal Income Tax Consequences”) if such Non-U.S. Holder fails to properly establish an exemption from such withholding tax by providing a properly executed applicable IRS Form W-8 evidencing such exemption. For a more detailed discussion of backup withholding and FATCA, see Instruction 8 set forth in the Letter of Transmittal and Section 5 — “Material United States Federal Income Tax Consequences”.

4. Withdrawal Rights.

Except as otherwise described in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be properly withdrawn at any time prior to the Expiration

 

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Date and, unless theretofore accepted for payment by Offeror pursuant to the Offer, may also be withdrawn at any time after January 20, 2019, which is the 60th day from the commencement of the Offer, unless such Shares have already been accepted for payment by us pursuant to the Offer.

For a withdrawal to be proper and effective, a written or, with respect to Eligible Institutions, facsimile transmission, notice of withdrawal must be timely received by the Depositary and Paying Agent at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. The signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless those Shares have been tendered for the account of any Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. If certificates representing the Shares to be withdrawn have been delivered or otherwise identified to the Depositary and Paying Agent, the name of the registered owner and the serial numbers shown on those certificates must also be furnished to the Depositary and Paying Agent prior to the physical release of those certificates. If a stockholder tenders Shares by giving instructions to a broker, dealer, commercial bank, trust company or other nominee, the stockholder must instruct the broker, dealer, commercial bank, trust company or other nominee to arrange for the withdrawal of those Shares.

If Offeror extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Offeror’s rights under the Offer, the Depositary and Paying Agent may, nevertheless, on behalf of Offeror, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described herein and as otherwise required by Rule 14e-1(c) promulgated under the Exchange Act.

Withdrawals of Shares May Not be Rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, properly withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 — “Procedures for Accepting the Offer and Tendering Shares”.

All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Offeror, in its reasonable discretion, whose determination will be final and binding upon the tendering party. Offeror also reserves the absolute right to waive any defect or irregularity in the withdrawal of any Shares by any particular stockholder, regardless of whether or not similar defects or irregularities are waived in the case of other stockholders. None of Parent, Offeror, ConvergeOne, the Depositary and Paying Agent, the Information Agent or any other person is or will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification.

5. Material United States Federal Income Tax Consequences.

The following is a general summary of material U.S. federal income tax consequences of the Offer and the Merger to holders of Shares whose Shares are tendered and accepted for payment pursuant to the Offer or whose Shares are converted into the right to receive cash in the Merger. This summary does not purport to address all U.S. federal income tax matters that may be relevant to a particular stockholder. This summary does not apply to any right to purchase capital stock of ConvergeOne and does not apply to holders who receive cash pursuant to the exercise of appraisal rights. This summary applies only to holders that hold their Shares as “capital assets” for U.S. federal income tax purposes and does not address tax considerations applicable to stockholders that may be subject to special tax rules including, without limitation, the following: (1) certain former citizens and long-term residents of the United States, (2) regulated investment companies and other financial institutions, (3) insurance companies, (4) dealers or traders in securities or currencies or notional principal contracts, (5) tax-exempt

 

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entities, (6) persons that hold Shares as part of a “hedging” or “conversion” transaction or as a position in a “straddle” or as part of a “synthetic security”, constructive sale or other integrated transaction for U.S. federal income tax purposes, (7) persons subject to the alternative minimum tax, (8) “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax, (9) real estate investment trusts, (10) persons that own (or are deemed to own for U.S. federal income tax purposes) 5% or more of the outstanding Shares, (11) partnerships (or other entities treated as pass-through entities for U.S. federal income tax purposes) and persons who hold Shares through partnerships (or other such entities), (12) persons that have a “functional currency” other than the U.S. dollar, (13) persons that acquired (or will acquire) Shares through exercise of employee stock options or otherwise as compensation, and (14) persons that purchase or sell Shares as part of a wash sale for tax purposes, all of whom may be subject to tax rules that differ significantly from those summarized below.

This summary is not a comprehensive description of all potential U.S. federal income tax consequences that may be relevant to the Offer and the Merger, nor does it address any tax consequences arising under any state, local or foreign tax laws or U.S. federal estate or gift tax laws. This summary is based on current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing, proposed and temporary regulations thereunder (the “U.S. Treasury Regulations”) and administrative and judicial interpretations thereof. All of the foregoing is subject to change, possibly with retroactive effect, and could affect the tax consequences described below.

For purposes of this Offer to Purchase, a “U.S. Holder” means a beneficial owner of Shares that is, for U.S. federal income tax purposes: (1) an individual who is a citizen or resident of the United States, (2) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States or any political subdivision thereof, (3) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (4) a trust (a) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (as defined under the Code) have the authority to control all of the substantial decisions of the trust, or (b) that has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a “United States person”. For purposes of this Offer to Purchase, a “Non-U.S. Holder” is a beneficial owner of Shares (other than an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder. If a partnership (or other entity taxable as a partnership for U.S. federal income tax purposes) holds Shares, the tax treatment of a partner, member or other owner in such partnership (or other such entity) will generally depend upon the status of the partner, member or other owner and upon the tax treatment and the activities of the partnership (or other such entity). Partners, members or owners of partnerships (or other such entities) holding Shares are urged to consult their own tax advisors.

The description of U.S. federal income tax consequences set forth below is based on current law, is for general information only and is not tax advice. Because individual circumstances may differ, each holder of Shares is urged to consult such holder’s own tax advisors as to the particular tax consequences to each such holder of the Offer and the Merger, including the application of U.S. federal, state, local and non-U.S. tax laws, applicable tax treaties and possible changes in such laws.

Consequences of the Offer and the Merger to U.S. Holders. The exchange of Shares for cash pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes. If you are a U.S. Holder you will generally recognize gain or loss on a sale of Shares for cash pursuant to the Offer or an exchange of Shares for cash pursuant to the Merger, in either case in an amount equal to the difference, if any, between the U.S. dollar amount received for Shares you tender pursuant to the Offer or exchange in the Merger and your adjusted tax basis in such Shares. Gain or loss will generally be calculated separately for each block of Shares (that is, Shares acquired at the same cost in a single transaction) tendered pursuant to the Offer or exchanged for cash pursuant to the Merger. Such gain or loss will be capital gain or loss and will generally be long-term capital gain or loss if, on the date of sale (or, if applicable, the date of the Merger), such Shares were held for more than one year, subject to certain exceptions. Long-term capital gains recognized by an individual generally will be taxed at preferential rates. The deductibility of capital losses is subject to limitations.

 

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Under certain circumstances, a U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a United States federal tax of 3.8% on the lesser of (1) such U.S. Holder’s “net investment income” (in the case of individuals) or “undistributed net investment income” (in the case of estates and trusts) for the relevant taxable year and (2) the excess of the U.S. Holder’s “modified adjusted gross income” (in the case of individuals) or “adjusted gross income” (in the case of estates and trusts) for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). The amount of gain recognized pursuant to the Offer or the Merger will generally be treated as “net investment income” for purposes of this tax. A U.S. Holder that is an individual, estate or trust is urged to consult with its tax advisor regarding the applicability of this particular tax to such holder.

Consequences of the Offer and the Merger to Non-U.S. Holders. Subject to the discussion below under “—Backup Withholding and Information Reporting” and “—FATCA”, gain recognized with respect to Shares that a Non-U.S. Holder exchanges in the Offer or converts into the right to receive cash in the Merger generally will be exempt from U.S. federal income tax, unless:

 

   

such holder’s gain, if any, on Shares is effectively connected with such holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to such holder’s permanent establishment in the United States), in which case (1) such holder will be subject to U.S. federal income tax in the same manner as if such holder were a U.S. Holder (except that such holder should provide an IRS Form W-8ECI instead of an IRS Form W-9, as described below under “—Backup Withholding and Information Reporting”) and (2) if such holder is a corporation, such holder may also be subject to an additional branch profits tax on such gain at a 30% rate (or such lower rate as may be specified under an applicable income tax treaty); or

 

   

such holder is an individual who was present in the United States for 183 days or more in the taxable year of the disposition (or, if applicable, the date of the Merger) and certain other conditions are met, in which case such holder will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on the gain from the exchange of Shares, which may be offset by certain U.S. source capital losses recognized in the same taxable year, even though the Non-U.S. Holder is not considered a resident of the United States, provided that the Non-U.S. Holder has timely filed U.S. federal income tax returns.

 

   

ConvergeOne is or has been a U.S. real property holding corporation for U.S. federal income tax purposes and the Non-U.S. Holder held, directly or indirectly, at any time during the five-year period ending on the date of the disposition (or, if applicable, the date of the Merger), more than 5% of Shares and such holder is not eligible for any treaty exception.

Backup Withholding and Information Reporting. All payments to which a holder of Shares would be entitled pursuant to the Offer or the Merger generally will be subject to information reporting and may be subject to backup withholding, unless such holder (1) is a corporation or other exempt recipient, (2) provides its correct taxpayer identification number (“TIN”) and certain other information under penalties of perjury, or (3) provides an adequate basis for exemption. A U.S. Holder should complete and sign the IRS Form W-9 that is included with the Letter of Transmittal, to be returned to the Depositary and Paying Agent, in order to provide the information and certification necessary to avoid backup withholding, unless an applicable exception exists and is proved in a manner satisfactory to the Depositary and Paying Agent. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability, provided that such holder furnishes certain required information to the IRS in a timely fashion. A Non-U.S. Holder should generally submit a properly completed IRS Form W-8BEN or W-8BEN-E, as applicable, W-8IMY or W-8ECI (or other applicable IRS Form W-8), certifying, under penalties of perjury, to such holder’s foreign status in order to establish an exemption from backup withholding.

If a holder of Shares does not provide a correct TIN, such holder may be subject to penalties imposed by the IRS, in addition to the backup withholding. All holders of Shares are urged to should consult such holders’ own

 

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tax advisors as to such holders’ qualification for exemption from backup withholding and the procedure for obtaining the exemption.

FATCA. Pursuant to Sections 1471 to 1474 of the Code and the U.S. Treasury Regulations promulgated thereunder (the provisions commonly known as “FATCA”), if a Non-U.S. Holder tenders Shares pursuant to the Offer or exchanges Shares pursuant to the Merger after December 31, 2018, the gross proceeds from such sale to “foreign financial institutions” and “non-financial foreign entities” (as specifically defined under the FATCA rules) may be subject to withholding at a rate of 30% unless specified conditions are met and such Non-U.S. Holder properly establishes its exemption from such withholding tax by providing a properly executed applicable IRS Form W-8 evidencing such exemption. Non-U.S. Holders should consult with their tax advisors regarding the possible implications of these rules on their tender of Shares pursuant to the Offer or their exchange of Shares pursuant to the Merger.

6. Price Range of Shares; Dividends.

The Shares trade on Nasdaq under the symbol “CVON”. The following table sets forth the high and low sale prices per Share for the periods indicated. Share prices are as reported on Nasdaq based on published financial sources. Based on ConvergeOne’s filings with the SEC, C1 Investment Corp. (“C1 Investment”) became a public company on February 22, 2018 when it merged with and into Forum Merger Corporation (“Forum”) pursuant to that certain Agreement and Plan or Merger, dated as of November 30, 2017 (the “Forum Merger Agreement”), by and among C1 Investment, Clearlake Capital Management III, L.P. and Forum, and the name of the surviving corporation was changed from C1 Investment to ConvergeOne Holdings, Inc.

 

     High      Low  

Fiscal Year Ended December 31, 2018

     

First Quarter

   $ 9.95      $ 7.95  

Second Quarter

   $ 9.86      $ 8.30  

Third Quarter

   $ 9.80      $ 8.34  

Fourth Quarter (through November 20, 2018)

   $ 12.50      $ 8.29  

ConvergeOne has advised Parent that, as of November 5, 2018, there were (1) 77,905,500 Shares issued and outstanding, (2) 6,276,500 Shares subject to issuance pursuant to outstanding ConvergeOne Options to acquire Shares, including 1,237,500 Shares subject to issuance pursuant to a unit purchase option for 1,125,000 Units at an exercise price of $10.00 per Unit (including 112,500 Shares issuable pursuant to rights included in the Units) held by EarlyBird Capital, Inc. and its distributees, (3) 85,287 Shares estimated to be subject to outstanding rights under the ConvergeOne ESPP (based on total employee contributions to the ConvergeOne ESPP from July 1, 2018 through October 31, 2018 and assuming the closing price per Share as reported on Nasdaq on the purchase date for the current offering period was equal to the Offer Price (as defined below)) and (4) 1,917,310 Shares subject to issuance pursuant to ConvergeOne Warrants to acquire Shares at an exercise price of $11.50 per share, including 562,500 Shares subject to issuance under warrants included in the Units that may be purchased pursuant to the EarlyBird Option.

On November 5, 2018, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the closing sale price per Share reported Nasdaq was $9.43. The Offer Price represents a 35% premium to the 30-day volume-weighted average trading price per Share (“VWAP”) prior to October 25, 2018.

On November 20, 2018, the last full day of trading prior to the commencement of the Offer, the closing sale price per Share reported on Nasdaq was $12.47.

Under the Merger Agreement, ConvergeOne is not permitted to declare or pay any dividend in respect of the Shares without Parent’s prior written consent, other than with respect to a quarterly dividend of $0.02 per Share

 

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in respect of ConvergeOne’s third quarter earnings. See Section 11 — “The Transaction Agreements — The Merger Agreement — Conduct of Business.”

Stockholders are urged to obtain a current market quotation for Shares.

7. Certain Information Concerning ConvergeOne.

General. The following description of ConvergeOne and its business are taken from ConvergeOne’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (the “10-Q”) and the joint press release, dated November 6, 2018 (the “Press Release”), and is qualified in its entirety by reference to the 10-Q and the Press Release.

Founded in 1993, ConvergeOne is a leading IT services provider of collaboration and technology solutions for large and medium enterprises. ConvergeOne serves clients through its comprehensive engagement model which includes the full lifecycle of services from consultation through implementation, optimization, and ongoing support services. ConvergeOne provides innovative and sophisticated services, including professional and managed, cloud and maintenance services, and complex multi-vendor technology offerings to its clients. ConvergeOne’s core technology markets are (1) collaboration and (2) enterprise networking, data center, cloud, and security.

ConvergeOne has over 10,400 enterprise and mid-market customers that trust ConvergeOne with collaboration, enterprise networking, data center, cloud and security solutions to achieve business outcomes. Their investments in cloud infrastructure and managed services provide transformational opportunities for customers to achieve financial and operational benefits with leading technologies. ConvergeOne has partnerships with more than 300 global industry leaders, including Avaya, Cisco, IBM, Genesys and Microsoft to customize specific business outcomes. ConvergeOne delivers solutions with a full lifecycle approach including strategy, design and implementation with professional, managed and support services. ConvergeOne holds more than 6,000 technical certifications across hundreds of engineers throughout North America including three Customer Success Centers.

ConvergeOne is incorporated in the State of Delaware. Its principal executive office is located at 3344 Highway 149, Eagan, Minnesota 55121 and its telephone number is (888) 321- 6227.

Available Information. ConvergeOne is subject to the information and reporting requirements of the Exchange Act and in accordance therewith is obligated to file reports and other information with the SEC relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning ConvergeOne’s business, principal physical properties, capital structure, material pending litigation, operating results, financial condition, directors and officers (including their remuneration and equity awards granted to them), the principal holders of ConvergeOne’s securities, any material interests of such persons in transactions with ConvergeOne and other matters is required to be disclosed in proxy statements and periodic reports distributed to holders of Shares and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference room at the SEC’s office at 100 F Street, N.E., Washington, D.C. 20549-0213. Copies may be obtained by mail, upon payment of the SEC’s customary charges, by writing to its principal office at 100 F Street, N.E., Washington, D.C. 20549-0213. Further information on the operation of the SEC’s Public Reference Room in Washington, D.C. can be obtained by calling the SEC at (800) SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy statements and other information about issuers, such as ConvergeOne, who file electronically with the SEC. The address of that site is http://www.sec.gov. ConvergeOne also maintains an Internet website at http://www.convergeone.com. The information contained in, accessible from or connected to ConvergeOne’s website is not incorporated into, or otherwise a part of, this Offer to Purchase or any of ConvergeOne’s filings with the SEC. The website addresses referred to in this paragraph are inactive text references and are not intended to be actual links to the websites.

 

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Sources of Information. Except as otherwise set forth herein, the information concerning ConvergeOne contained in this Offer to Purchase has been based upon publicly available documents and records on file with the SEC and other public sources. Although we have no knowledge that any such information contains any misstatements or omissions, none of Parent, Offeror or any of their respective affiliates or assigns, the Information Agent or the Depositary and Paying Agent assumes responsibility for the accuracy or completeness of the information concerning ConvergeOne contained in such documents and records or for any failure by ConvergeOne to disclose events which may have occurred or may affect the significance or accuracy of any such information.

Certain Projections. ConvergeOne provided Parent with certain unaudited financial information concerning ConvergeOne. Such information, as well as certain additional unaudited projected financial information, is described under “Item 4. The Solicitation or Recommendation” in the Schedule 14D-9, which will be filed with the SEC and is being mailed to holders of Shares with this Offer to Purchase (the “Projections”). The holders of Shares are urged to, and should, carefully read the Schedule 14D-9.

Parent and Offeror have been informed by ConvergeOne that ConvergeOne does not, as a matter of course, publicly disclose forecasts or internal projections as to future performance or results of operations due to the inherent unpredictability of the underlying assumptions and projections.

Parent and Offeror also have been informed by ConvergeOne that such unaudited projected financial information is included in the Schedule 14D-9 solely to give ConvergeOne stockholders access to certain financial projections that were made available to ConvergeOne’s Board, advisors and potential buyers, and is not included in the Schedule 14D-9 in order to influence any stockholder’s decision to tender Shares in the Offer or for any other purpose.

Parent and Offeror further have been informed by ConvergeOne that the Projections were prepared by ConvergeOne’s management for internal use and were not prepared with a view toward public disclosure, or with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or United States generally accepted accounting principles. Parent and Offeror further have been informed by ConvergeOne that neither ConvergeOne’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the prospective financial information included in the Schedule 14D-9, or expressed any opinion or any other form of assurance on such information or its achievability.

Parent and Offeror further have been informed by ConvergeOne that the Projections reflect subjective judgment in many respects and, therefore, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The inclusion of the Projections in the Schedule 14D-9 should not be regarded as an indication that ConvergeOne or anyone who received the Projections then considered, or now considers, the Projections to be necessarily predictive of actual future events, and this information should not be relied upon as such. ConvergeOne has informed Parent and Offeror that the Projections reflect numerous estimates and assumptions made by ConvergeOne’s management with respect to general business, economic, competitive, regulatory, reimbursement and other market and financial conditions and other future events, all of which are difficult to predict and many of which are beyond ConvergeOne’s control. ConvergeOne also has informed Parent and Offeror that ConvergeOne’s management views the Projections as being subject to inherent risks and uncertainties associated with such projections.

Parent and Offeror further have been informed by ConvergeOne that the Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding ConvergeOne in ConvergeOne’s public filings with the SEC. ConvergeOne has informed Parent and Offeror that the Projections do not take into account any circumstances or events occurring after the date they were prepared, including any potential changes resulting from the Offer or the Merger. Further, ConvergeOne has informed Parent and Offeror

 

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that the Projections do not take into account the effect of any failure of the Offer or the Merger to be consummated and should not be viewed as accurate or continuing in that context.

In light of the foregoing factors and the uncertainties inherent in the Projections, holders of Shares are cautioned not to place undue, if any, reliance on the Projections.

8. Certain Information Concerning Parent, Offeror and CVC VII.

General. Parent and Offeror are Delaware corporations. Each of Parent and Offeror was formed on November 2, 2018, in each case, solely for the purpose of completing the Offer and the Merger and each has conducted no business activities other than activities incidental to its formation or in connection with the transactions contemplated by the Merger Agreement. Until immediately prior to the time Offeror purchases Shares pursuant to the Offer, it is not anticipated that Parent or Offeror will have any significant assets or liabilities or engage in activities other than those incidental to their formation, capitalization and the transactions contemplated by the Offer and/or the Merger. Offeror is a direct wholly owned subsidiary of Parent. PVKG Investment Holdings is the sole stockholder of Parent. CVC VII (A), CVC Investment Europe VII and CVC VII Associates are the sole stockholders of PVKG Investment Holdings. The principal office address of each of Parent and Offeror is c/o CVC Advisors (U.S.) Inc., 712 Fifth Avenue, 43rd Floor, New York, New York 10019. The telephone number at the principal office is (212) 265-6222. The principal office address of CVC VII is c/o CVC Capital Partners VII Limited, 1 Waverley Place, Union Street St. Helier, Jersey, JE1 1SG, Channel Islands, and the telephone number at the principal executive office is +44 (0) 1534 850750.

The Rollover Stockholders have agreed to exchange the Rollover Shares, pursuant to the Rollover Agreement, for equity interests in PVKG Investment Holdings and have agreed not to tender the Rollover Shares pursuant to the Offer. As of November 5, 2018, the Rollover Shares represented approximately 3.2% of the outstanding Shares.

Concurrently with the execution of the Merger Agreement, the Significant Stockholders have entered into the Support Agreement, which requires the Significant Stockholders, subject to the terms of the Support Agreement discussed in Section 11—“The Transaction Agreements,” among other things, to tender all of the Shares (other than the Rollover Shares) owned by such Significant Stockholder as of the date of the Support Agreement or otherwise acquired prior to the termination of the Support Agreement, within ten business days after the commencement of the Offer. The Significant Stockholders collectively beneficially owned approximately 68% of the Shares (with such tender and support obligations subject to reduction to 39.99% upon an adverse recommendation change by the ConvergeOne Board) outstanding as of November 5, 2018, inclusive of the issuance of 2,574,137 Shares to certain stockholders (including Clearlake and certain of the other signatories) following ConvergeOne’s achievement of the Earnings Target for fiscal year 2020 as described in the ConvergeOne’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 pursuant to the Forum Merger Agreement.

Pursuant to an Equity Commitment Letter dated November 6, 2018, (the “Equity Commitment Letter”), CVC VII committed an aggregate amount equal to $750 million, in cash as capital to Parent in connection with completion of the Offer and the Merger and to enable Parent and ConvergeOne, as the surviving company in the Merger, to pay fees, costs and expenses in connection with the Transactions, in each case subject to the applicable conditions set forth in the Merger Agreement and the Equity Commitment Letter.

The name, business address, citizenship, present principal occupation and employment history of each of the directors, executive officers and control persons of each of Parent, Offeror and CVC VII are set forth in Schedule I to this Offer to Purchase.

Except as described elsewhere in this Offer to Purchase, during the past five years, none of Parent, Offeror, CVC VII or, to the knowledge of each of Parent, Offeror and CVC VII, any of the entities or persons listed in

 

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Schedule I hereto (1) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) was a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws.

Except as described elsewhere in this Offer to Purchase (including Schedule I hereto), (1) none of Parent, Offeror, CVC VII or, to the knowledge of each of Parent, Offeror and CVC VII, any of the entities or persons listed in Schedule I hereto or any associate or majority-owned subsidiary of any of the persons so listed beneficially owns or has a right to acquire, directly or indirectly, any Shares, and (2) none of Parent, Offeror, CVC VII or, to the knowledge of each of Parent, Offeror and CVC VII any of the persons or entities referred to in clause (1) above or any of their respective executive officers, directors, affiliates or subsidiaries has effected any transaction in Shares or any other equity securities of ConvergeOne during the 60-day period preceding the date of this Offer to Purchase. As of the date hereof, Parent, Offeror and CVC VII do not beneficially own of record any Shares.

Except as described elsewhere in this Offer to Purchase (including Schedule I hereto), (1) none of Parent, Offeror, CVC VII or, to the knowledge of each of Parent, Offeror and CVC VII, any of the entities or persons listed on Schedule I hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of ConvergeOne, including any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, guarantees of profits, division of profits or loss or the giving or withholding of proxies, and (2) during the two years prior to the date of this Offer to Purchase, there have been no transactions that would require reporting under the rules and regulations of the SEC between Parent, Offeror, CVC VII or any of its or their subsidiaries or, to the knowledge of Parent and Offeror, any of the persons listed in Schedule I hereto, on the one hand, and ConvergeOne or any of its executive officers, directors and/or affiliates, on the other hand.

Except as set forth elsewhere in this Offer to Purchase, during the two years prior to the date of this Offer to Purchase, there have been no contracts, negotiations or transactions between Parent, Offeror, CVC VII, or any of their subsidiaries or, to the knowledge of each of Parent, Offeror and CVC VII, any of the entities or persons listed in Schedule I hereto, on the one hand, and ConvergeOne or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of ConvergeOne’s securities, an election of ConvergeOne’s directors or a sale or other transfer of a material amount of ConvergeOne’s assets.

Available Information. Pursuant to Rule 14d-3 under the Exchange Act, Parent and Offeror filed with the SEC a Tender Offer Statement on Schedule TO (as amended, the “Schedule TO”), of which this Offer to Purchase forms a part, and exhibits to the Schedule TO. The Schedule TO and the exhibits thereto, and such reports, proxy statements and other information, can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549-0213. Information regarding the public reference facilities may be obtained from the SEC by telephoning (800) SEC-0330. The SEC also maintains a website on the Internet at http://www.sec.gov that contains the Schedule TO and its exhibits and other information that the Offeror has filed electronically with the SEC. Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549-0213 at prescribed rates. The website addresses referred to in this paragraph are inactive text references and are not intended to be actual links to the websites.

9. Source and Amount of Funds.

Offeror estimates that it will need approximately $1.9 billion to purchase all outstanding Shares pursuant to the Offer, to provide funding for the consideration to be paid for the Merger, to refinance certain existing indebtedness of ConvergeOne at the Merger Effective Time, to cash collateralize or backstop letters of credit

 

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issued for the account of ConvergeOne or any of its subsidiaries or their respective businesses that will remain outstanding at the Merger Effective Time and to pay certain fees and expenses related to the Transactions. Offeror has received a Debt Commitment Letter from certain lenders to provide Offeror with up to $1.6 billion of debt financing, including a $250 million senior secured ”asset based” revolving credit facility (the “ABL Facility”), up to $925 million senior secured first lien term loan facility (the “First Lien Term Facility”), a $75 million senior secured first lien delayed draw term loan facility (the “Delayed Draw Term Facility”, and together with the First Lien Term Facility, the “First Lien Facilities”) and up to $350 million senior secured second lien term loan facility (the “Second Lien Term Facility”, and together with the ABL Facility and the First Lien Facilities, the “Credit Facilities”). The Credit Facilities are collectively referred to herein as the “Debt Financing.” Subject to certain conditions, the Credit Facilities will be made available to Offeror to finance the Offer and the Merger, refinance certain of ConvergeOne’s existing indebtedness, pay related fees and expenses and to provide for funding of the surviving corporation. In addition, Parent has obtained an Equity Commitment Letter from CVC Capital Partners VII (A) L.P., CVC Capital Partners Investment Europe VII L.P. and CVC Capital Partners VII Associates L.P. (the “Equity Investors”) which provides for up to $750 million in aggregate of equity financing. Parent will contribute or otherwise advance to Offeror the proceeds of the equity commitments, which, together with proceeds of the Credit Facilities and ConvergeOne’s available cash following the Merger, will be sufficient to pay the Offer Price for all outstanding Shares tendered in the Offer, the Merger Consideration and all related fees and expenses. The equity and debt financing commitments are subject to certain conditions.

We do not think our financial condition is relevant to your decision whether to tender Shares and accept the Offer because: (1) we were organized solely in connection with the Offer and the Merger and, prior to the Expiration Date, will not carry on any activities other than in connection with the Offer and the Merger, (2) the consideration offered in the Offer consists solely of cash, (3) the Offer is being made for all outstanding Shares of ConvergeOne, (4) we have received equity financing and debt financing commitments in respect of funds sufficient to purchase all Shares tendered pursuant to the Offer and in connection with the Merger, (5) there is no financing condition to the completion of the Offer, and (6) if we consummate the Offer, we will acquire all remaining Shares in the Merger (other than Company Options, which shall be canceled) for cash at the same price per share as the Offer Price.

Debt Financing.

Offeror has received a Debt Commitment Letter, dated November 6, 2018 (as amended by a Joinder Agreement, dated November 20, 2018, the “Debt Commitment Letter” and including any executed commitment letter or similar agreement for alternate financing, collectively, the “Debt Financing Commitments”), from prospective arrangers and lenders (the “Lender Parties”) to provide, subject to the satisfaction (or waiver by the Lender Parties) in all material respects of the conditions set forth therein, to Offeror (which includes solely for purposes of this Section 9, the surviving corporation of the Merger), up to $1.6 billion in aggregate principal amount of Credit Facilities, comprised of the ABL Facility, the First Lien Facilities and the Second Lien Term Facility, for the purpose of financing the Offer and the Merger, refinancing certain of ConvergeOne’s existing indebtedness, to cash collateralize or backstop letters of credit issued for the account of ConvergeOne or any of its subsidiaries or their respective businesses that will remain outstanding on the Closing Date (to the extent such letters of credit are not deemed issued under the ABL Facility on the Closing Date), paying fees and expenses incurred in connection with the Offer and the Merger and the transactions contemplated thereby, for providing ongoing working capital and for other general corporate purposes of Offeror and its Restricted Subsidiaries (as defined in the Debt Commitment Letter) and, solely in the case of the Delayed Draw Term Facility, to finance the one or more certain acquisitions not in connection with the Offer or the Merger.

In the event that either (1) the Merger Agreement is terminated in accordance with its terms without the consummation of the Merger having occurred, (2) the Merger is consummated with or without the funding of the Credit Facilities or (3) the End Date has occurred and five business days have passed, then upon the occurrence of the earliest of such events, the Debt Commitment Letter and the commitment of the Lender Parties thereunder to provide the Credit Facilities will automatically terminate, unless the Lender Parties, in their discretion, agree

 

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to an extension in writing. The documentation governing the Debt Financing has not been finalized and, accordingly, the actual terms of the Debt Financing may differ from those described in this document. The Offeror has agreed to use its commercially reasonable efforts to consummate the Debt Financing on the terms and conditions described in the Debt Commitment Letter. If such portion of the Debt Financing necessary to consummate the Transactions (including without limitation, to pay the Offer Price and the Merger Consideration and the fees and expenses of the Parent related to the Transactions) becomes unavailable on the terms and conditions contemplated in the Debt Commitment Letter, Parent and Offeror will use their commercially reasonable efforts to arrange and obtain alternative financing from alternative sources in an amount sufficient to consummate the Offer and the Merger and to pay all fees and expenses in connection with the Transactions on terms, taken as a whole, not materially less favorable to Parent and Offeror than those contained in the Debt Commitment Letter.

Although the Debt Financing described in this document is not subject to a due diligence or “market out” condition, such financing may not be considered assured. As of the date hereof, no alternative financing arrangements or alternative financing plans have been made in the event the Debt Financing described herein is or becomes not available. There is no financing condition to the Offer.

Conditions Precedent to the Debt Commitments. The availability of the Credit Facilities is subject to, among other things:

 

   

execution and delivery by Parent, Offeror and ConvergeOne and certain of its subsidiaries of credit agreements and other related documentation with respect to the ABL Facility, the First Lien Term Facility, the Delayed Draw Term Facility and the Second Lien Term Facility (the “Credit Agreements”);

 

   

certain representations and warranties in the Merger Agreement and certain specified representations and warranties in the Credit Agreements being true and correct in all material respects;

 

   

confirmation that the Merger has been consummated or will be consummated substantially concurrently with the initial borrowing under one or more of the Credit Facilities;

 

   

confirmation that the Equity Financing has been consummated or will be consummated substantially concurrently with the initial borrowing under one or more of the Credit Facilities;

 

   

delivery of certain historical and pro forma financial information about ConvergeOne;

 

   

since the date of the Merger Agreement, there has not occurred and been continuing any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on ConvergeOne; and

 

   

payment of fees and expenses required by the Debt Commitment Letter.

Credit Facilities. The Credit Facilities will be comprised of (1) the ABL Facility with a term of five years, (2) the First Lien Term Facility made in a single drawing on the Closing Date, (3) the Delayed Draw Term Facility with an availability period of six months and (4) the Second Lien Term Facility made in a single drawing on the Closing Date.

Wells Fargo Bank, National Association will act as lead arranger and bookrunner for the ABL Facility. Each of Deutsche Bank Securities Inc. (“DBSI”), UBS Securities LLC (“UBS Securities”), Citigroup Global Markets Inc. (together with certain of its affiliates, “Citi”), Macquarie Capital (USA) Inc. (“Macquarie Capital”) and SG Americas Securities, LLC (“SG”) will act as a lead arranger and bookrunner for the First Lien Facilities. Each of UBS, DBSI, Citi, Macquarie Capital and SG will act as a lead arranger and bookrunner for the Second Lien Term Facility.

ABL Facility.

Interest Rate. Loans under the ABL Facility are expected to bear interest, at Offeror’s option, at a rate equal to (1) the adjusted LIBOR plus the applicable margin or (2) ABR plus the applicable margin, in each case, which applicable margin may increase or decrease based upon excess availability.

 

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Guarantors. All obligations of Offeror under the ABL Facility and, at the option of the Offeror, under hedging agreements and cash management arrangements, will be guaranteed by Parent and each of the existing and subsequently acquired, included by division, or organized direct or indirect wholly owned domestic restricted subsidiaries of Offeror (subject to customary exceptions).

Security. Subject to customary exceptions and other limitations set forth in the definitive documentation thereof, the obligations of Offeror and the guarantors under the ABL Facility and under designated hedging agreements and cash management arrangements entered into with a Lender Party or any of its affiliates or any other person (the “Hedging/Cash Management Arrangements”), will be secured, subject to permitted liens and other agreed upon exceptions, (1) on a first priority basis by a perfected security interest on accounts receivable, inventory, rights to any price protection payments, rebates, discounts, credits, factory holdbacks, incentive payments and other amounts due from a floorplan approved vendor, deposit accounts, securities accounts, commodities accounts, and cash and cash equivalents, general intangibles (other than intellectual property and equity interests), and related chattel paper, instruments, documents, commercial tort claims, letter of credit rights, supporting obligations and certain other assets related to the foregoing and certain other assets owned by Offeror or such guarantors (collectively, the “ABL Priority Collateral”) and (2) by a third priority security interest in substantially all assets of the Offeror and such guarantors other than the ABL Priority Collateral (the “Term Loan Collateral”).

Other Terms. The ABL Facility will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and acquisitions, transactions with affiliates, liens and dividends and other distributions. The ABL Facility will also include customary events of default, including the occurrence of a “change of control” to be defined.

First Lien Facilities.

Interest Rate. Loans under the First Lien Facilities are expected to bear interest, at Offeror’s option, at a rate equal to (1) the adjusted LIBOR plus the applicable margin or (2) ABR plus the applicable margin, in each case, which applicable margin may increase or decrease based upon the first lien net leverage ratio of the Offeror.

Guarantors. All obligations of Offeror under the First Lien Facilities will be guaranteed by the same guarantors as under the ABL Facility.

Security. Subject to certain customary exceptions and other agreed limitations set forth in the definitive documentation thereof, the obligations of Offeror and the guarantors under the First Lien Facilities and under designated Hedging/Cash Management Arrangements, will be secured, subject to permitted liens and other agreed upon exceptions, by (1) a second priority security interest on all ABL Priority Collateral and (2) a first priority security interest on the Term Loan Collateral.

Other Terms. The First Lien Facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and acquisitions, transactions with affiliates, liens and dividends and other distributions. The First Lien Facilities will also include customary events of defaults, including the occurrence of a “change of control” to be defined.

Second Lien Term Facility.

Interest Rate. Loans under the Second Lien Term Facility are expected to bear interest, at Offeror’s option, at a rate equal to (1) the adjusted LIBOR plus the applicable margin or (2) ABR plus the applicable margin.

Guarantors. All obligations of Offeror under the Second Lien Term Facility and, at the option of the Offeror, under any Hedging/Cash Management Arrangements will be unconditionally guarantee jointly and severally on a senior second lien secured basis by the guarantors of the First Lien Facilities.

 

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Security. Subject to certain customary exceptions and other agreed limitations set forth in the definitive documentation thereof, the obligations of Offeror and the guarantors under the Second Lien Term Facility and under designated Hedging/Cash Management Arrangements, will be secured, subject to permitted liens and other agreed upon exceptions, by (1) a third priority security interest on the ABL Priority Collateral and (2) a second priority security interest on the Term Loan Collateral

Other Terms. The Second Lien Term Facility will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and acquisitions, transactions with affiliates, liens and dividends and other distributions. The Second Lien Term Facilities will also include customary events of defaults including a change of control to be defined.

This summary does not purport to be complete and is qualified in its entirety by the full text of the Debt Commitment Letter and the Joinder Agreement, copies of which are filed as Exhibit (b)(1) and Exhibit (b)(2), respectively, to the Schedule TO and which are incorporated herein by reference.

Equity Financing.

Parent has received an Equity Commitment Letter, dated November 6, 2018, from the Equity Investors pursuant to which the Equity Investors have committed, severally, and not jointly, subject to the conditions of the Equity Commitment Letter, equity financing (“Equity Financing” and together with the Debt Financing, the “Financing”) up to $750 million in aggregate in equity for the purpose of funding and only to the extent necessary, together with the receipt of the proceeds of the Debt Financing, (1) the payment for any and all Shares tendered pursuant to the Offer at the Acceptance Time (the “Offer Amount”) and (2) the payment due in connection with the Merger at the Effective Time (the “Merger Amount”). With respect to the Offer Amount and the Merger Amount, the conditions to each Equity Investor funding its respective obligation under the Equity Commitment Letter include: (1) the terms of the Equity Commitment Letter, (2) the written waiver by Parent or Offeror or satisfaction of all conditions precedent set forth in the Merger Agreement (including the Offer Condition) to Parent’s and Offeror’s obligations to effect the Closing, (3) the prior or substantially simultaneous receipt of the net cash proceeds of the Debt Financing (or any alternative financing) and (4) the substantially simultaneous Closing of the Merger on the terms and subject to the conditions of the Merger Agreement.

The Equity Investors’ funding obligations under the Equity Commitment Letter will terminate automatically and immediately upon the earliest to occur of: (1) the Closing, (2) the termination of the Merger Agreement in accordance with its terms and (3) the assertion by ConvergeOne or any of its affiliates, or any of their respective representatives acting on their behalf, in any legal proceeding of any claim against any Equity Investor, Parent, Offeror or certain other related parties relating to (A) the Equity Commitment Letter, (B) that certain Limited Guarantee, dated as of November 6, 2018, by the guarantors party thereto in favor of ConvergeOne (the “Limited Guarantee”), (C) the Merger Agreement or any of the transactions contemplated by the Merger Agreement or the Equity Commitment Letter (other than, in the case of this clause (C), any claim by ConvergeOne to the extent expressly permitted under the Limited Guarantee), in each case other than any legal proceeding to specifically enforce the provisions of the Equity Commitment Letter or any legal proceeding pursuant to Section 9.5(b) of the Merger Agreement. Upon termination of the Equity Commitment Letter, no Equity Investor will have any further obligations or liabilities thereunder. However, such termination will not relieve any Equity Investor of any liability or obligation it may have under the Limited Guarantee (except to the extent provided in the Limited Guarantee).

ConvergeOne is a third party beneficiary of the Equity Commitment Letter solely for the purpose in the event that ConvergeOne is awarded, in accordance with, and subject to, the terms and conditions of the Merger Agreement, specific performance of Parent’s right to cause the Equity Financing to be funded in accordance with the terms and conditions of the Equity Commitment Letter and the Merger Agreement.

 

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This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Equity Commitment Letter, a copy of which has been filed as Exhibit (d)(5) to the Schedule TO and which is incorporated herein by reference.

10. Background of the Offer; Past Contacts or Negotiations with ConvergeOne.

Background of the Offer

The following chronology summarizes certain meetings and events among representatives of CVC Capital Partners and representatives of ConvergeOne that led to the signing of the Merger Agreement and the commencement of the Offer. The following chronology does not purport to catalogue every conversation among the respective representatives of CVC Capital Partners, ConvergeOne and Clearlake Capital Group. For a review of ConvergeOne’s and Clearlake Capital Group’s additional activities relating to these contacts, please refer to the Schedule 14D-9, which will be filed by ConvergeOne with the SEC and is being mailed to you with this Offer to Purchase.

On August 21, 2018, CVC Capital Partners received an invitation from members of ConvergeOne’s management to participate in a process exploring a potential sale transaction, which process would be conducted by William Blair & Company, L.L.C. (“William Blair”) and Raymond James & Associates, Inc. (“Raymond James”) on behalf of ConvergeOne. In connection with such process, ConvergeOne provided to CVC Capital Partners an initial draft of the Confidentiality Agreement (as defined below), the terms and conditions of which were subsequently negotiated among representatives of CVC Capital Partners and ConvergeOne. On August 31, 2018, ConvergeOne and CVC Advisors (U.S.) Inc. (“CVC Advisors”) executed the Confidentiality Agreement. The Confidentiality Agreement contains limitations regarding the use and disclosure of ConvergeOne’s confidential information and standstill restrictions.

On September 17, 2018, representatives of CVC Capital Partners and members of ConvergeOne’s management held an introductory dinner meeting and on September 18, 2018, representatives of CVC Capital Partners and members of ConvergeOne’s management held a meeting during which members of ConvergeOne’s management reviewed with the representatives of CVC Capital Partners certain financial, operational and other due diligence information relating to ConvergeOne.

On September 27, 2018, CVC Capital Partners received a process letter from William Blair and Raymond James inviting CVC Capital Partners to submit a proposal for the acquisition of ConvergeOne by October 22, 2018, which process letter indicated that a markup of an auction draft merger agreement (the “Auction Draft Merger Agreement”) to be provided should accompany such proposal and which process letter encouraged participants to enter into discussions regarding the Auction Draft Merger Agreement with Cooley LLP, outside legal counsel to ConvergeOne (“Cooley”), ahead of submitting such proposal. The following day, CVC Capital Partners received from ConvergeOne certain additional financial and operational due diligence information relating to ConvergeOne.

From October 2, 2018, to November 6, 2018, ConvergeOne provided access to legal, financial and operational due diligence information relating to ConvergeOne to CVC Capital Partners, including via access to a virtual dataroom. Also during such period, multiple due diligence sessions and other management meetings were held in person and by telephone among representatives of CVC Capital Partners and representatives ConvergeOne in furtherance of CVC Capital Partners’ due diligence review of ConvergeOne.

On or about October 17, 2018, representatives of CVC Capital Partners held meetings by telephone with representatives of ConvergeOne and separately with representatives of William Blair, during which meetings the representatives of CVC Capital Partners indicated that CVC Capital Partners would require additional time to provide a proposal and would submit its preliminary, non-binding indication of interest on October 24, 2018. On October 23, 2017, an auction draft of ConvergeOne’s disclosure letter (the “Auction Draft Disclosure Schedule”) related to the Auction Draft Merger Agreement was made available in the virtual data room.

 

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On October 24, 2018, CVC Advisors submitted a preliminary, non-binding indication of interest (the “October 24 Indication of Interest”) proposing that a newly-formed entity controlled by Fund VII would acquire 100% of ConvergeOne for $12.00 per Share. The October 24 Indication of Interest included a proposed revised draft of the Auction Draft Merger Agreement (the “October 24 Revised Merger Agreement”), together with a preliminary Debt Commitment Letter and proposed drafts of the Equity Commitment Letter and Limited Guarantee. The October 24 Revised Merger Agreement revised certain provisions of the Auction Draft Merger Agreement, including, among other things, (i) reserving on structuring the potential transaction as a tender offer for all outstanding Shares followed by a second-step short-form merger (a “Two-Step Merger”) as set forth in the Auction Draft Merger Agreement, (ii) financing the Offer and Merger using both equity and debt financing, and (iii) provided for payment by Parent to ConvergeOne of a reverse termination fee of 5% of equity value under certain circumstances, back-stopped by a limited guarantee.

On October 25, 2018, CVC Capital Partners received a process letter from William Blair and Raymond James inviting CVC Capital Partners to submit a final proposal for the acquisition of ConvergeOne by November 2, 2018, which process letter indicated that a final markup of the merger agreement should accompany such proposal and which process letter encouraged participants to continue negotiating and finalizing the merger agreement with Cooley ahead of submitting such proposal.

From October 26, 2018 to November 6, 2018, representatives of Cooley and representatives of White & Case, with input and guidance from representatives of CVC Capital Partners, negotiated the terms and conditions, and exchanged drafts, of the Merger Agreement, the Debt Commitment Letter, the Equity Commitment Letter, the Limited Guaranty and the Support Agreement.

On November 2, 2018, CVC Advisors submitted a revised, non-binding indication of interest (the “November 2 Indication of Interest”) reiterating the prior proposal for a newly-formed entity controlled by Fund VII to acquire 100% of ConvergeOne for $12.00 per Share, and included a request for exclusivity through the evening of November 5, 2018. Later on November 2, 2018, a representative of William Blair contacted representatives of CVC Capital Partners and indicated that ConvergeOne would require an increase of the proposed purchase price to at least $12.75 per Share. Representatives of CVC Capital Partners then indicated, on behalf of Parent and Offeror, that it would be willing to increase its proposal to $12.50 per Share, but that such increase represented Parent’s and Offeror’s last and final proposal and that CVC Capital Partners would require that ConvergeOne enter into an exclusivity arrangement.

On November 2, 2018, a representative of William Blair indicated that ConvergeOne would grant the previously requested exclusivity at a proposal of $12.50 per Share through the evening of November 5, 2018.

On November 3, 2018, CVC Advisors and ConvergeOne executed the Exclusivity Agreement.

From November 3, 2018 to November 6, 2018, representatives of Cooley and representatives of White & Case, with input and guidance from representatives of CVC Capital Partners, continued to negotiate the terms and conditions, and exchanged drafts, of the Merger Agreement.

Also on November 3, 2018, at the request of representatives of CVC Capital Partners, representatives of White & Case contacted representatives of Cooley to seek ConvergeOne’s permission to contact members of ConvergeOne’s management to commence discussions on a preliminary and non-binding basis certain post-closing retention matters. Later that same day, representatives of Cooley conveyed ConvergeOne’s permission. No commitments were made by CVC Capital Partners or any members of ConvergeOne’s management with respect to post-closing retention matters during such discussions.

On November 5, 2018, members of ConvergeOne’s management and representatives of CVC Capital Partners discussed allowing certain members of ConvergeOne’s management to roll over certain Shares held by such members of management upon consummation of the Merger.

 

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During the morning of November 6, 2018, representatives of Parent and Offeror, White & Case, ConvergeOne and Cooley finalized the Merger Agreement and the various other transaction agreements, including the Rollover Agreement, and each of the parties thereto executed and delivered such agreements, effective as of November 6, 2018.

Later that morning, CVC Capital Partners and ConvergeOne issued a joint press release announcing the execution of the Merger Agreement.

11. The Transaction Agreements.

The Merger Agreement

The following summary of certain provisions of the Merger Agreement and all other provisions of the Merger Agreement discussed herein are qualified by reference to the Merger Agreement itself, which is incorporated herein by reference and filed as Exhibit (d)(1) to the Schedule TO. The Merger Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 — “Certain Information Concerning Parent, Offeror and CVC VII.” Stockholders and other interested parties should read the Merger Agreement for a more complete description of the provisions summarized below. Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Merger Agreement.

This summary of the Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual disclosures about Parent, Offeror, ConvergeOne or their respective affiliates. The Merger Agreement contains representations, warranties and covenants that are the product of negotiations among the parties thereto and made to, and solely for the benefit of, each other as of specified dates. The assertions embodied in those representations, warranties and covenants are subject to qualifications and limitations agreed to by the respective parties and are also qualified in important part by a confidential disclosure letter delivered by ConvergeOne to Parent in connection with the Merger Agreement. The representations, warranties and covenants in the Merger Agreement were made for the purpose of allocating contractual risk between the parties thereto and governing contractual rights and relationships between the parties thereto instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders of Parent or ConvergeOne. In reviewing the representations, warranties and covenants contained in the Merger Agreement or any descriptions thereof in this Section 11, it is important to bear in mind that such representations, warranties and covenants or any descriptions thereof were not intended by the parties to the Merger Agreement to be characterizations of the actual state of facts or conditions of Parent, Offeror, ConvergeOne or their respective affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may have changed since the date of the Merger Agreement and may change after the date hereof, and such subsequent information may or may not be fully reflected in public disclosures. For the foregoing reasons, such representations, warranties and covenants or descriptions thereof should not be read alone and should instead be read in conjunction with the other information contained in the reports, statements and filings that Parent and ConvergeOne publicly file.

The Offer. The Merger Agreement provides that, if the Merger Agreement has not been terminated in accordance with its terms, as promptly as practicable after the date of the Merger Agreement (and in any event no later than ten business days after the date of the Merger Agreement), Parent will cause Offeror to, and Offeror will, commence (within the meaning of Rule 14d-2 promulgated under the Exchange Act) the Offer. The obligations of Offeror to, and of Parent to cause Offeror to, accept for payment, and pay for, any Shares validly tendered (and not properly withdrawn) pursuant to the Offer, are subject to the terms and conditions of the Merger Agreement, including the prior satisfaction of the Minimum Condition and the prior satisfaction or waiver of the other conditions of the Offer Conditions described in Section 15 — “Certain Conditions of the Offer” (the “Offer Conditions”). Each of Parent and Offeror expressly reserves the right to (1) increase the Offer Price, (2) waive or modify any of the Offer Conditions and (3) make any other changes in the terms and

 

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conditions of the Offer. However, unless otherwise provided by the Merger Agreement, Parent and Offeror have agreed that they will not (without the prior written consent of ConvergeOne): (1) decrease the Offer Price, (2) change the form of consideration payable in the Offer, (3) decrease the maximum number of Shares sought to be purchased in the Offer, (4) impose conditions or requirements to the Offer in addition to the Offer Conditions, (5) amend or modify any of the Offer Conditions in a manner that adversely affects, or could reasonably be expected to adversely affect, any holder of Shares or that would, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the Offer or prevent, materially delay or materially impair the ability of Parent or Offeror to consummate the Offer, the Merger or the other Transactions, (6) change or waive the Minimum Condition, (7) extend or otherwise change the Expiration Date in a manner other than as required or permitted by the Merger Agreement or (8) provide any “subsequent offering period” within the meaning of Rule 14d-11 promulgated under the Exchange Act.

The Offer may not be withdrawn prior to the Expiration Date (or any rescheduled Expiration Date), unless the Merger Agreement is terminated in accordance with its terms.

Unless otherwise agreed to in writing by Parent and ConvergeOne, the Offer is initially scheduled to expire at 12:00 midnight, Eastern time on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018) (the “Initial Expiration Date” and, such date or such subsequent date to which the expiration of the Offer is extended in accordance with the terms of the Merger Agreement, the “Expiration Date”), which is the 20th business day after the date on which Offeror commences the Offer. Subject to Parent, Offeror and ConvergeOne’s respective termination rights under the terms of the Merger Agreement, if any Offer Condition is not satisfied as of the scheduled Expiration Date, and has not been waived, Offeror may, in its discretion and without the consent of ConvergeOne or any other person, extend the Offer on one or more occasions for an additional period of up to ten business days per extension (or any other duration agreed to by Parent and ConvergeOne), to permit the Offer Condition to be satisfied. Offeror will also extend the Offer from time to time for: (A) any period required by any legal requirement, any interpretation or position of the SEC, the SEC’s staff or Nasdaq applicable to the Offer and (B) periods of up to ten business days per extension, until any waiting period (and any extension thereof) applicable to the consummation of the Offer under the HSR Act will have expired or been terminated. Additionally, if any Offer Condition is not satisfied as of the scheduled Expiration Date and has not been waived, at the request of ConvergeOne, Offeror will extend the Offer on one or more occasions for an additional period specified by ConvergeOne of up to ten business days per extension (or any other duration agreed to by Parent and ConvergeOne) to permit the Offer Condition to be satisfied. However, in each of the foregoing extensions, in no event will Offeror be required to extend the Offer beyond the Extension Deadline, nor will it be permitted to extend the Offer beyond the Extension Deadline without the prior written consent of ConvergeOne. Offeror will not terminate the Offer prior to any scheduled Expiration Date without the prior written consent of ConvergeOne unless the Merger Agreement is terminated pursuant to its terms.

In the event that the Merger Agreement is terminated pursuant to its terms, Offeror will (and Parent will cause Offeror to) promptly (and, in any event, within 24 hours of such termination), irrevocably and unconditionally terminate the Offer and Offeror will not acquire any Shares pursuant to the Offer. If the Offer is terminated or withdrawn by Offeror, it will promptly return, and will cause any depository acting on behalf of Offeror to return, in accordance with applicable legal requirements, all tendered Shares to the registered holders thereof.

On the terms and subject to the conditions specified in the Merger Agreement, and subject to the satisfaction or, to the extent waivable by Parent or Offeror, waiver of the Offer Conditions, Offeror will, and Parent will cause Offeror to, irrevocably accept for payment at the Acceptance Time and pay for all Shares validly tendered (and not properly withdrawn) pursuant to the Offer as promptly as practicable after the Acceptance Time. However, with respect to Shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered in settlement or satisfaction of such guarantee, Offeror will be under no obligation to make any payment for such Shares unless and until such Shares are delivered in settlement or satisfaction of such

 

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guarantee. Parent will cause to be provided to Offeror all of the funds necessary to purchase any Shares that Offeror becomes obligated to purchase pursuant to the Offer, and will cause Offeror to perform, on a timely basis, all of Offeror’s obligations under the Merger Agreement.

Notwithstanding anything in the Merger Agreement to the contrary, if, between the date of the Merger Agreement and the Acceptance Time, the number of outstanding Shares is changed into a different number or class of Shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, the Offer Price will be appropriately and equitably adjusted, without duplication, to provide the holders of Shares with the same economic effect as contemplated by the Merger Agreement prior to such event. However, no such adjustment will be construed to permit ConvergeOne to take any action with respect to its securities that is prohibited by the terms of the Merger Agreement.

The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, and in accordance with the DGCL, at the Effective Time, ConvergeOne and Parent will consummate the Merger and Offeror will be merged with and into ConvergeOne and the separate existence of Offeror will cease. ConvergeOne will continue as the Surviving Corporation.

The Merger will have the effects set forth in the Merger Agreement and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise agreed pursuant to the terms of the Merger Agreement, all of the property, rights, privileges, powers and franchises of ConvergeOne and Offeror will vest in the Surviving Corporation, and all debts, liabilities and duties of ConvergeOne and Offeror will become the debts, liabilities and duties of the Surviving Corporation.

Unless the Merger Agreement has been terminated in accordance with its terms, and unless otherwise mutually agreed in writing between ConvergeOne, Parent and Offeror, the consummation of the Merger (the “Closing”) will take place at 8:00 a.m., Eastern time, on the same date as the Acceptance Time, except if the Offer Condition relating to no restraints has not been satisfied or waived by such date, in which case the consummation of the Merger will take place no later than the first business day on which such condition is satisfied or waived. The date on which the Closing occurs is referred to as the “Closing Date”.

Subject to the provisions of the Merger Agreement, as soon as practicable on the Closing Date, ConvergeOne will file or cause to be filed a certificate of merger with the Secretary of State of the State of Delaware with respect to the Merger, in such form as required by, and executed and acknowledged in accordance with, Section 251(h) of the DGCL. The Merger will become effective upon the date and time of the filing of such certificate of merger with the Secretary of State of the State of Delaware or such later date and time as is agreed upon in writing by the Parties hereto and specified in the certificate of merger (such date and time, the “Effective Time”).

At the Effective Time, (1) the Surviving Corporation’s certificate of incorporation will be amended and restated as of the Effective Time to conform to the certificate of merger attached as Exhibit B to the Merger Agreement until thereafter amended as provided in the certificate of incorporation or by applicable legal requirement, (2) the Surviving Corporation’s bylaws will be amended and restated as of the Effective Time to conform to the bylaws attached as Exhibit C to the Merger Agreement until thereafter amended as provided in the bylaws or by applicable legal requirement and (3) the directors of Offeror immediately prior to the Effective Time will be the directors of the Surviving Corporation and the officers of ConvergeOne immediately prior to the Effective Time will be the officers of the Surviving Corporation, in each case, to hold office in accordance with the Certificate of Incorporation or bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until the earlier of their death, resignation or removal in accordance with the Surviving Corporation’s certificate of incorporation and bylaws.

 

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Effect of the Merger on Capital Stock. At the Merger Effective Time:

 

  (i)

any Shares then held by ConvergeOne (or held in ConvergeOne’s treasury) will automatically be canceled and retired and will cease to exist, and no consideration will be delivered in exchange for such Shares;

 

  (ii)

any Shares then held by Parent, Offeror or any other direct or indirect wholly owned subsidiary of Parent or ConvergeOne will automatically be canceled and retired and will cease to exist, and no consideration will be delivered in exchange for such Shares;

 

  (iii)

except as provided in clauses “(i)” and “(ii)” above and subject to any adjustment in accordance with the terms of the Merger Agreement to reflect any reclassification of Shares or other similar transaction between the date of the Merger Agreement and the Effective Time, each Share outstanding immediately prior to the Effective Time (other than any Rollover Shares and dissenting shares) will be canceled and cease to exist and will be converted into the right to receive the Offer Price in cash, without interest (the “Merger Consideration”) and less any withholding of taxes required by applicable law; and

 

  (iv)

each share of the common stock, $0.01 par value per share, of Offeror outstanding immediately prior to the Effective Time will be converted into one validly issued, fully paid, and non-assessable share of common stock of the Surviving Corporation.

Treatment of ConvergeOne Equity Awards. At the Effective Time, by virtue of the Merger and without any further action on the part of the holders thereof, Parent, Offeror or ConvergeOne,

 

   

each ConvergeOne Option that is then outstanding and unexercised as of immediately before the Effective Time, whether vested or unvested, will be canceled, extinguished and terminated for no consideration or payment; and

 

   

each ConvergeOne Warrant that is outstanding and unexercised as of immediately before the Effective Time will be canceled, and the holder thereof will then become entitled to receive solely, in full satisfaction of the rights of such holder with respect thereto, a lump-sum cash payment equal to the product of (a) the number of Shares for which such ConvergeOne Warrant would have converted to had it been exercised and (b) the excess, if any, of the Merger Consideration over the exercise price per share of such ConvergeOne Warrant (and for the avoidance of doubt, any ConvergeOne Warrant that has an exercise price that is greater than or equal to the Merger Consideration shall be canceled at the Effective Time for no consideration or payment). Prior to the Effective Time, ConvergeOne shall deliver notice of the Transactions to the holders of ConvergeOne Warrants in accordance with the terms of the relevant Warrant Agreement and shall cause such Warrant Agreement to be terminated with no outstanding liability to or obligations of ConvergeOne and its subsidiaries, Parent or Offeror, other than as set forth in the Merger Agreement.

Loan Payoff. Prior to the Closing, ConvergeOne will satisfy all notification requirements under the terms of any indebtedness. ConvergeOne will obtain prior to the Closing payoff letters in form and substance reasonably satisfactory to Parent (the “Payoff Letters”) from the lenders or other applicable third persons (or an authorized agent on behalf thereof) with respect to any indebtedness outstanding as of immediately prior to the Effective Time and set forth on the Company Disclosure Schedule (and will deliver to Parent drafts of the Payoff Letters for its review at least two business days prior to the Closing Date), which Payoff Letters will (a) provide the dollar amount of all such indebtedness required to be paid in order to fully pay off such indebtedness as of the Closing and (b) provide for releases in customary forms concurrently with the repayment of obligations giving rise thereto of all encumbrances with respect to the capital stock, property and assets of ConvergeOne and its subsidiaries relating to such indebtedness (other than any obligation which, pursuant to the terms of the credit agreements, expressly survives termination), with the result that immediately following the Closing, there will be no further monetary obligations of ConvergeOne or any of its subsidiaries with respect to any such indebtedness outstanding immediately prior to the Closing. Parent and/or Offeror will pay or cause to be paid in full, on the Closing Date, such amount set forth in the Payoff Letters.

 

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Representations and Warranties. In the Merger Agreement, ConvergeOne has made customary representations and warranties to Parent and Offeror, which are subject to specified exemptions and qualifications contained in the Merger Agreement and the confidential disclosure letter that ConvergeOne delivered to Parent and Offeror concurrently with the execution of the Merger Agreement (the “Company Disclosure Schedule”) and to certain disclosure in ConvergeOne’s SEC filings filed prior to the date of the Merger Agreement (including the exhibits and other information incorporated by reference therein) (the “Company SEC Documents”), including representations relating to, among other things:

 

   

corporate matters such as organization, standing, corporate power and authority and qualification;

 

   

capitalization of ConvergeOne and its subsidiaries, including the number of Shares issued and outstanding;

 

   

authority relative to the Merger Agreement, including approval by the ConvergeOne Board;

 

   

absence of certain violations, breaches or defaults under certain contracts, organizational documents and laws and the absence of notices required to be given to, or consents required to be obtained from, any person, in each case, arising out of the execution, delivery or performance by ConvergeOne of the Merger Agreement and the consummation by ConvergeOne of the transactions contemplated by the Merger Agreement;

 

   

required governmental filings, consents and approvals in connection with the execution, delivery or performance of ConvergeOne of the Merger Agreement and the consummation by ConvergeOne of the transactions contemplated by the Merger Agreement;

 

   

SEC filings and ConvergeOne’s financial statements and internal controls and procedures;

 

   

absence of certain undisclosed liabilities;

 

   

absence of certain changes;

 

   

compliance with applicable laws;

 

   

employee benefits matters;

 

   

tax matters;

 

   

labor matters;

 

   

litigation matters and investigations by governmental authorities;

 

   

environmental matters;

 

   

intellectual property matters;

 

   

title to material tangible assets owned by ConvergeOne and its subsidiaries;

 

   

real property;

 

   

certain material contracts of ConvergeOne and its subsidiaries;

 

   

government contracts;

 

   

regulatory compliance;

 

   

compliance with anti-bribery, anti-money laundering and anti-corruption laws, rules and regulations;

 

   

customers and suppliers;

 

   

maintenance of certain insurance policies by ConvergeOne and its subsidiaries;

 

   

accuracy of information supplied for purposes of the offer documents;

 

   

receipt by ConvergeOne of an opinion from its financial advisor;

 

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inapplicability of state takeover laws and regulations to the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement;

 

   

following the Acceptance Time, assuming that satisfaction of the Minimum Condition, the absence of any vote required of the holders of Shares to authorize the Merger Agreement and the Merger; and

 

   

broker’s, finder’s, financial advisor’s and similar fees and commissions.

The representations and warranties in the Merger Agreement made by ConvergeOne are, in certain cases, modified by “knowledge”, “materiality” and “Material Adverse Effect” qualifiers. For purposes of the Merger Agreement, an event, occurrence, change, development, violation, inaccuracy, circumstance or other matter will be deemed to have a “Material Adverse Effect” on ConvergeOne and its subsidiaries, taken as a whole, if such event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter (whether or not any such matter, considered together with all other matters, would constitute a breach of the representations, warranties, covenants or agreements of ConvergeOne set forth in the Merger Agreement) (1) individually or in the aggregate, would reasonably be expected to prevent or materially impair, the consummation of the Transactions by ConvergeOne or the ability of ConvergeOne to perform its obligations under the Merger Agreement or (2) has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations of ConvergeOne and its subsidiaries, taken as a whole. For the purposes of clause (2), none of the following will be deemed in and of themselves, either alone or in combination, to constitute a Material Adverse Effect, and none of the following will be taken into account in determining whether there is, or would reasonably likely to be a Material Adverse Effect on ConvergeOne and its subsidiaries:

 

  (i)

any change in the market price or trading volume of ConvergeOne’s stock;

 

  (ii)

any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter directly resulting from the announcement or pendency of the Transactions (other than for purposes of any representation or warranty relating to non-contravention and required consents but subject to disclosures in the Company Disclosure Schedule);

 

  (iii)

any event, occurrence, circumstance, change or effect in the industries in which ConvergeOne and its subsidiaries operate or in the economy generally or other general business, financial or market conditions;

 

  (iv)

any event, circumstance, change or effect arising directly or indirectly from or otherwise relating to fluctuations in the value of any currency;

 

  (v)

any event, circumstance, change or effect arising directly or indirectly from or otherwise relating to any act of terrorism, war, national or international calamity or any other similar event;

 

  (vi)

the failure of ConvergeOne to meet internal or analysts’ expectations or projections or the results of operations of ConvergeOne;

 

  (vii)

any adverse effect arising directly from or otherwise directly relating to any action taken by ConvergeOne at the written direction of Parent or any action specifically required to be taken by ConvergeOne pursuant to the terms of the Merger Agreement, or the failure of ConvergeOne to take any action that it is specifically prohibited by the terms of the Merger Agreement from taking to the extent Parent fails to give its consent thereto after a written request therefor pursuant to the terms of the Merger Agreement;

 

  (viii)

any event, occurrence, circumstance, change or effect resulting or arising from Parent’s or Offeror’s breach of the Merger Agreement; and

 

  (ix)

any event, occurrence, circumstance, change or effect arising directly or indirectly from or otherwise relating to any change in, or any compliance with or action taken for the purpose of complying with, any legal requirement or GAAP (or interpretations of any legal requirement or GAAP);

 

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except, (1) the exceptions in the foregoing clauses (i) and (vi) will not prevent or otherwise affect a determination that the underlying cause of any such decline or failure referred to therein (if not otherwise falling within any other exception provided above) is or would reasonably be likely to be a Material Adverse Effect and (2) in the case of clauses (iii), (iv), (v) or (ix), if the event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter disproportionately adversely affects ConvergeOne and its subsidiaries relative to other participants in the industries in which ConvergeOne and its subsidiaries operate or the economy generally.

Additionally, the Merger Agreement provides that ConvergeOne has represented that the ConvergeOne Board (at a meeting duly called and held), acting upon the unanimous recommendation of the ConvergeOne Special Transaction Committee, unanimously (1) determined that the Merger Agreement and the Transactions, including the Offer and the Merger, are fair, advisable to, and in the best interest of, ConvergeOne and the holders of Shares, (2) approved and deemed advisable the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the Transactions, including the Offer and the Merger, in accordance with the DGCL, (3) agreed that the Merger Agreement will be subject to Section 251(h) of the DGCL and (4) recommended that holders of Shares tender their Shares to Parent pursuant to the Offer (including such recommendation of the ConvergeOne Special Transaction Committee, the “ConvergeOne Board Recommendation”).

In the Merger Agreement, Parent and Offeror have also made customary representations and warranties to ConvergeOne that are subject to specified exemptions and qualifications contained in the Merger Agreement and the confidential disclosure letter that Parent and Offeror delivered to ConvergeOne concurrently with the execution of the Merger Agreement. Parent’s and Offeror’s representations and warranties are, in certain cases, modified by “knowledge”, “materiality” and “Parent Material Adverse Effect” qualifiers. For the purposes of the Merger Agreement, “Parent Material Adverse Effect” means any effect that would individually or in the aggregate, prevent, materially impede, materially delay or materially impair the ability of Parent or Offeror to consummate the Transactions.

Parent’s and Offeror’s representations and warranties, include representations relating to, among other things:

 

   

corporate matters such as organization, standing, corporate power and authority and qualification;

 

   

authority relative to the Merger Agreement;

 

   

absence of certain violations, breaches or defaults under certain contracts, organizational documents and laws and the absence of notices required to be given to, or consents required to be obtained from, any person, in each case, arising out of the execution, delivery and performance by Parent and Offeror of the Merger Agreement and the consummation by Parent and Offeror of the transactions contemplated by the Merger Agreement;

 

   

the availability of the financing commitments;

 

   

ownership of Shares;

 

   

broker’s, finder’s, financial advisor’s or other similar fees or commissions;

 

   

accuracy of information supplied for purposes of the offer documents and the Schedule 14D-9; and

 

   

the reasons for Offeror’s formation, the nature of Offeror’s operations and Parent’s beneficial ownership of all of the shares of Offeror.

None of the representations and warranties contained in the Merger Agreement will survive beyond the Merger Effective Time.

Conduct of Business. The Merger Agreement contains certain covenants restricting the conduct of business by ConvergeOne and its subsidiaries from the date of the Merger Agreement until the Acceptance Time or the

 

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earlier termination of the Merger Agreement in accordance with its terms. In general, ConvergeOne has agreed that, except (1) as required or otherwise expressly contemplated under the Merger Agreement or as required by applicable legal requirements or ConvergeOne labor agreements, (2) with the written consent of Parent, which consent will not be unreasonably withheld, delayed or conditioned (unless ConvergeOne reasonably believes after consultation with outside antitrust counsel that obtaining such consent would violate any law, including antitrust law) or (3) as set forth on the Company Disclosure Schedule, ConvergeOne will:

 

   

ensure that each of ConvergeOne and its subsidiaries conducts in all material respects its business and operations in the ordinary course and in compliance with all applicable legal requirements or ConvergeOne labor agreements; and

 

   

use commercially reasonable efforts, consistent with past practices and policies to (1) preserve intact the business and operations of ConvergeOne and its subsidiaries; (2) keep available all of the services of its directors, officers and material employees of ConvergeOne and its subsidiaries and (3) preserve the current relationships of ConvergeOne and its subsidiaries with material customers, suppliers, distributors, licensors, licensees and others with which they have significant business dealings.

ConvergeOne will promptly notify Parent of (1) any knowledge of the receipt of any notice from any person alleging that the Consent of such person is or may be required in connection with any of the Transactions and (2) any legal proceeding commenced, or, to its knowledge threatened in writing, relating to or involving any of ConvergeOne or its subsidiaries that relates to the consummation of the Transactions.

ConvergeOne has also agreed that from the date of the Merger Agreement until the Acceptance Time or the earlier termination of the Merger Agreement in accordance with its terms, except (1) as required or otherwise expressly contemplated under the Merger Agreement or as required by applicable legal requirements or ConvergeOne labor agreements, (2) with the written consent of Parent, which consent will not be unreasonably withheld, delayed or conditioned (unless ConvergeOne reasonably believes after consultation with outside antitrust counsel that obtaining such consent would violate any law, including antitrust law) or (3) as set forth on the Company Disclosure Schedule, ConvergeOne and its subsidiaries will not without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed), among other actions:

 

   

amend, waive or otherwise change its Certificate of Incorporation or bylaws or other charter or organizational documents;

 

   

authorize for issuance, issue, grant, sell, encumber (other than pursuant to the existing credit facilities in the ordinary course of business), dispose of, transfer or propose, agree or commit to authorize for issuance, issue, grant, sell, encumber, dispose of or transfer any of its equity securities or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its equity securities, or other securities, including any securities convertible into or exchangeable for any of its shares or other equity securities or securities of any class and any other equity-based awards, or engage in any hedging transaction with a third person with respect to such securities, except (1) with respect to the granting or the issuance of shares upon the exercise of ConvergeOne Options to ConvergeOne’s or its subsidiaries’ employees and other service providers consistent with past practice granted prior to the date of the Merger Agreement in accordance with the terms thereof or (2) as the result of the exercise or conversion of any instrument convertible into or exchangeable for any capital stock, equity interest or other security of ConvergeOne and its subsidiaries outstanding as of the date of the Merger Agreement;

 

   

split, combine, recapitalize or reclassify any of its shares or other equity interests or issue or authorize the issuance of any other securities in respect thereof or declare, set aside, set a record date for or pay any dividend or other distribution (whether in cash, equity or property or any combination thereof) in respect of its equity interests, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire, or modify or amend the terms of, any of its securities;

 

   

except as required by applicable legal requirements or ConvergeOne labor agreements, (1) increase the compensation payable or to become payable to any of its employees or consultants, other than

 

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increases in the ordinary course of business consistent with past practice to any such individuals who are not directors or officers of any of ConvergeOne or its subsidiaries that do not exceed 5% individually or 3% in the aggregate, (2) amend or adopt any bonus, pension, severance, retention, insurance or other benefit payment or arrangement, (3) accelerate the vesting of or lapsing of restrictions with respect to any stock-based compensation or other long-term incentive compensation, (4) grant any new awards under any Employee Plan, (5) enter into, amend or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization to Parent, (6) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any Employee Plan that is required by applicable legal requirement to be funded or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP or applicable legal requirement or (7) hire or engage any new employee or consultant if such new employee or consultant will receive annual base compensation in excess of $400,000;

 

   

(1) incur, create, modify, assume, endorse or otherwise become liable for any Indebtedness for borrowed money or guarantees thereof (directly, contingently or otherwise), other than (A) any such Indebtedness in an aggregate principal amount not to exceed $2,000,000 (other than Indebtedness under the ConvergeOne revolving credit agreement in the ordinary course of business) or (B) as incurred between ConvergeOne and any of its wholly owned subsidiaries or between any of such wholly owned subsidiaries or guarantees by ConvergeOne of Indebtedness of any wholly owned subsidiary of ConvergeOne, (2) cancel any material Indebtedness owed by any of ConvergeOne or its subsidiaries, (3) repay, redeem, repurchase, repay, defease or cancel any Indebtedness for borrowed money, except as required by the terms thereof or in an amount not in excess of $2,000,000 in the aggregate under the ConvergeOne revolving credit agreement in the ordinary course of business, (4) issue or sell any bonds, debentures, notes, warrants or other rights to acquire any debt securities of any of ConvergeOne or its subsidiaries, or any similar instruments, (5) enter into any “keep well” or other agreement to maintain any financial condition of another person, (6) make any loans, advances or capital contributions to, or investments in, any other person or (7) enter into any arrangement having the economic effect of any of the foregoing;

 

   

(1) transfer, license, sublicense to any person or otherwise covenant not to assert, grant, extend, materially amend or modify, permit to lapse, abandon or fail to preserve any Company Registered IP, Company IP License or other Company IP of ConvergeOne that is material to the business of ConvergeOne or its subsidiaries (excluding non-exclusive licenses of Company IP granted to ConvergeOne’s or its subsidiaries’ customers in the ordinary course of business consistent with past practice) or (2) disclose to any person who has not entered into a reasonably protective confidentiality agreement any Trade Secrets (including any source code for any Proprietary Software);

 

   

merge or consolidate with or acquire or agree to acquire (by merger, consolidation, acquisition of stock or assets, or otherwise) any other person, any equity interest therein or a portion of the assets thereof, except for the acquisition of supplies and other inventory in the ordinary course of business consistent with past practice;

 

   

(1) amend, change, cancel, terminate, renew or extend, or request or agree to any amendment to or change in or cancellation, termination, renewal or extension of, certain material contracts to which ConvergeOne or its subsidiaries is a party or by which ConvergeOne or its subsidiaries or any of its or their properties or assets are bound or affected (each a “Material Contract”) or certain contracts to which ConvergeOne or its subsidiaries is a party pursuant to which ConvergeOne or its subsidiary leases or subleases leased real property from another person (a “Company Lease”), (2) waive, release or assign, in any respect, any rights under any Material Contract or Company Lease or (3) enter into any new contract that would be a Material Contract or Company Lease if it had existed as of the date of the Merger Agreement;

 

   

fail to maintain its books, accounts and records in all material respects in the ordinary course of business consistent with past practice;

 

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terminate, cancel or otherwise fail to keep in force any insurance policies or replacement or revised policies maintained by any of ConvergeOne or its subsidiaries providing insurance coverage with respect to its assets, operations and activities in such amount and scope of coverage as are currently in effect without replacing such coverage with a comparable amount of insurance coverage to the extent available on commercially reasonable terms;

 

   

revalue in any material respect any of its properties or assets, including writing-off notes or accounts receivable, or make any change in accounting methods, principles or practices or change its fiscal year, except to the extent required to comply with any change in GAAP and after consulting with ConvergeOne’s and its subsidiaries’ outside auditors;

 

   

make or change any tax election, change any annual tax accounting period, adopt or change any method of tax accounting, amend any material tax returns or file any claims for material tax refunds, enter into any material closing agreement, settle any material tax claim, audit or assessment or surrender any right to claim a material tax refund, offset or other reduction in tax liability;

 

   

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

 

   

make, authorize, enter into any commitment for or incur any new capital expenditure(s) in an amount in excess of $5,000,000 in the aggregate;

 

   

commence any legal proceeding (other than to enforce its rights under the Merger Agreement and in connection with the Transactions) or, waive, release, assign, pay, discharge, satisfy, settle or compromise, any pending or threatened legal proceeding or any claim, liability or obligation (absolute or accrued, asserted or unasserted, contingent or otherwise) arising from such legal proceeding, or consent to the entry of any order, decree, ruling, judgment, injunction, writ, determination, binding decision, verdict, judicial award or other action that is or has been made, entered, rendered, or otherwise put into effect by or under the authority of any governmental body, other than any waiver, release, assignment, payment, discharge, satisfaction, settlement or compromise in the ordinary course of business consistent with past practice that involves only the payment of monetary damages in an amount not in excess of $2,000,000 in the aggregate or such greater amount reserved therefor or reflected in the Company SEC Documents filed with the SEC prior to the date of the Merger Agreement;

 

   

sell, lease, license, transfer, exchange or swap, mortgage or otherwise pledge or encumber (other than (1) securitizations in the ordinary course of business and consistent with past practice or (2) pursuant to the ConvergeOne existing credit facilities in the ordinary course of business), or authorize the sale, lease, license, transfer, exchange, swap, mortgage, pledge or encumbrance of (other than (1) securitizations in the ordinary course of business and consistent with past practice or (2) pursuant to the ConvergeOne existing credit facilities in the ordinary course of business), or otherwise dispose of, any properties, assets (tangible or intangible) or rights in any single transaction or series of related transactions, except for the sale of inventory and the provision of services in the ordinary course of business consistent with past practice;

 

   

other than as expressly required by the Merger Agreement, enter into any agreement, understanding or arrangement with respect to the voting of equity securities of ConvergeOne or any of its subsidiaries;

 

   

take any action that would reasonably be expected to prevent, materially delay or impair, or omit to take any action where such omission would reasonably be expected to prevent, materially delay or impair, the obtaining of any governmental authorizations of any governmental body to be obtained in connection with the Merger Agreement;

 

   

enter into any new line of business outside of its existing business as of the date of the Merger Agreement;

 

   

enter into, amend, waive or terminate (other than terminations in accordance with their terms) any transaction with ConvergeOne or any of its former, current or future officers, directors, partners,

 

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stockholders, optionholders, managers, members or affiliates or any other persons (other than compensation and benefits and advancement of expenses, in each case, provided in the ordinary course of business consistent with past practice); or

 

   

authorize, resolve or enter into any agreement or agree to do any of the foregoing actions.

Acquisition Proposals. Except as permitted by the Merger Agreement, ConvergeOne and its subsidiaries will, will cause their affiliates to, and will direct their representatives to, cease any solicitation, encouragement, discussions or negotiations with any persons that may be ongoing with respect to an Acquisition Proposal (as defined below) and ConvergeOne and its subsidiaries will not, will cause their affiliates not to, and will direct their representatives not to:

 

   

continue any solicitation, knowing encouragement, knowing facilitation, discussions or negotiations with any persons that may be ongoing with respect to an Acquisition Proposal; and

 

   

directly or indirectly, (1) solicit, initiate or knowingly facilitate or knowingly encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (2) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any non-public information in connection with or for the purpose of knowingly encouraging or facilitating, an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal or (3) enter into any letter of intent, acquisition agreement, agreement in principle or similar agreement with respect to an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal or requiring ConvergeOne and its subsidiaries (or that would require ConvergeOne and its subsidiaries) to abandon, terminate or fail to consummate the Offer, the Merger or the other Transactions.

ConvergeOne agreed to, as soon as reasonably practicable after the date of the Merger Agreement, (1) deliver a written notice to each person (other than Parent, Offeror and their respective representatives) that entered into a confidentiality agreement in connection with its consideration of any Acquisition Proposal, (A) informing such person that ConvergeOne is ending all discussions and negotiations with such person with respect to any Acquisition Proposal, effective as of the date thereof and (B) requesting such person to return or destroy in accordance with the terms of such confidentiality agreement all confidential information furnished prior to the execution of the Merger Agreement to or for the benefit of such person by or on behalf of ConvergeOne and its subsidiaries and (2) terminate all access granted to any such person (other than Parent, Offeror and their respective representatives) to any physical or electronic data room. None of ConvergeOne or its subsidiaries will modify, amend or terminate, or waive, release or assign any provisions of, any confidentiality or standstill agreement (or any similar agreement) to which it is a party relating to any such Acquisition Proposal or any inquiry, offer or proposal in connection therewith and will enforce, to the fullest extent permitted under applicable legal requirements, the provisions of any such agreement. However, ConvergeOne and its subsidiaries will be permitted to waive any standstill agreement (or similar agreement) in order to permit a person to make an Acquisition Proposal to the ConvergeOne Board in a confidential manner, if and only if the ConvergeOne Board determines, upon the recommendation of the ConvergeOne Special Transaction Committee, in good faith (after consultation with its outside legal counsel) that the failure to so waive would be inconsistent with the directors’ fiduciary duties to its holders of Shares under applicable legal requirement.

In addition, if at any time on or after the date of the Merger Agreement and prior to the Acceptance Time, ConvergeOne, one of its subsidiaries, or any of their respective representatives receives an unsolicited written Acquisition Proposal from any person or group of persons, which Acquisition Proposal was made or renewed on or after the date of the Merger Agreement and did not result from a breach of the terms of the Merger Agreement, ConvergeOne and its representatives may take the following actions:

 

   

contact such person or group of persons to clarify the terms and conditions of the Acquisition Proposal and inform such person or group of persons of the non-solicitation terms of the Merger Agreement; and

 

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if the ConvergeOne Board, upon the recommendation of the ConvergeOne Special Transaction Committee, determines in good faith, after consultation with financial advisors and outside legal counsel, that such Acquisition Proposal constitutes or could reasonably be expected to lead to a Superior Offer (as defined below) and the ConvergeOne Board, upon the recommendation of the ConvergeOne Special Transaction Committee, determines in good faith, after consultation with outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties to the holders of Shares under applicable legal requirement, then ConvergeOne and its representatives may:

 

   

furnish, pursuant to (but only pursuant to) a customary confidentiality agreement that (1) contains provisions (other than standstill provisions) that are no less favorable in the aggregate to ConvergeOne than those contained in the Confidentiality Agreement and (2) does not prohibit ConvergeOne or its subsidiaries from providing any information to Parent in accordance with the non-solicitation provision of the Merger Agreement, or otherwise prohibit ConvergeOne or any of its subsidiaries from complying with their respective obligations under the Merger Agreement, information (including non-public information) with respect to ConvergeOne and its subsidiaries to the person or group of persons who has made such Acquisition Proposal. ConvergeOne must also concurrently provide to Parent any non-public information concerning ConvergeOne or its subsidiaries that is provided to any person given such access which was not previously provided to Parent or its representatives; and

 

   

engage in or otherwise participate in discussions or negotiations with the person or group of persons making such Acquisition Proposal.

ConvergeOne has also agreed under the Merger Agreement that it will (1) promptly (and in any event within 24 hours) notify Parent of any Acquisition Proposal or any inquiries, proposals or offers with respect to an Acquisition Proposal, received by ConvergeOne or its subsidiaries or any of their respective representatives, (2) identify the person making such Acquisition Proposal, or inquiry, proposal or offer, and provide to Parent a summary of the material terms and conditions of such Acquisition Proposal or such inquiry, proposal or offer (including copies of any written materials related thereto and any subsequent amendments or modifications thereto), (3) keep Parent reasonably informed of any material developments, discussions or negotiations regarding any Acquisition Proposal on a reasonably prompt basis and (4) promptly upon the request of Parent, reasonably inform Parent of the status of such Acquisition Proposal.

For the purposes of the Merger Agreement, an “Acquisition Proposal” means any bona fide proposal or offer from any person (other than Parent and its affiliates) or “group,” within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transactions or series of related transactions, any direct or indirect:

 

   

acquisition, sale or license of assets or properties of ConvergeOne or its subsidiaries equal to 15% or more of ConvergeOne’s consolidated assets or to which 15% or more of the ConvergeOne’s revenues or earnings are attributable (other than non-exclusive out-bound licenses in the ordinary course of business), in each case, including through the acquisition of securities or assets of one or more of ConvergeOne or its subsidiaries;

 

   

issuance, acquisition or other disposition of 15% or more of the outstanding Shares or voting power of ConvergeOne;

 

   

recapitalization, tender offer or exchange offer that if consummated would result in any person or group beneficially owning 15% or more of the outstanding Shares or other voting securities of ConvergeOne;

 

   

merger, consolidation, amalgamation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving ConvergeOne or any of its subsidiaries that would constitute a “significant subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Exchange Act) of ConvergeOne that if consummated would result in any person or group beneficially owning 15% or more of the outstanding Shares or voting power of ConvergeOne, in each case other than the Transactions; or

 

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any combination of the foregoing types of transactions if the sum of the percentage of consolidated assets, net revenues, net income or Shares or voting power of ConvergeOne involved is 15% or more.

For the purposes of the Merger Agreement, a “Specified Agreement” means a binding written definitive acquisition agreement providing for the consummation of a transaction constituting a Superior Offer.

For the purposes of the Merger Agreement, a “Superior Offer” means a bona fide written Acquisition Proposal made by a third-party after the date of the Merger Agreement that

 

   

did not result from, and is not otherwise attributable to, a breach of the Merger Agreement; and

 

   

the ConvergeOne Board determines, in its good faith judgment, after consultation with its outside legal counsel and its financial advisor(s), is reasonably likely to be consummated in accordance with its terms, taking into account all legal, regulatory, timing and financing aspects (including certainty of closing) of the proposal and the person making the proposal and all other aspects of the Acquisition Proposal, and if consummated, would result in a transaction more favorable to the holders of Shares (solely in their capacity as such) from both a financial point of view and taking into account all legal, regulatory and financing aspects (including certainty of closing) than the transaction contemplated by the Merger Agreement;

provided, however, that for purposes of the definition of “Superior Offer,” the references to “15%” in the definition of Acquisition Proposal will be deemed to be references to “50%.”

ConvergeOne Board of Directors Recommendation. ConvergeOne has represented that the ConvergeOne Board will not, and any committee thereof will not, from the date of the Merger Agreement until the Acceptance Time or the earlier termination of the Merger Agreement in accordance with its terms:

 

   

(A) withdraw (or modify in a manner adverse to Parent or Offeror), or publicly propose to withdraw (or modify in a manner adverse to Parent or Offeror), the ConvergeOne Board Recommendation or (B) approve, recommend or declare advisable, or publicly propose to approve, recommend or declare advisable, any Acquisition Proposal;

 

   

approve, recommend or declare advisable, or propose to approve, recommend or declare advisable, or allow ConvergeOne to execute or enter into any contract with respect to any Acquisition Proposal, or requiring, or reasonably expected to cause, ConvergeOne to abandon, terminate, delay or fail to consummate, or that would otherwise materially impede, interfere with or be inconsistent with, the Transactions (other than a confidentiality agreement described in the section entitled “Acquisition Proposals” above); or

 

   

resolve or agree to take any of the foregoing actions (any such action described in the points above, a “ConvergeOne Adverse Recommendation Change”).

Notwithstanding anything to the contrary set forth in the preceding paragraph, at any time prior to the Acceptance Time, if ConvergeOne has received a written Acquisition Proposal (which Acquisition Proposal did not arise out of a breach of the Merger Agreement) from any person that has not been withdrawn and after consultation with financial advisors and outside legal counsel and the ConvergeOne Board determines, upon the recommendation of the ConvergeOne Special Transaction Committee, in good faith, that such Acquisition Proposal is a Superior Offer and continues to be a Superior Offer, the ConvergeOne Board may (x) make a ConvergeOne Adverse Recommendation Change or (y) terminate the Merger Agreement in accordance with its terms to enter into a Specified Agreement with respect to such Superior Offer, if and only if:

 

   

the ConvergeOne Board determines in good faith, upon the recommendation of the ConvergeOne Special Transaction Committee, after consultation with the ConvergeOne’s outside legal counsel, that the failure to do so would be inconsistent with the fiduciary duties of the ConvergeOne Board to the holders of Shares under applicable legal requirements;

 

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ConvergeOne has given Parent prior written notice of its intention to consider making a ConvergeOne Adverse Recommendation Change or terminate the Merger Agreement pursuant to its terms at least three business days prior to making any such ConvergeOne Adverse Recommendation Change or termination (a “Determination Notice”) (which notice will not constitute a ConvergeOne Adverse Recommendation Change);

 

   

(1) ConvergeOne has provided Parent a summary of the material terms and conditions of the Acquisition Proposal (including copies of any written materials related thereto) in accordance with the terms of the Merger Agreement, (2) ConvergeOne has given Parent the three business days after the Determination Notice to propose revisions to the terms of the Merger Agreement or make another proposal and has made its representatives reasonably available to negotiate in good faith with Parent (to the extent Parent desires to negotiate) with respect to such proposed revisions or other proposal, if any, and (3) after considering the results of any such negotiations and giving effect to the proposals made by Parent, if any, after consultation with financial advisors and outside legal counsel, the ConvergeOne Board determined, in good faith, upon the recommendation of the ConvergeOne Special Transaction Committee, that such Acquisition Proposal is a Superior Offer and that the failure to make the ConvergeOne Adverse Recommendation Change or terminate the Merger Agreement pursuant to its terms would continue to be inconsistent with the fiduciary duties of the ConvergeOne Board to the holders of Shares under applicable legal requirements; and

 

   

in connection with a termination of the Merger Agreement pursuant to its terms, ConvergeOne pays or causes to be paid to Parent the Termination Fee payable to pursuant to the terms of the Merger Agreement, prior to or concurrently with such termination. For the avoidance of doubt, the aforementioned provisions will also apply to any material amendment to any financial terms or other material terms of such Acquisition Proposal and require a new Determination Notice, except that the references to three business days will be deemed to be two business days.

Change in Circumstance. At any time prior to the Acceptance Time, other than in connection with an Acquisition Proposal, the ConvergeOne Board may make a ConvergeOne Adverse Recommendation Change in response to a Change in Circumstance, if and only if

 

   

the ConvergeOne Board determines in good faith, upon the recommendation of the ConvergeOne Special Transaction Committee, after consultation with ConvergeOne’s outside legal counsel, that the failure to do so would be inconsistent with the fiduciary duties of the ConvergeOne Board to the holders of Shares under applicable legal requirements;

 

   

ConvergeOne has given Parent a Determination Notice at least three business days prior to making any such ConvergeOne Adverse Recommendation Change; and

 

   

(1) ConvergeOne has specified the Change in Circumstance in reasonable detail, (2) ConvergeOne has given Parent the three business days after the Determination Notice to propose revisions to the terms of the Merger Agreement or make another proposal, and has made its representatives reasonably available to negotiate in good faith with Parent (to the extent Parent desires to do so) with respect to such proposed revisions or other proposal, if any and (3) after considering the results of any such negotiations and giving effect to the proposals made by Parent, if any, after consultation with outside legal counsel, the ConvergeOne Board determines, in good faith, upon the recommendation of the ConvergeOne Special Transaction Committee, that the failure to make the ConvergeOne Adverse Recommendation Change in response to such Change in Circumstance would continue to be inconsistent with the fiduciary duties of the ConvergeOne Board to the holders of Shares under applicable legal requirements.

The above provisions will also apply to any material change to the facts and circumstances relating to such Change in Circumstance and require a new Determination Notice, except that the references to three business days will be deemed to be two business days.

 

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For the purposes of the Merger Agreement, a “Change in Circumstance” means any material event or development or material change in circumstances that (1) was neither known to the ConvergeOne Board nor reasonably foreseeable as of or prior to the date of the Merger Agreement and (2) does not relate to any Acquisition Proposal; however, none of the following will be deemed in and of themselves, either alone or in combination, to constitute, and none of the following will be taken into account in determining whether there is, a Change in Circumstance:

 

   

any change in the market price or trading volume of ConvergeOne’s stock;

 

   

any event, circumstance, change or effect arising directly or indirectly from or otherwise relating to fluctuations in the value of any currency;

 

   

the failure or success of ConvergeOne to meet internal or analysts’ expectations or projections or the results of operations of ConvergeOne; and

 

   

developments with respect to current or potential products and/or services that are in ConvergeOne’s and its subsidiaries’ existing pipeline and/or business plans.

Tender Offer Rules. Nothing contained in the Merger Agreement will prohibit ConvergeOne from (1) taking and disclosing to its stockholders a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, (2) making any disclosure to the holders of Shares that is required by applicable legal requirements or (3) making any “stop, look and listen” communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act. However, ConvergeOne will not effect, or disclose pursuant to such rules or legal requirements or otherwise take a position which constitutes, a ConvergeOne Adverse Recommendation Change unless specifically permitted pursuant to the terms of the Merger Agreement.

Security Clearances. From the date of the Merger Agreement until the earlier of the Acceptance Time or the termination of the Merger Agreement in accordance with its terms, ConvergeOne will (1) ensure that each of the Defense Security Service of the United States Department of Defense and any other governmental body responsible for the maintenance of ConvergeOne’s and its subsidiaries’ facility security clearances, if any, will not terminate, suspend, revoke or in any way materially change either the government contracts with ConvergeOne or its subsidiaries or such parties’ facility security clearance with respect to such government contracts as a result of the Merger Agreement or the Transactions and (2) continue to take any and all requisite steps to and otherwise cause each of its subsidiaries to obtain or retain the requisite facility and personnel security clearances to own and operate ConvergeOne and its subsidiaries (and any successor thereto) and their respective businesses as currently conducted and as currently contemplated to be conducted without delay or interruption.

Merger without a Stockholders’ Meeting. The parties to the Merger Agreement have agreed that as promptly as practicable following the consummation of the Offer, the parties will take all necessary and appropriate actions to cause the Merger to become effective without a meeting of the holders of Shares, in accordance with Section 251(h) of the DGCL.

Access and Investigation. From the date of the Merger Agreement until the earlier of the Acceptance Time or the termination of the Merger Agreement in accordance with its terms, upon reasonable advance notice to ConvergeOne, ConvergeOne and its subsidiaries will, and will cause their respective representatives to: (1) provide Parent and Parent’s representatives with reasonable access during normal business hours of ConvergeOne to ConvergeOne’s representatives, personnel, and assets and to all existing books, records, tax Returns, work papers and other documents and information relating to ConvergeOne and its subsidiaries and (2) promptly provide Parent and Parent’s representatives with all reasonably requested information regarding the business of ConvergeOne and its subsidiaries, including copies of the existing books, records, tax returns, work papers and other documents and information relating to ConvergeOne and its subsidiaries, and with such additional financial, operating and other data and information regarding ConvergeOne and its subsidiaries, as Parent may reasonably request. However, any such access will be conducted at Parent’s expense, at a reasonable

 

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time, under the supervision of appropriate personnel of ConvergeOne or its subsidiaries and in such a manner as not to unreasonably interfere with the normal operation of the business of ConvergeOne or its subsidiaries or create material risk of damage or destruction to any material assets or property. Any investigation will be subject to ConvergeOne’s and its subsidiaries’ reasonable security measures and insurance requirements and will not include invasive testing. ConvergeOne and its subsidiaries will not be required to disclose any information if, on advice of outside legal counsel, such disclosure would (1) jeopardize any attorney-client or other legal privilege (so long as ConvergeOne and its subsidiaries have reasonably cooperated with Parent and otherwise used reasonable best efforts to permit such inspection of or to disclose such information on a basis that does not waive such privilege with respect thereto) or (2) contravene any applicable legal requirement or binding agreement entered into prior to the date of the Merger Agreement (including any confidentiality agreement to which ConvergeOne, its subsidiaries or any of their respective affiliates is a party) (so long as ConvergeOne and its subsidiaries have reasonably cooperated with Parent and otherwise used reasonable best efforts to develop an alternative to permit such inspection of or to disclose such information on a basis that does not contravene such legal requirement or binding agreement). Any information will be disclosed subject to execution of a joint defense agreement in customary form, and disclosure may be limited to external counsel for Parent, to the extent ConvergeOne and its subsidiaries determine, on the advice of outside legal counsel, that doing so may be reasonably required for the purpose of complying with applicable antitrust laws. With respect to the information disclosed pursuant to the terms of the Merger Agreement, Parent will comply with, and will instruct Parent’s representatives to comply with, all of its obligations under the Confidentiality Agreement (as defined below). All requests for information made pursuant to the Merger Agreement will be directed to the executive officer or other person designated by ConvergeOne. No access, review or investigation pursuant to the Merger Agreement will affect any of the representations, warranties, covenants, rights or remedies, or the conditions to the obligations of, the parties thereunder.

Filings, Consents and Approvals. Each of the parties to the Merger Agreement has agreed to use its reasonable best efforts to take, or cause to be taken, all actions, to file, or cause to be filed, all documents, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things reasonably necessary, proper or advisable under the HSR Act, under other applicable antitrust laws or pursuant to 31 C.F.R. Part 801 to consummate and make effective the Transactions as promptly as practicable.

In addition, each of the parties to the Merger Agreement has agreed to promptly take and cause their respective subsidiaries to take, all actions and steps requested or required by any governmental body as a condition to granting any consent, permit, authorization, waiver, clearance or approval, and to cause the prompt expiration or termination of any applicable waiting period and to resolve objections, if any, of the FTC, the United States Department of Justice, or other governmental bodies of any other jurisdiction for which consent, permit, authorization, waiver, clearance, approval and expiration or termination of the waiting period is sought with respect to the Transactions, so as to obtain such consent, permit, authorization, waiver, clearance, approval or termination of the waiting period under the HSR Act, such other antitrust laws or pursuant to 31 C.F.R. Part 801, and to avoid the commencement of a lawsuit by the FTC, the United States Department of Justice or other governmental bodies under such other antitrust laws, and to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any suit or proceeding which would otherwise have the effect of preventing the Closing or delaying the Acceptance Time beyond the Expiration Date, including (1) negotiating, committing to and effecting, by consent decree, hold separate order or otherwise, the sale, lease, license, divestiture or disposition of any assets, rights, product lines, or businesses of ConvergeOne, Parent or any of their respective subsidiaries, (2) terminating existing relationships, contractual rights or obligations of ConvergeOne, Parent or any of their respective subsidiaries, (3) terminating any venture or other arrangement, (4) creating any relationship, contractual rights or obligations of ConvergeOne, Parent or any of their respective subsidiaries, (5) effectuating any other change or restructuring of ConvergeOne, Parent or any of their respective subsidiaries and (6) otherwise taking or committing to take any actions with respect to the businesses, product lines or assets of ConvergeOne, Parent or any of their respective subsidiaries; provided, that ConvergeOne, Parent, Offeror and their respective subsidiaries will only be required to take or commit to take any such action, or agree to any such condition or restriction, if such action, commitment, agreement, condition or restriction is

 

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binding on such applicable persons only in the event the Closing occurs. The Parties will defend through litigation on the merits any claim asserted in court by any party, including any governmental body, under antitrust laws in order to avoid entry of, or to have vacated or terminated, any decree, order or judgment (whether temporary, preliminary or permanent) that could restrain, delay, or prevent the Closing by the End Date; provided that such litigation in no way limits the obligation of Offeror and Parent to take all actions and steps to eliminate each and every impediment identified in the Merger Agreement.

Subject to the terms and conditions of the Merger Agreement, each of the parties hereto will (and will cause their respective subsidiaries, if applicable, to): (1) promptly, but in no event later than ten business days after the date hereof, make an appropriate filing of all Notification and Report forms as required by the HSR Act and pursuant to 31 C.F.R. Part 801, in each case, with respect to the Transactions; (2) as promptly as reasonably practicable after the date hereof, make all other filings, notifications or other consents as may be required to be made or obtained by such party because it is also deemed necessary, proper or advisable under applicable antitrust laws and (3) cooperate with each other in determining whether, and promptly preparing and making, any other filings or notifications or other consents required to be made with, or obtained from, any other governmental bodies in connection with the Transactions.

Without limiting the generality of anything contained in this provision, from the date of the Merger Agreement until the earlier of the Acceptance Time or the termination of the Merger Agreement in accordance with its terms, each party hereto will use its reasonable best efforts to (1) cooperate in all respects and consult with each other in connection with any filing or submission in connection with any investigation or other inquiry, including allowing the other parties to have a reasonable opportunity to review in advance and comment on drafts of filings and submissions, (2) give the other parties prompt notice of the making or commencement of any request, inquiry, investigation, action or legal proceeding brought by a governmental body or brought by a third party before any governmental body, in each case, with respect to the Transactions, (3) keep the other parties informed as to the status of any such request, inquiry, investigation, action or legal proceeding, (4) promptly inform the other parties of any material communication to or from the FTC, the United States Department of Justice or any other governmental body in connection with any such request, inquiry, investigation, action or legal proceeding, (5) upon request, promptly furnish to the other parties, subject to an appropriate confidentiality agreement to limit disclosure to outside counsel and consultants retained by such counsel, with copies of documents provided to or received from any governmental body in connection with any such request, inquiry, investigation, action or legal proceeding, provided, however that such material may be redacted as necessary to (A) comply with contractual arrangements, (B) address legal privilege or confidentiality concerns and (C) comply with applicable legal requirement; provided, further that such party will use commercially reasonable efforts to find alternative means of disclosing any such information restricted by confidentiality concerns or attorney-client privilege or prohibited under applicable legal requirement or by the terms of any agreement to which Parent, Offeror, ConvergeOne or any of its subsidiaries is a party, (6) subject to an appropriate confidentiality agreement to limit disclosure to counsel and outside consultants retained by such counsel, and to the extent reasonably practicable, consult in advance and cooperate with the other parties and consider in good faith the views of the other parties in connection with any substantive communication, analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal to be made or submitted in connection with any such request, inquiry, investigation, action or legal proceeding and (7) except as may be prohibited by any governmental body or by any legal requirement, in connection with any such request, inquiry, investigation, action or legal proceeding in respect of the Transactions, each party hereto will provide advance notice of and permit authorized representatives of the other party to be present at each meeting or conference relating to such request, inquiry, investigation, action or legal proceeding and to have access to and be consulted in advance in connection with any argument, opinion or proposal to be made or submitted to any governmental body in connection with such request, inquiry, investigation, action or legal proceeding. Each party will supply as promptly as practicable such information, documentation, other material or testimony that may be reasonably requested by any governmental body, including by complying at the earliest reasonably practicable date with any reasonable request for additional information, documents or other materials received by any party or any of their respective subsidiaries from any governmental body in connection with such applications or filings for the

 

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transactions contemplated by the Merger Agreement. Offeror will pay all filing fees under the HSR Act and for any filings required under foreign antitrust laws, but ConvergeOne will bear its own costs for the preparation of any such filings. Neither party will commit to or agree with any governmental body to stay, toll or extend any applicable waiting period under the HSR Act, or pull and refile under the HSR Act, or other applicable antitrust laws, without the prior written consent of the other. Notwithstanding anything in the Merger Agreement to the contrary, (x) Parent and its affiliates will not be obligated to provide or disclose to any other party, and no other party will have the right to receive or review, any information containing Parent’s or its affiliates’ confidential information or business secrets and (y) Parent and Offeror will have the right to make (after considering in good faith any objections raised by ConvergeOne) the final decision with respect to any decision, strategy, plan, course of action or other matters relating to effecting the obligations set forth in the Merger Agreement with respect to any objections, if any, that a governmental body in the United States or any other jurisdiction may assert with respect to the Transactions on behalf of Parent, Offeror and ConvergeOne to the fullest extent applicable.

Parent has agreed that it will not acquire or agree to acquire any assets, business or any person, whether by merger, consolidation, purchasing a substantial portion of the assets of or equity in any person or by any other manner or engage in any other transaction or take any other action, if the entering into of an agreement relating to or the consummation of such acquisition, merger, consolidation or purchase or other transaction or action would reasonably be expected to (1) impose any delay in the expiration or termination of any applicable waiting period or impose any delay in the obtaining of, or increase the risk of not obtaining, any authorization, consent, clearance, approval or order of a governmental body necessary to consummate the Offer, the Merger and the other transactions contemplated by the Merger Agreement, including any approvals and expiration of waiting periods pursuant to the HSR Act or any other applicable legal requirements, (2) increase the risk of any governmental body entering, or increase the risk of not being able to remove or successfully challenge, any permanent, preliminary or temporary injunction or other order, decree, decision, determination or judgment that would delay, restrain, prevent, enjoin or otherwise prohibit consummation of the Offer, the Merger and the other transactions contemplated by the Merger Agreement or (3) otherwise delay or impede the consummation of the Offer, the Merger and the other transactions contemplated by the Merger Agreement.

Notwithstanding anything in the Merger Agreement to the contrary, no party (or their respective affiliates, as applicable) will be required, nor will any of ConvergeOne or its subsidiaries be permitted without Parent’s prior written consent, to (1) undertake any efforts, or to take or consent to any action with respect to, any business, assets, properties or operations of Parent or its affiliates (other than ConvergeOne and its subsidiaries following the consummation of the Transactions) and (2) agree to the payment of a “consent fee, “profit sharing” payment or other consideration (including increased or accelerated payments) or the provision of additional security (including a guarantee) in connection with the Offer or the Merger, including in connection with obtaining any consent or waiver pursuant to any contract.

State Takeover Statutes. If any state takeover law may become, or may purport to be, applicable to the transactions, each of Parent and ConvergeOne and the members of their respective boards of directors will use their respective reasonable best efforts to grant such approvals and take such actions as are necessary so that the transactions contemplated by the Merger Agreement may be consummated as promptly as practicable on the terms and conditions contemplated by the Merger Agreement and otherwise act to lawfully eliminate the effect of any state takeover law on any of the Transactions.

Indemnification of Officers and Directors. All rights to indemnification, advancement of expenses and exculpation ConvergeOne existing in favor of those persons who are directors and officers of ConvergeOne and its subsidiaries as of the date of the Merger Agreement or have been directors and officers of ConvergeOne and its subsidiaries in the past (the “Indemnified Persons”) for their acts and omissions occurring prior to the Effective Time, as provided in the certificate of incorporation and bylaws (or applicable governing documents) of each of ConvergeOne and its subsidiaries (as in effect as of the date of the Merger Agreement) and as provided in the indemnification agreements between ConvergeOne and each of its subsidiaries and said Indemnified Persons (as set forth on the Company Disclosure Schedule and in effect as of the date of the Merger Agreement) in the

 

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forms made available by ConvergeOne to Parent or Parent’s representatives prior to the date of the Merger Agreement, will survive the Merger and will not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of such Indemnified Persons, and will be observed by the Surviving Corporation and its subsidiaries to the fullest extent available under Delaware law for a period of six years from the Effective Time, and any claim made in writing pursuant to such rights within such six-year period will continue to be subject to the terms of the Merger Agreement and the rights provided thereunder until disposition of such claim.

From the Effective Time until the sixth anniversary of the date on which the Effective Time occurs, the Surviving Corporation and its subsidiaries (together with their successors and assigns, the “Indemnifying Parties”) will, to the fullest extent permitted under applicable legal requirements, indemnify and hold harmless each Indemnified Person in his or her capacity as an officer or director of ConvergeOne and its subsidiaries against all losses, claims, damages, liabilities, fees, expenses, judgments or fines incurred by such Indemnified Person as an officer or director of ConvergeOne and its subsidiaries in connection with any pending or threatened legal Proceeding based on or arising out of, in whole or in part, the fact that such Indemnified Person is or was a director or officer of ConvergeOne or its subsidiaries at or prior to the Effective Time and pertaining to any and all matters pending, existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, including any such matter arising under any claim with respect to the transactions contemplated in the Merger Agreement. Without limiting the foregoing, from the Effective Time until the sixth anniversary of the date on which the Effective Time occurs, the Indemnifying Parties will also, to the fullest extent permitted under applicable legal requirements, advance reasonable and documented out-of-pocket costs and expenses (including reasonable and documented attorneys’ fees) incurred by the Indemnified Persons in connection with matters for which such Indemnified Persons are eligible to be indemnified pursuant to the Merger Agreement within 15 days after receipt by Parent of a written request for such advance, subject to the execution by such Indemnified Persons of appropriate undertakings in favor of the Indemnifying Parties to repay such advanced costs and expenses if it is ultimately determined in a final and non-appealable judgment of a court of competent jurisdiction that such Indemnified Person is not entitled to be indemnified under the Merger Agreement.

From the Effective Time until the sixth anniversary of the Effective Time, the Surviving Corporation will maintain, and Parent will cause Surviving Corporation to maintain, in effect, the existing policies of directors’ and officers’ liability insurance maintained by ConvergeOne and its subsidiaries as of the date of the Merger Agreement (accurate and complete copies of which has been made available by ConvergeOne to Parent or Parent’s representatives prior to the date of the Merger Agreement) for the benefit of the Indemnified Persons who are currently covered by such existing policies with respect to their acts and omissions occurring prior to the Effective Time in their capacities as directors and officers of ConvergeOne and its subsidiaries (as applicable), on terms with respect to coverage, deductibles and amounts no less favorable in the aggregate than the existing policies (or at or prior to the Effective Time Parent or ConvergeOne and its subsidiaries may (through a nationally recognized insurance broker approved by Parent (such approval not to be unreasonably withheld, delayed or conditioned)) purchase a six-year “tail” policy for the existing policies effective as of the Effective Time) and if such “tail policy” has been obtained, it will be deemed to satisfy all obligations to obtain and/or maintain insurance pursuant to the terms of the Merger Agreement. However, in no event will the Surviving Corporation be required to expend in any one year an amount in excess of 300% of the annual premium currently payable by ConvergeOne and its subsidiaries with respect to such current policies, it being understood that if the annual premiums payable for such insurance coverage exceeds such amount, Parent will be obligated to cause the Surviving Corporation to obtain a policy with the greatest coverage available for a cost equal to such amount. Additionally, ConvergeOne and its subsidiaries’ insurance broker as of the date of the Merger Agreement will be deemed to be a nationally recognized insurance broker.

In the event Parent or the Surviving Corporation or any of their respective successors or assigns (1) consolidates with or merges into any other person and will not be the continuing or surviving corporation or entity of such consolidation or merger or (2) transfers all or substantially all of its properties and assets to any

 

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person, then, and in each such case, Parent will ensure that the successors and assigns of Parent or the Surviving Corporation, as the case may be, or at Parent’s option, Parent, will assume the obligations set forth in the “Indemnification of Officers and Directors” provision of the Merger Agreement.

The provisions of the “Indemnification of Officers and Directors” provision of the Merger Agreement will survive the acceptance of Shares for payment pursuant to the Offer and the consummation of the Merger and are (1) intended to be for the benefit of, and will be enforceable by, each of the Indemnified Persons and their successors, assigns and heirs and (2) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. Unless required by applicable legal requirement, the “Indemnification of Officers and Directors” provision of the Merger Agreement may not be amended, altered or repealed after the Acceptance Time in such a manner as to adversely affect the rights of any Indemnified Person or any of their successors, assigns or heirs without the prior written consent of the affected Indemnified Person.

Employee Matters. The Merger Agreement provides that ConvergeOne will take all actions (including obtaining any necessary determinations and/or resolutions of the ConvergeOne Board or a committee thereof) that may be necessary (under the ConvergeOne Equity Plans and award agreements pursuant to which ConvergeOne Options are outstanding) to (1) cancel, extinguish and terminate for no consideration or payment, effective as of and contingent upon the Effective Time, each ConvergeOne Option that is outstanding and unexercised as of immediately before the Effective Time in accordance with Merger Agreement and (2) terminate each Company Equity Plan effective as of and contingent upon the Effective Time, in each case, with no obligations or liabilities to ConvergeOne and its subsidiaries, Parent or Offeror remaining thereunder

Prior to the Acceptance Time, ConvergeOne will take all actions necessary or required under the Employee Stock Purchase Plan (the “ESPP”) and legal requirements to, contingent on the Effective Time, (1) ensure that no new offering will be authorized or commenced on or after the date of the Merger Agreement and (2) with respect to each offering in existence under the ESPP on the date of the Merger Agreement, provide that no participant may increase his or her rate of deferral and cause the last business day prior to the Acceptance Time to be treated as the last day of such offering and the final purchase date of the then-current purchase period under such offering and use the ESPP participants’ accumulated contributions to purchase shares under the ESPP on such date, and make such other pro-rata adjustments as may be necessary to reflect the shortened offering and shortened purchase period but otherwise treat such shortened offering and purchase period as fully effective and completed for all purposes under the ESPP. ConvergeOne will terminate the ESPP in its entirety effective as of the Acceptance Time, contingent upon the Effective Time. Prior to the Acceptance Time, ConvergeOne will take all actions (including, if appropriate, amending the terms of the ESPP) that ConvergeOne determines are reasonably necessary to give effect to the transactions contemplated by the Merger Agreement.

Prior to the Acceptance Time, ConvergeOne will take all actions that may be necessary to cancel, extinguish and terminate the Unit Purchase Option, dated April 2017, in favor of EarlyBird Capital, Inc., effective as of, and contingent upon, the Effective Time, with no obligations or liabilities to ConvergeOne and its subsidiaries, Parent or Offeror remaining thereunder.

Section 16 of the Exchange Act. ConvergeOne will take appropriate action to approve, for purposes of Section 16(b) of the Exchange Act, the disposition and cancellation or deemed disposition and cancellation of Shares and ConvergeOne Options in the Transactions by applicable individuals and to cause such dispositions and/or cancellations to be exempt under Rule 16b-3 promulgated under the Exchange Act.

Section 14d-10 of the Exchange Act. Prior to the Acceptance Time and to the extent permitted by applicable legal requirements, the Compensation Committee of the ConvergeOne Board will approve, as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the Exchange Act, each agreement, arrangement or understanding between ConvergeOne or any of its affiliates and any of the officers, directors or employees of ConvergeOne that are effective as of the date of the Merger

 

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Agreement or will be entered into pursuant to which compensation, severance or other benefit is paid to such officer, director or employee and will take all other action reasonably necessary to satisfy the requirements of the non-exclusive safe harbor set forth in Rule 14d-10(d)(2) under the Exchange Act.

Stock Exchange Delisting; Deregistration. The Surviving Corporation will cause the ConvergeOne’s securities to be de-listed from Nasdaq and de-registered under the Exchange Act as promptly as practicable following the Effective Time and ConvergeOne will, prior to the Effective Time, reasonably cooperate with Parent with respect thereto.

Financing. Prior to the Acceptance Time, each of Parent and Offeror will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things, in each case, within its control, necessary, proper or advisable to arrange the Debt Financing on the terms and conditions described in the Debt Commitment Letters (including the “flex” provisions), including using its commercially reasonable efforts (1) to maintain in effect the Debt Commitment Letters, (2) to satisfy on a timely basis, to the extent within its control, all terms and conditions applicable to Parent to obtaining the Debt Financing set forth therein and (3) to enter into definitive agreements in form and substance reasonably satisfactory to Parent with respect thereto on the terms and conditions not less favorable than those contemplated by the Debt Commitment Letters (including the “flex” provisions).

Parent or Offeror may replace or amend the Debt Commitment Letters to add lenders, lead arrangers, bookrunners, syndication agents or similar entities who had not executed the Debt Commitment Letters as of the date of the Merger Agreement, or otherwise amend any terms or conditions of the Debt Commitment Letters so long as the terms thereof (x) would not reasonably be expected to make the funding of the Debt Financing less likely to occur or materially delay or prevent the Closing or (y) are not with respect to such portion of the Debt Financing that is necessary to consummate the Transactions including to pay the aggregate Offer Price and the Merger Consideration and the fees and expenses of Parent related to the Transactions, and conditionality less beneficial to ConvergeOne than those in the Debt Commitment Letters as in effect on the date of the Merger Agreement.

In the event any portion of the Debt Financing becomes unavailable on substantially the terms and conditions contemplated in the Debt Commitment Letters (including the “flex “ provisions), and such portion of the Debt Financing is necessary to consummate the Transactions, including to pay the aggregate Offer Price and the Merger Consideration and the fees and expenses of Parent related to the Transactions, Parent will as promptly as reasonably practicable notify ConvergeOne and will use its commercially reasonable efforts to arrange to obtain alternative debt financing from alternative debt sources on financial terms no less favorable, in the aggregate, to Parent than those terms set forth in the Debt Commitment Letters and upon other terms and conditions not materially less favorable, in the aggregate, than those in the Debt Commitment Letters, in an aggregate amount sufficient to consummate the transactions contemplated hereby promptly following the occurrence of such event, and in such event all references to “Debt Financing” will be deemed to reference such alternative debt financing. Parent will deliver to ConvergeOne true and complete copies of all agreements pursuant to which any such alternative source has committed to provide Parent with any portion of such alternative financing (except that the fees and other commercially sensitive matters specified in any fee letter may have been redacted, none of which redactions will relate to the amount, conditionality, enforceability or termination of such alternative financing). ConvergeOne acknowledges and agrees that that the failure by Parent or Offeror to obtain the Debt Financing following compliance with this provision will not, in and of itself, be considered a breach of the Merger Agreement for any purpose. Parent will give ConvergeOne prompt notice upon having knowledge of any actual or potential material breach by any party to any of the Commitment Letters or any actual or potential termination of any of the Commitment Letters.

Prior to the Effective Time, ConvergeOne will, and will cause each of its subsidiaries to, use its commercially reasonable efforts to cause each of their respective representatives to, as applicable, provide all cooperation reasonably requested by Parent or Offeror in connection with the Debt Financing or any permitted

 

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replacement, amended, modified or alternative financing for the transactions contemplated by the Merger Agreement (provided that such requested cooperation does not unreasonably interfere with the ongoing operations of ConvergeOne), including using their respective commercially reasonable efforts to cause such representatives (1) to be available on a customary basis to meet with prospective lenders, rating agencies and investors in presentations, meetings, road shows and due diligence sessions and reasonably cooperate with the marketing efforts of Parent and Offeror and the Debt Financing sources for any such Debt Financing, (2) to assist with the preparation of disclosure documents, offering documents, private placement memoranda, bank information memoranda, rating agency presentations, projections and similar documents in connection therewith (including ConvergeOne timely executing and delivering one or more customary authorization and representation letters that are customary in the Debt Financing), (3) to furnish Parent, Offeror and the Debt Financing sources with financial statements and financial and other pertinent information regarding ConvergeOne and its subsidiaries as may be reasonably requested by Parent or Offeror to consummate the financings contemplated by the Debt Commitment Letters, (4) facilitating the execution and delivery of any definitive financing documentation, security documents, hedging arrangements, customary certificates or other documents as may be reasonably requested by Parent or Offeror in connection with the Debt Financing, in each case which will become effective only on or after the Effective Time, (5) to take such reasonable actions as may be required to facilitate the pledge of collateral to secure the Debt Financing (including cooperation in connection with the pay-off of the ConvergeOne existing credit facilities and the release of encumbrances related thereto), (6) to promptly provide Parent and Offeror with a copy of any borrowing base certificate and any other notice, certificate or document relating to the calculation of the borrowing base, in each case, delivered to the agent or lenders under ConvergeOne’s ABL credit facility, (7) to assist Offeror in obtaining appraisals and field exams required in connection with the Debt Financing upon reasonable prior notice during normal business hours and in completing any borrowing base certificate required in connection with the Debt Financing, (8) to furnish all documentation and other information required by governmental authorities under applicable “know your customer” and anti-money laundering laws, including the U.S. Patriot Act of 2001 within the timeframes contemplated by the Debt Commitment Letters, (9) to cooperate with the Debt Financing sources’ due diligence, to the extent customary and reasonable, including delivery by Parent or Offeror of corporate organizational documents, good standing certificates, lien searches and other diligence items contemplated by the Debt Commitment Letters and (10) to take all other actions necessary to permit the consummation of the Debt Financing. ConvergeOne hereby consents to the use of its and its subsidiaries’ logos in connection with the Debt Financing, provided, that such logos are used solely in a manner that does not violate any existing contractual obligation of ConvergeOne and is not intended to, nor reasonably likely to, harm or disparage ConvergeOne or its subsidiaries. Offeror will (x) promptly upon any request by any of ConvergeOne or its subsidiaries reimburse such entities for all reasonable and documented out-of-pocket fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by any such entity or any of their respective representatives in connection with their compliance with this provision and (y) indemnify and hold harmless ConvergeOne and its subsidiaries and their respective affiliates and representatives from and against any and all losses suffered or incurred by them in connection with the arrangement of the Debt Financing and any information utilized in connection therewith, except to the extent that any of the foregoing arise from the bad faith, negligence or willful misconduct of ConvergeOne or any of its subsidiaries, as applicable and in no event will “losses” (1) include lost profits, lost revenues or lost opportunities, (2) include consequential, punitive or other special damages regardless of the legal theory, except to the extent any such losses are payable by such indemnified persons to an unaffiliated third party in connection with a third party claim or (3) be calculated based on any multiple of lost earnings or other similar methodology used to value equity of ConvergeOne and its subsidiaries or any other person. Neither ConvergeOne nor any of its subsidiaries will be required to pay any commitment or other similar fee in connection with the Financing that are not subject to the expense reimbursement provision above. Additionally, neither ConvergeOne nor any of its subsidiaries or their respective officers, directors or employees will be required to execute, enter into or perform any agreement with respect to the Financing that is not contingent upon the Closing or that would be effective prior to the Closing (other than the authorization and representation letters referred to above). Notwithstanding anything to the contrary elsewhere in the Merger Agreement, ConvergeOne will not be required to make any representations, warranties or certifications as to which, after the

 

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ConvergeOne’s use of commercially reasonable efforts to cause such representation, warranty or certification to be true, ConvergeOne has determined that such representation, warranty or certification is not true.

Other Covenants. The Merger Agreement contains other customary covenants and agreements, including, but not limited to, covenants related to public announcements, employee communications and certain litigation.

Conditions to the Merger. The obligations of the parties to effect the Merger are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

 

   

there will not have been issued by any court of competent jurisdiction and remain in effect any temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Merger, nor will any legal requirement or order have been promulgated, entered, enforced, enacted, issued or deemed applicable to the Merger by any Governmental Body which directly or indirectly prohibits, or makes illegal the consummation of the Merger; provided, however, that no party will be permitted to invoke this condition to the Closing unless it has taken all actions required under the Merger Agreement to have any such order lifted; and

 

   

Offeror (or Parent on Offeror’s behalf) will have accepted for payment all of the Shares validly tendered pursuant to the Offer and not properly withdrawn.

Termination. The Merger Agreement may be terminated prior to the Effective Time:

 

   

by mutual written consent of Parent and ConvergeOne at any time prior to the Acceptance Time;

 

   

by either Parent or ConvergeOne, if:

 

   

the Offer has expired pursuant to its terms (including any extensions thereof permitted or required pursuant to the Merger Agreement) without Offeror’s acceptance for payment of Shares validly tendered and not properly withdrawn pursuant to the Offer in accordance with the Merger Agreement;

 

   

a court of competent jurisdiction or other governmental body has issued an order, or has enacted any legal requirement or taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the acceptance for payment of Shares pursuant to the Offer or the Merger or making consummation of the Offer or the Merger illegal, which legal requirement, order or other action will be final and nonappealable;

 

   

the Acceptance Time has occurred on or prior 5 p.m. Eastern time on February 4, 2019 (the “End Date”) (such termination, an “End Date Termination”); or

provided, however, that in each of the foregoing termination provisions, a party will not be permitted to terminate the Merger Agreement pursuant to such termination right if the failure of the condition to occur or be satisfied prior to the specified time is caused by the failure on the part of such party to perform in any material respect any covenant or obligation in the Merger Agreement required to be performed by such party at such specified time.

 

   

by ConvergeOne:

 

   

at any time prior to the Acceptance Time, in order to accept a Superior Offer and concurrently with such termination enters into a Specified Agreement; provided that ConvergeOne (1) has complied in all material respects with the requirements of the non-solicitation and ConvergeOne Board Recommendation provisions of the Merger Agreement and (2) pays the Termination Fee (such termination, a “Superior Offer Termination”);

 

   

at any time prior to the Acceptance Time, if a breach of any representation or warranty contained in the Merger Agreement or failure to perform any covenant or obligation in the Merger Agreement on the part of Parent or Offeror has occurred, in each case if such breach or failure

 

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would reasonably be expected to prevent Parent or Offeror consummating the Transactions when required pursuant to the Merger Agreement and such breach or failure cannot be satisfied and cannot be cured by Parent or Offeror, as applicable, by the End Date, or if capable of being cured, has not been cured by the earlier of 30 days of the date ConvergeOne gives Parent notice of such breach or failure to perform and the End Date; provided, however, that, ConvergeOne will not have the right to terminate the Merger Agreement pursuant to this provision if ConvergeOne is then in material breach of any representation, warranty, covenant or obligation thereunder;

 

   

if Offeror has failed to commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer within three business days of the period specified in the Merger Agreement; provided, however, that, ConvergeOne will not have the right to terminate the Merger Agreement pursuant to this provision if ConvergeOne is then in material breach of any representation, warranty, covenant or obligation thereunder; or

 

   

if (1) the Expiration Date has occurred, (2) all of the Offer Conditions have been and remain satisfied (other than those that require deliveries or are tested at the consummation of the Offer, but which are then capable of being satisfied at the consummation of the Offer), (3) Parent and Offeror fail to accept for payment in accordance with the Merger Agreement all Shares validly tendered pursuant to the Offer and not properly withdrawn and (4) ConvergeOne has irrevocably confirmed in writing it is ready, willing and able to consummate the Offer (such termination a “Parent Failure to Close Termination”).

 

   

by Parent:

 

   

at any time prior to the Acceptance Time, if, whether or not permitted to do so: (1) the ConvergeOne Board has failed to include the ConvergeOne Board Recommendation in the Schedule 14D-9, or has effected a ConvergeOne Adverse Recommendation Change, (2) the ConvergeOne Board has failed to publicly reaffirm its recommendation of the Merger Agreement within ten business days after Parent so requests in writing, provided that, Parent may only make such request once every 20 days, (3) the ConvergeOne Board fails to publicly reject an Acquisition Proposal and publicly reaffirm the ConvergeOne Board Recommendation within ten business days after a public announcement or disclosure of an Acquisition Proposal or (4) in the case of a tender offer or exchange offer by a party other than Parent and Offeror that is subject to Regulation 14D under the Exchange Act, the ConvergeOne Board fails to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, the rejection of such tender offer or exchange offer within ten business days of the commencement of such tender offer or exchange offer (such termination, a “ConvergeOne Adverse Recommendation Change Termination”); or

 

   

at any time prior to the Acceptance Time, if a breach of any representation or warranty contained in the Merger Agreement or failure to perform any covenant or obligation in the Merger Agreement on the part of ConvergeOne has occurred such that the condition set forth in clause “(ii)”, “(iii)” or “(vii)” of the Offer Conditions would not be satisfied and cannot be cured by ConvergeOne by the End Date, or if capable of being cured, has not been cured by the earlier of 30 days of the date Parent gives ConvergeOne notice of such breach or failure to perform and the End Date; provided, however, that, Parent will not have the right to terminate the Merger Agreement pursuant to this provision if either Parent or Offeror is then in material breach of any representation, warranty, covenant or obligation thereunder.

Effect of Termination. In the event of termination of the Merger Agreement pursuant to its terms, written notice of such termination will be given to the other party or parties, specifying the provision of the Merger Agreement pursuant to which such termination is made and the Merger Agreement will be of no further force or effect and there will be no liability on the part of Parent, Offeror or ConvergeOne or their respective directors, officers and affiliates following any such termination. However, (1) certain specified provisions of the Merger Agreement, including those described in the section entitled “Termination Fee,” below, will survive the

 

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termination of the Merger Agreement and will remain in full force and effect, (2) the Confidentiality Agreement will survive termination of the Merger Agreement and will remain in full force and effect in accordance with its terms and (3) subject to the terms of the Merger Agreement, the termination of the Merger Agreement will not relieve any party from any liability for common law fraud or willful breach of the Merger Agreement prior to the date of termination. Nothing will limit or prevent any party from exercising any rights or remedies it may have under the Merger Agreement in lieu of terminating the Merger Agreement pursuant to its terms.

Termination Fee. The Merger Agreement provides that a termination fee of $54,000,000 (the “Termination Fee”) will be payable by ConvergeOne to Parent in the following circumstances:

 

   

if the Merger Agreement is terminated by Parent pursuant to a ConvergeOne Adverse Recommendation Change Termination;

 

   

(1) the Merger Agreement is terminated (A) by Parent or ConvergeOne pursuant to an End Date Termination or (B) by Parent pursuant to a breach of the Merger Agreement by ConvergeOne, (2) if the Merger Agreement is terminated pursuant to an End Date Termination and any person has publically disclosed a bona fide Acquisition Proposal after the date of the Merger Agreement and prior to such termination (unless publically withdrawn prior to such termination) and (3) within 12 months of such termination, ConvergeOne consummates an Acquisition Proposal or enters into a definitive agreement with respect to an Acquisition Proposal (which is subsequently consummated regardless of whether such consummation occurs within such 12 month period) (provided that for purposes of this clause (3) the references to “15%” in the definition of “Acquisition Proposal” will be deemed to be references to “50%”); or

 

   

ConvergeOne terminates the Merger Agreement pursuant to a Superior Offer Termination.

The full payment of the Termination Fee will be deemed to be liquidated damages and the sole and exclusive remedy (whether in law, equity, contract, tort or otherwise) for any and all losses or damages suffered or incurred by Parent, Offeror, any of their respective affiliates or any other person in connection with the Merger Agreement (and the termination thereof), the Transactions (and the abandonment thereof) or any matter forming the basis for such termination, and none of Parent, Offeror, any of their respective affiliates, Debt Financing sources and former, current and future general or limited partners, directors, managers, officers, employees, counsel, financial advisors, auditors, agents, other authorized representatives, stockholders, optionholders, managers, members and assigns (the “Parent Related Parties”) or any other person will be entitled to bring or maintain any claim, action or proceeding against ConvergeOne or any of its affiliates arising out of or in connection with the Merger Agreement, any of the Transactions or any matters forming the basis for such termination. However, nothing in the Merger Agreement will limit the rights of Parent or Offeror to seek specific performance or with respect to claims of common law fraud or willful breach of the Merger Agreement by ConvergeOne prior to the date of termination.

Parent Termination Fee. The Merger Agreement provides that a termination fee of $107,000,000 (the “Parent Termination Fee”) will be payable by Parent to ConvergeOne in the following circumstances:

 

   

if the Merger Agreement is terminated by ConvergeOne (1) pursuant to a breach of the Merger Agreement by Parent or (2) due to a Parent Failure to Close Termination; or

 

   

if Parent terminates the Merger Agreement pursuant to an End Date Termination at a time at which ConvergeOne had the right to terminate the Merger Agreement pursuant to a breach of the Merger Agreement by Parent or due to a Parent Failure to Close Termination.

The full payment of the Parent Termination Fee will be deemed to be liquidated damages and the sole and exclusive remedy (whether in law, equity, contract, tort or otherwise) for any and all losses or damages suffered or incurred by ConvergeOne and any of its respective former, current or future officers, directors, partners, stockholders, optionholders, managers, members or affiliates or any other persons (collectively (and including

 

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the ConvergeOne), “ConvergeOne Related Parties”) in connection with the Merger Agreement (and the termination thereof), the Transactions (and the abandonment thereof) or any matter forming the basis for such termination, and none of the ConvergeOne Related Parties or any other person will be entitled to bring or maintain any claim, action or proceeding against the Parent Related Parties or the guarantor (pursuant to the terms and conditions of the Limited Guarantee) arising out of or in connection with the Merger Agreement, any of the Transactions or any matters forming the basis for such termination, and none of the Parent Related Parties will have any further liability or obligation to the ConvergeOne Related Parties relating to, or arising out of, the Equity Commitment Letters, the Equity Financing, the Limited Guarantee, the Debt Commitment Letters (and any abandonment thereof) or the Debt Financing. However, nothing in the Merger Agreement will limit the rights of ConvergeOne to seek specific performance.

Expenses. All fees and expenses incurred in connection with the Merger Agreement will be paid by the party incurring such expense, whether or not the Offer and Merger are consummated.

Governing Law. The Merger Agreement is governed by the laws of the State of Delaware.

Amendments. Prior to the Effective Time, the Merger Agreement may be amended with the approval of the respective boards of directors of ConvergeOne and Parent. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

Specific Performance. Notwithstanding anything in the Merger Agreement to the contrary, the parties to the Merger Agreement have agreed that (1) they will be entitled to an injunction or injunctions, specific performance or equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement without proof of damages or otherwise (in addition to any other remedy to which the parties are entitled at law or in equity), (2) the election to pursue an injunction, specific performance or other equitable relief, subject in all respects to the terms of the Merger Agreement, will not restrict, impair or otherwise limit Parent, Offeror or ConvergeOne from, in the alternative and as applicable, seeking to terminate the Merger Agreement and collect the Parent Termination Fee or the Termination Fee, as applicable, pursuant to the terms of the Merger Agreement; provided, however, that in no event will such persons be permitted or entitled to receive both a grant of an injunction, specific performance or other equitable relief or any other remedies under the Merger Agreement or available at law or equity, on the one hand, and payment of any monetary damages whatsoever or the payment of all or a portion of the Parent Termination Fee or the Termination Fee, as applicable, on the other hand and (3) the right of specific performance and other agreements in the Merger Agreement are an integral part of the transactions contemplated by the Merger Agreement (including the Merger) and without that right, neither ConvergeOne nor Parent would have entered into the Merger Agreement. Each of the Parties to the Merger Agreement agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other Parties thereto have an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity. The Parties to the Merger Agreement acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in accordance with its terms will not be required to provide any bond or other security in connection with any such order or injunction.

Offer Conditions. The Offer Conditions are described in Section 15 —“Certain Conditions of the Offer.”

The Confidentiality Agreement

The following summary description of the Confidentiality Agreement (as defined below) and all other provisions of the Confidentiality Agreement discussed herein are qualified by reference to such Confidentiality Agreement, which has been filed as Exhibit (d)(2) to the Schedule TO filed with the SEC in connection with the Offer. The Confidentiality Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 —“Certain Information Concerning Parent, Offeror and CVC VII.” Stockholders

 

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and other interested parties should read the Confidentiality Agreement for a more complete description of the provisions summarized below.

On August 31, 2018, CVC Advisors and ConvergeOne entered into a confidentiality agreement (as it may be amended from time to time, the “Confidentiality Agreement”). Under the Confidentiality Agreement, the parties agreed to undertake reasonable precautions to keep confidential, subject to certain exceptions, information furnished by the other party in furtherance of the proposed transaction between the parties, and to use such information solely for the purpose of evaluating, and negotiating the terms of, a potential transaction between the parties. The parties agreed to certain standstill provisions that prohibit Parent and its affiliates from taking certain actions involving or with respect to ConvergeOne for a one year period, subject to certain exceptions set forth in the Confidentiality Agreement. Each party also agreed, subject to certain exceptions, that it and its representatives would not, for a period of one year from the date of the Confidentiality Agreement, solicit the employment of any officer or employee of the other party or other party’s affiliates who first became known to such party in connection with the proposed transaction or the evaluation thereof. The foregoing provisions automatically terminated upon the entry of the parties into the Merger Agreement.

The Exclusivity Agreement

The following summary description of the Exclusivity Agreement (as defined below) and all other provisions of the Exclusivity Agreement discussed herein are qualified by reference to such Exclusivity Agreement, which has been filed as Exhibit (d)(3) to the Schedule TO filed with the SEC in connection with the Offer. The Exclusivity Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 —“Certain Information Concerning Parent, Offeror and CVC VII.” Stockholders and other interested parties should read the Exclusivity Agreement for a more complete description of the provisions summarized below.

ConvergeOne and CVC Advisors entered into an exclusivity letter agreement on November 3, 2018 (as it may be amended from time to time, the “Exclusivity Agreement”), pursuant to which ConvergeOne agreed, among other things, that from the date thereof through 5:00 p.m., Pacific Time, on the earlier of (1) November 5, 2018 and (2) the date on which CVC Advisors advised ConvergeOne that it was abandoning the possible transaction and terminating all discussions with respect thereto (the “Exclusivity Period”), that neither ConvergeOne would not, nor would ConvergeOne authorize or instruct any of its officers, directors or employees, or any investment banker, attorney or other advisor or representative retained by ConvergeOne to, (1) continue any solicitation, knowing encouragement, knowing facilitation, discussions or negotiations with any person (other than ongoing discussions with CVC Advisors or its affiliates) that may have been ongoing with respect to an Acquisition Proposal or (2) directly or indirectly (A) solicit, initiate or knowingly facilitate or knowingly encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constituted, or could have reasonably been expected to lead to, an Acquisition Proposal, (B) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any non-public information in connection with or for the purpose of knowingly encouraging or facilitating, an Acquisition Proposal or any proposal or offer that could have reasonably been expected to lead to an Acquisition Proposal or (C) enter into any letter of intent, acquisition agreement, agreement in principle or similar agreement with respect to an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal.

The Rollover Agreement

The following summary description of the Rollover Agreement and all other provisions of the Rollover Agreement discussed herein are qualified by reference to such Rollover Agreement, which has been filed as Exhibit (d)(4) to the Schedule TO filed with the SEC in connection with the Offer. The Rollover Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 — “Certain Information Concerning Parent and Offeror.” Stockholders and other interested parties should read the Rollover Agreement for a more complete description of the provisions summarized below.

 

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In connection with entering into the Merger Agreement, the Rollover Stockholders entered into the Rollover Agreement. Pursuant to the Rollover Agreement, the Rollover Stockholders have agreed, among other things, to exchange a portion of their Rollover Shares into equity interests of PVKG Investment Holdings, the direct parent of Parent, at the same price per share paid by CVC VII (A) for its purchase of indirect shares of Parent in connection with the Merger Agreement. The obligations of the parties pursuant to the Rollover Agreement are subject to the satisfaction or waiver by Parent, Offeror and ConvergeOne, as applicable, of all of the conditions to the consummation of the Merger, as set forth in the Merger Agreement. The Rollover Stockholders each made customary representations, warranties and acknowledgements regarding the contribution.

 

Name

   Number of Rollover
Shares
 

John A. McKenna, Jr.

     1,405,641  

Jeffrey Nachbor

     320,000  

Paul Maier

     185,435  

John F. Lyons

     150,000  

Craig Chumley

     50,000  

Klaus Hillmann

     42,164  

Gerry Pearce

     57,668  

Seth Frank

     47,114  

William Benson

     1,710  

Neil Wada

     9,330  

Joe Fabrizio

     33,354  

Colleen Haberman

     20,000  

Mark Langanki

     6,889  

Brooks Martin

     28,000  

Scott Ford

     100,000  

Except pursuant to the terms of the Rollover Agreement, the Support Agreement (as defined below) or the Merger Agreement, each Rollover Stockholder has agreed not to:

 

   

grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any of such Rollover Stockholder’s Rollover Shares;

 

   

tender any of such Rollover Stockholder’s Rollover Shares pursuant to the Offer; or

 

   

otherwise sell, assign, transfer, encumber or dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer encumbrance or other disposition of, any of such Rollover Stockholder’s Rollover Shares.

The Rollover Agreement will automatically terminate if, at any time prior to the closing of the transactions contemplated by the Rollover Agreement, the Merger Agreement is terminated in accordance with its terms.

The parties to the Rollover Agreement are entitled to an injunction or injunctions to prevent breaches of the agreement and to enforce specifically the terms and provisions therein.

The Limited Guarantee

The following summary description of the Limited Guarantee (as defined below) and all other provisions of the Limited Guarantee discussed herein are qualified by reference to such Limited Guarantee, which has been filed as Exhibit (d)(6) to the Schedule TO filed with the SEC in connection with the Offer. The Limited Guarantee may be examined and copies may be obtained at the places and in the manner set forth in Section 8 — “Certain Information Concerning Parent, Offeror and CVC VII.” Stockholders and other interested parties should read the Limited Guarantee for a more complete description of the provisions summarized below.

 

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In connection with entering into the Merger Agreement, CVC Capital Partners VII (A) L.P., CVC Capital Partners Investment Europe VII L.P. and CVC Capital Partners VII Associates L.P. (the “Guarantors”) provided ConvergeOne with a limited guarantee (the “Limited Guarantee”) pursuant to which each Guarantor guarantees, severally, and not jointly, the payment and performance of Parent’s obligations to ConvergeOne with respect to the payment of the Parent Termination Fee, enforcement expenses related to the Parent Termination Fee and certain indemnification obligations related to financing cooperation (the “Guaranteed Obligation”), subject to a maximum aggregate obligation of $107,000,000, a $10,000,000 cap on costs, and the other terms and conditions of the Limited Guarantee.

The Support Agreement

The following summary description of the Support Agreement and all other provisions of the Support Agreement discussed herein are qualified by reference to such Support Agreement, which has been filed as Exhibit (d)(7) to the Schedule TO filed with the SEC in connection with the Offer. The Support Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 — “Certain Information Concerning Parent, Offeror and CVC VII.” Stockholders and other interested parties should read the Support Agreement for a more complete description of the provisions summarized below.

In connection with entering into the Merger Agreement, certain ConvergeOne holders of Shares (the “Significant Stockholders”), entered into a Tender and Support Agreement with Parent and Offeror, dated November 6, 2018 (the “Support Agreement”).

The Support Agreement provides that if no ConvergeOne Adverse Recommendation Change has occurred and is continuing, each Significant Stockholder will, no later than ten business days after the commencement of the Offer, tender all of the Shares (other than any Rollover Shares (as defined below)) beneficially owned by such Significant Stockholder as of the date of the Support Agreement and any Shares otherwise acquired by such Significant Stockholder prior to the termination of the Support Agreement (the “Subject Shares”). If a ConvergeOne Adverse Recommendation Change has occurred, each Significant Shareholder will, no later than ten business days after the commencement of the Offer, tender at least the number of Shares necessary to fulfill such Significant Stockholder’s “Recommendation Change Requirement” set forth in the Support Agreement. The Significant Stockholders may not withdraw any tendered Shares from the Offer unless and until (1) the Support Agreement is validly terminated or (2) a ConvergeOne Adverse Recommendation Change is made after the Significant Stockholder has tendered its Shares. In the event that the Significant Stockholders are permitted to withdraw their tendered Shares, each Significant Stockholder must still keep its Recommendation Change Requirement tendered, and must re-tender any withdrawn Shares when the ConvergeOne Adverse Recommendation Change is no longer continuing.

Pursuant to the Support Agreement, each Significant Stockholder has also agreed that at each annual or special meeting of the holders of Shares, any adjournment or postponement thereof, and in connection with any action proposed to be taken by written consent of the holders of Shares:

 

   

if no ConvergeOne Adverse Recommendation Change has occurred and is continuing, each Significant Stockholder will be present (in person or by proxy) at any such meeting and will vote or exercise its right to consent with respect to all of its Subject Shares (1) in favor of the adoption of the Merger Agreement and the approval of the Merger and (2) notwithstanding such Significant Stockholder’s rights to participate in discussions relating to an Acquisition Proposal, as permitted under the Support Agreement and the Merger Agreement, against any Acquisition Proposal and any other proposal or action that would reasonably be expected to impede, interfere with, delay or postpone the Merger or change the voting rights of any class of Shares in any manner; and

 

   

if a ConvergeOne Adverse Recommendation Change has occurred and is continuing, each Significant Stockholder will be present (in person or by proxy) at any such meeting and will vote or exercise its right to consent with respect to at least such Significant Stockholder’s Recommendation Change

 

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Requirement (1) in favor of the adoption of the Merger Agreement and the approval of the Merger and (2) notwithstanding such Significant Stockholder’s rights to participate in discussions relating to a possible tender and support voting or similar agreement in connection with an Acquisition Proposal, as permitted under the Support Agreement and the Merger Agreement, against any Acquisition Proposal and any other proposal or action that would reasonably be expected to impede, interfere with, delay or postpone the Merger or change the voting rights of any class of Shares in any manner.

The Significant Stockholders also agreed not to exercise any appraisal rights with respect to their Shares in connection with the Merger Agreement or take part in any action against Parent, Offeror, ConvergeOne or any of their successors challenging the validity, or seeking to enjoin the operation, of the Support Agreement or alleging breach of fiduciary duty of any person in connection with the Merger Agreement or the Transactions. Additionally, the Significant Stockholders, and each non-individual Significant Stockholder’s affiliates, are prohibited from:

 

   

initiating or continuing any solicitation, knowing encouragement, knowing facilitation, discussions or negotiations with any persons with respect to an Acquisition Proposal;

 

   

soliciting, initiating or knowingly facilitating or knowingly encouraging (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes or could reasonably be expected to lead to an Acquisition Proposal;

 

   

engaging in, continuing or otherwise participating in any activities, discussions or negotiations regarding, or furnishing to any other person any non-public information in connection with or for the purpose of knowingly encouraging or facilitating, an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal; or

 

   

endorsing, approving or entering into any letter of intent, acquisition agreement, agreement in principle or similar agreement with respect to an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal or to prevent such Significant Stockholder from complying with its non-solicitation obligations, or requiring or that would reasonably be expect to cause ConvergeOne to abandon, terminate, delay or fail to consummate, or that would otherwise reasonably impede, interfere with or be inconsistent with, the Offer or the Merger.

The Support Agreement terminates automatically on the first to occur of (1) the valid termination of the Merger Agreement in accordance with its terms, (2) the Effective Time, (3) the date the Offer expires without acceptance for payment of the Shares pursuant to the Offer, (4) the date of any material modification, waiver or amendment to any provision of the Merger Agreement that reduces the amount, changes the form or otherwise adversely affects the consideration payable to the Significant Stockholder pursuant to the Merger Agreement in effect as of November 6, 2018 and (5) the mutual written consent of all of the parties to the Support Agreement.

The Significant Stockholders collectively beneficially owned approximately 68% of the Shares (with such tender and support obligations subject to reduction to 39.99% upon an adverse recommendation change by the ConvergeOne Board) outstanding as of November 5, 2018, inclusive of the issuance of 2,574,137 Shares to certain of such stockholders (including Clearlake) following ConvergeOne’s achievement of the “Earnings Target” for fiscal year 2020 pursuant to the Forum Merger Agreement (as defined below) as described in the ConvergeOne’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.

12. Purpose of the Offer; No Stockholder Vote; Plans for ConvergeOne.

Purpose of the Offer. The purpose of the Offer is to acquire control of, and the entire equity interest in, ConvergeOne, while allowing holders of Shares an opportunity to receive the Offer Price by tendering their Shares pursuant to the Offer. The Offer, as the first step in the acquisition of ConvergeOne, is intended to facilitate the acquisition of all outstanding Shares. The purpose of the Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer (other than the Rollover Shares). If the Offer is consummated,

 

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subject to the satisfaction or waiver of the conditions to the obligations of Parent and Offeror to effect the Merger contained in the Merger Agreement, Parent intends to consummate the Merger either (1) on the same date as the Acceptance Time or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of the Acceptance Time, then on the first business day on which such condition is satisfied or waived.

Holders of Shares whose Shares are purchased in the Offer will cease to have any equity interest in ConvergeOne and will no longer participate in the future growth of ConvergeOne. If the Merger is consummated, all current holders of Shares will no longer have an equity interest in ConvergeOne, regardless of whether they tender their Shares in connection with the Offer, and instead will only have the right to receive an amount in cash equal to the Offer Price (other than the Rollover Stockholders), without interest and less any withholding of taxes required by applicable law, or, to the extent that holders of Shares are entitled to and have properly demanded appraisal in connection with the Merger, the amounts to which such holders of Shares are entitled pursuant to Section 262 of the DGCL.

No Stockholder Vote. If the Offer is consummated, we are not required to and will not seek the vote of ConvergeOne’s remaining stockholders before effecting the Merger. Section 251(h) of the DGCL provides that following consummation of a successful tender offer for a public corporation, and subject to certain statutory provisions, if the acquiring corporation owns at least the amount of shares of each class of stock of the target corporation that would otherwise be required to approve a merger involving the target corporation, and the other stockholders receive the same consideration for their stock in the merger as was payable in the tender offer, the acquiring corporation can effect a merger without the vote of the other stockholders of the target corporation. Accordingly, if we consummate the Offer, we intend to effect the closing of the Merger without a vote of the holders of Shares pursuant to Section 251(h) of the DGCL.

Federal Communications Commission. Federal Communications Commission (the “FCC”) authorizations previously held by ConvergeOne Technology Solutions, Inc. were transferred to a newly-formed entity controlled by Clearlake prior to the execution of the Merger Agreement to facilitate prompt completion of the transactions contemplated by the Merger Agreement. Operations of those authorizations are being managed by ConvergeOne Technology Solutions pursuant to a management agreement. Following completion of the transaction and after necessary FCC approvals are obtained, the parties anticipate that the authorizations will be transferred back to ConvergeOne.

Plans for ConvergeOne. Except as otherwise set forth in this Offer to Purchase, including as contemplated in this Section 12 and Section 13 —“Certain Effects of the Offer,” it is expected that, following the Merger, the business and operations of ConvergeOne will be continued substantially as they are currently being conducted. Parent intends to continue to evaluate the business and operations of ConvergeOne after consummation of the Offer and the Merger and will take such additional actions as they deem appropriate under the circumstances then existing with a view to enhancing the development of ConvergeOne in conjunction with Parent’s existing business. Plans may change based on further analysis and Parent, Offeror and, after completion of the Offer and the Merger, the new ConvergeOne board of directors, reserve the right to change their plans and intentions at any time, as deemed appropriate.

The Merger Agreement provides that, following the consummation of the Offer and subject to the conditions set forth in the Merger Agreement, Offeror will be merged with and into ConvergeOne and that, following the Merger and until thereafter amended, (1) the certificate of incorporation of the Surviving Corporation will be amended and restated as of the Merger Effective Time to conform to the certificate of incorporation attached to the Merger Agreement as Exhibit B thereto, and (2) the bylaws of the Surviving Corporation will be amended and restated as of the Merger Effective Time to conform to the bylaws attached to the Merger Agreement as Exhibit C thereto. See Section 11 —“The Transaction Agreements”.

From and after the Merger Effective Time, until successors are duly elected and qualified, or until the earlier of their death, resignation or removal in accordance with the certificate of incorporation and bylaws of the

 

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Surviving Corporation, Offeror’s directors immediately prior to the Merger Effective Time will be the directors of the Surviving Corporation immediately following the Merger Effective Time and ConvergeOne’s officers immediately prior to the Merger Effective Time will be the officers of the Surviving Corporation immediately following the Merger Effective Time. See Section 11 —“The Transaction Agreements”.

Except as described above or elsewhere in this Offer to Purchase (including Section 11 —“The Transaction Agreements ,” this Section 12 and Section 13 —“Certain Effects of the Offer”), neither we nor Parent have any present plans or proposals that would relate to or result in (1) any extraordinary transaction involving ConvergeOne or any of its subsidiaries (such as a merger, reorganization or liquidation), (2) any purchase, sale or transfer of a material amount of assets of ConvergeOne or any of its subsidiaries, (3) any material change in ConvergeOne’s capitalization or dividend rate or policy or indebtedness, (4) any change in the present board of directors or management of ConvergeOne, (5) any other material change in ConvergeOne’s corporate structure or business, (6) any class of equity securities of ConvergeOne’s being delisted from a national securities exchange or ceasing to be authorized to be quoted in an automated quotation system operated by a national securities association, (7) any class of equity securities of ConvergeOne becoming eligible for termination of registration pursuant to Section 12(g) of the Exchange Act, (8) the suspension of ConvergeOne’s obligation to file reports under Section 15(d) of the Exchange Act, (9) the acquisition by any person of additional securities of ConvergeOne, or the disposition of securities of ConvergeOne, or (10) any changes in ConvergeOne’s charter, bylaws or other governing instruments or other actions that could impede the acquisition of control of the subject company.

Parent and Offeror are conducting a detailed review of ConvergeOne and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel, and will consider what changes would be desirable in light of the circumstances that exist upon completion of the Offer and the Merger. Parent and Offeror will continue to evaluate the business and operations of ConvergeOne during the pendency of the Offer and after the consummation of the Offer and the Merger and will take such actions as they deem appropriate under the circumstances then existing. Thereafter, Parent intends to review such information as part of a comprehensive review of ConvergeOne’s business, operations, capitalization and management with a view to optimizing development of ConvergeOne’s potential in conjunction with ConvergeOne’s or Parent’s existing businesses. Possible changes could include changes in ConvergeOne’s business, corporate structure, charter, bylaws, capitalization, board of directors and management. Plans may change based on further analysis and Parent, Offeror and, after completion of the Offer and the Merger, the reconstituted ConvergeOne Board, reserve the right to change their plans and intentions at any time, as deemed appropriate.

To the best knowledge of Parent and Offeror, except for certain pre-existing agreements described in the Rollover Agreement, the Support Agreement, and to be described in the Schedule 14D-9, no employment, equity contribution, or other agreement, arrangement or understanding between any executive officer or director of ConvergeOne, on the one hand, and Parent, Offeror or ConvergeOne, on the other hand, existed as of the date of the Merger Agreement, and neither the Offer nor the Merger is conditioned upon any executive officer or director of ConvergeOne entering into any such agreement, arrangement or understanding.

It is possible that certain members of ConvergeOne’s current management team will enter into new employment arrangements with ConvergeOne after the completion of the Offer and the Merger. Any such arrangements with the existing management team are currently expected to be entered into after the completion of the Offer and will not become effective until the time the Merger is completed, if at all. There can be no assurance that any parties will reach an agreement on any terms, or at all.

13. Certain Effects of the Offer.

Because the Merger will be governed by Section 251(h) of the DGCL, no stockholder vote will be required to consummate the Merger. Following the consummation of the Offer and subject to the satisfaction of the remaining conditions set forth in the Merger Agreement, we, Parent and ConvergeOne

 

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will consummate the Merger either (1) on the same date as the Acceptance Time or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of the Acceptance Time, then on the first business day on which such condition is satisfied or waived. We do not expect there to be a significant period of time between the consummation of the Offer and the consummation of the Merger.

Market for Shares. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly, which could adversely affect the liquidity and market value of the remaining Shares held by stockholders other than Offeror and Parent. If the Offer is successful, there will be no market for the Shares because, subject to the satisfaction of the remaining conditions set forth in the Merger Agreement, Parent, Offeror and ConvergeOne intend to consummate the Merger either (1) on the same date as the Acceptance Time or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of the Acceptance Time, then on the first business day on which such condition is satisfied or waived.

Nasdaq Listing. The Shares are currently listed on Nasdaq. Immediately following consummation of the Merger (which is expected to occur either (1) on the same date as the Acceptance Time or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of the Acceptance Time, then on the first business day on which such condition is satisfied or waived), the Shares will no longer meet the requirements for continued listing on Nasdaq as there will be only one stockholder. Nasdaq requires, among other things, that any listed shares of common stock have at least 400 total stockholders. As promptly as practicable following the consummation of the Merger, we intend and will cause ConvergeOne to delist the Shares from Nasdaq.

Margin Regulations. The Shares are currently “margin securities” under the Regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), which designation has the effect, among other effects, of allowing brokers to extend credit on the collateral of Shares. Depending upon factors similar to those described above regarding the market for Shares and stock quotations, it is possible that, following the Offer, Shares would no longer constitute “margin securities” for the purposes of the margin regulations of the Federal Reserve Board and, therefore, could no longer be used as collateral for margin loans made by brokers.

Exchange Act Registration. The Shares are currently registered under the Exchange Act. As a result, ConvergeOne currently files periodic reports on account of the Shares. Such registration may be terminated upon application by ConvergeOne to the SEC if Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of Shares under the Exchange Act would substantially reduce the information required to be furnished by ConvergeOne to its stockholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to ConvergeOne, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with meetings of stockholders and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to “going private” transactions. Furthermore, the ability of “affiliates” of ConvergeOne and persons holding “restricted securities” of ConvergeOne to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired. If registration of Shares under the Exchange Act were terminated, Shares would no longer be “margin securities” or be eligible for quotation on Nasdaq as described above. Following consummation of the Merger and the delisting of the Shares from Nasdaq, Parent and ConvergeOne intend to take steps to cause the termination of the registration of Shares under the Exchange Act as promptly as practicable and expect to take steps to cause the suspension of all of ConvergeOne’s reporting obligations under the Exchange Act.

 

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14. Dividends and Distributions.

As described in Section 11 —“The Transaction Agreements — The Merger Agreement — Conduct of Business”, the Merger Agreement provides that from the date of the Merger Agreement until the Merger Effective Time, neither ConvergeOne nor any of its subsidiaries will declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock or property or any combination thereof) with respect to any shares of ConvergeOne’s capital stock, other than with respect to a quarterly dividend of $0.02 per Share in respect of ConvergeOne’s third quarter earnings.

15. Certain Conditions of the Offer.

Capitalized terms used but not defined in this Section 15 have the meanings ascribed to them in the Merger Agreement.

The obligation of Offeror to accept for payment and pay for Shares validly tendered (and not properly withdrawn) pursuant to the Offer is subject to the satisfaction of the conditions set forth in clauses “(i)” through “(viii)” below. Accordingly, notwithstanding any other provision of the Offer or the Merger Agreement to the contrary, Offeror shall not be required to accept for payment or (subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act) pay for, and may delay the acceptance for payment of, or (subject to any such rules and regulations) the payment for, any tendered Shares, and, to the extent permitted by the Merger Agreement, may terminate the Offer: (1) upon termination of the Merger Agreement, and (2) at any scheduled Expiration Date (subject to any extensions of the Offer pursuant to Section 1.1(c) of the Merger Agreement) or amend the Offer as otherwise permitted by the Merger Agreement, if: (A) the Minimum Condition shall not be satisfied as of one minute following 11:59 p.m., Eastern time, on the Expiration Date of the Offer, or (B) any of the additional conditions set forth in clauses “(ii)” through “(vii)” below shall not be satisfied or waived in writing by Parent:

 

  (i)

there shall have been validly tendered (and not properly withdrawn) Shares (excluding Shares tendered pursuant to notices of guaranteed delivery that have not yet been “received” (as such term is defined in Section 251(h) of the DGCL)) that, considered together with the Rollover Shares and all other Shares (if any) otherwise beneficially owned by Parent or any of its wholly owned Subsidiaries (including Offeror), would represent one more than 50% of the total number of Shares outstanding at the time of the expiration of the Offer (it being understood that, for purposes of calculating whether the Minimum Condition has been satisfied, the aggregate number of Shares outstanding shall (a) include, without duplication, (I) Shares issuable in respect of ConvergeOne Options for which the holders thereof have validly exercised such ConvergeOne Options and satisfied all of the requirements for exercise thereof prior to the expiration of the Offer, even if delivery of Shares resulting from such exercises to the respective optionholders has not occurred prior to the expiration of the Offer and (II) Shares issuable in respect of ConvergeOne Warrants for which such ConvergeOne Warrants have been validly exercised and the holders of such ConvergeOne Warrants have satisfied all of the requirements for exercise thereof prior to the expiration of the Offer, even if delivery of Shares resulting from such exercises to the respective warrantholders has not occurred prior to the expiration of the Offer and (b) not include Shares held in treasury by ConvergeOne as of the expiration of the Offer or any other Shares acquired by ConvergeOne prior to the expiration of the Offer (including any such Shares acquired in connection with tax withholding or payment of the exercise price for the exercise of ConvergeOne Options), even if delivery to ConvergeOne of Shares so acquired has not occurred prior to the expiration of the Offer);

 

  (ii)

(a) the representations and warranties of ConvergeOne as set forth in Section 3.3 (Capitalization) of the Merger Agreement (solely with respect to ConvergeOne and other than for inaccuracies that are de minimis in nature and amount (for the avoidance of doubt, only amounts that are less than $10,000,000 in the aggregate shall be deemed de minimis for purposes of this clause (a))) shall have been accurate in all respects as of the date of the Merger Agreement, (b) the representations and warranties of ConvergeOne as set forth in the first sentence of Section 3.1(a) (Due Organization), the first sentence

 

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  of Section 3.1(d) (Subsidiaries), Section 3.19 (Authority; Binding Nature of Agreement), Section 3.20 (Anti-Takeover Laws) and Section 3.24 (Financial Advisors) of the Merger Agreement shall have been accurate in all material respects as of the date of the Merger Agreement, and shall be accurate in all material respects at and as of the Acceptance Time as if made on and as of such time and (c) the representations and warranties of ConvergeOne as set forth in the Merger Agreement (other than those referred to in the preceding clauses (a) and (b)) shall have been accurate in all respects as of the date of the Agreement, and shall be accurate in all respects at and as of the Acceptance Time as if made on and as of such time, except that any inaccuracies in such representations and warranties shall be disregarded if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and would not reasonably be expected to have, a Material Adverse Effect (it being understood that, in the case of (b) and (c), for purposes of determining the accuracy of such representations and warranties, (I) all “Material Adverse Effect” qualifications and other materiality qualifications contained in such representations and warranties shall be disregarded and (II) the accuracy of those representations or warranties that address matters only as of a specific date shall be measured (subject to the applicable materiality standard as set forth in this clause (ii)(a), (b) or (c), as the case may be) only as of such date);

 

  (iii)

ConvergeOne shall have complied with or performed in all material respects all of ConvergeOne’s covenants, obligations and agreements it is required to comply with or perform at or prior to the Acceptance Time;

 

  (iv)

any consent, approval or clearance with respect to, or terminations or expiration of any applicable mandatory waiting period (and any extensions thereof) imposed under the HSR Act shall have been obtained, shall have been received or shall have terminated or expired, as the case may be; provided, however, that Parent and Offeror shall not be permitted to invoke this clause “(iv)” unless they shall have taken all actions required under the Merger Agreement to obtain such consent, approval or clearance or cause such termination or expiration;

 

  (v)

there shall not have been issued by any court of competent jurisdiction or remain in effect any temporary restraining order, preliminary or permanent injunction or other order preventing the acquisition of or payment for Shares pursuant to the Offer nor shall any action have been taken, or any legal requirement or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger by any Governmental Body which directly or indirectly prohibits, or makes illegal, the acquisition of or payment for Shares pursuant to the Offer, or the consummation of the Merger; provided, however, that Parent and Offeror shall not be permitted to invoke this clause “(v)” unless they shall have taken all actions required under the Merger Agreement to have any such order lifted;

 

  (vi)

the Merger Agreement shall not have been terminated in accordance with Section 8.1 of the Merger Agreement;

 

  (vii)

since the date of the Merger Agreement, there shall not have occurred and be continuing any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and

 

  (viii)

the date that is 45 days after the date on which the Parties submit to the Committee on Foreign Investment in the United States a declaration pursuant to 31 C.F.R. § 801.401 shall have occurred.

The conditions described above are for the sole benefit of Parent and Offeror and, subject to the terms and conditions of the Merger Agreement and the applicable legal requirements, may be waived by Parent and Offeror in whole or in part at any time and from time to time in their sole discretion (other than the Minimum Condition, which may not be waived), in each case subject to the terms of the Merger Agreement. Any reference in this Section 15, Annex I to the Merger Agreement or the Merger Agreement to a condition or requirement being satisfied will be deemed to be satisfied if such condition or requirement is so waived. The foregoing conditions will be in addition to, and not a limitation of, the rights of Parent and Offeror to extend, terminate, amend and/or

 

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modify the Offer pursuant to the terms and conditions of the Merger Agreement. The failure by Parent or Offeror at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right and each such right will be deemed an ongoing right that may be asserted at any time and from time to time.

16. Adjustments to Prevent Dilution.

In the event that, notwithstanding ConvergeOne’s covenant to the contrary (See Section 11 —“The Transaction Agreements — The Merger Agreement — Conduct of Business”), between the date of the Merger Agreement and the Acceptance Time, the number of outstanding Shares is changed into a different number of Shares or a different class by reason of any reclassification, stock split (including a reverse stock split), recapitalization, split-up, combination, exchange of shares, readjustment or other similar transaction, or a stock dividend or stock distribution thereon is declared with a record date during such period, the Offer Price and the consideration payable in the Merger will be appropriately adjusted, without duplication, to provide the holders of Shares the same economic effect as contemplated by the Merger Agreement prior to such event.

17. Certain Legal Matters; Regulatory Approvals.

General. Except as described in this Section 17, based on its examination of publicly available information filed by ConvergeOne with the SEC, other publicly available information concerning ConvergeOne and other information made available to Offeror and Parent by ConvergeOne, Offeror is not aware of any pending legal proceeding relating to the Offer. Except as described in this Section 17, based on its and Parent’s examination of publicly available information filed by ConvergeOne with the SEC, other publicly available information concerning ConvergeOne and other information made available to Offeror and Parent by ConvergeOne, Offeror is not aware of any governmental license or regulatory permit that appears to be material to ConvergeOne’s business that might be adversely affected by Offeror’s acquisition of Shares as contemplated herein or of any approval or other action by any governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by Offeror or Parent as contemplated herein. Should any such approval or other action be required, Offeror currently contemplates that, except as described below under “State Takeover Statutes,” such approval or other action will be sought. While Offeror does not currently intend to delay acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that if such approvals were not obtained or such other actions were not taken, adverse consequences might not result to ConvergeOne’s business, any of which under certain conditions specified in the Merger Agreement could cause Offeror to elect to terminate the Offer without the purchase of Shares thereunder. See Section 15 —“Certain Conditions of the Offer”.

State Takeover Statutes. ConvergeOne is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL prevents a Delaware corporation from engaging in a “business combination” (defined to include mergers and certain other actions) with an “interested stockholder” (including a person who owns or has the right to acquire 15% or more of a corporation’s outstanding voting stock) for a period of three years following the date such person became an “interested stockholder” unless, among other things, the “business combination” is approved by the board of directors of such corporation before such person became an “interested stockholder.” The ConvergeOne Board has taken all action necessary under the DGCL to ensure that no such restrictions apply to the Offer, Merger or any other transactions contemplated by the Merger Agreement.

ConvergeOne, directly or through subsidiaries, may be deemed to be conducting business in a number of states throughout the United States, some of which have enacted takeover laws. We do not know whether any of these laws will, by their terms, apply to the Offer or the Merger and have not attempted to comply with any such laws. Should any person seek to apply any state takeover law, we will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event any person asserts that the takeover laws of any state are applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, we

 

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may be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, we may be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, we may not be obligated to accept for payment any Shares tendered in the Offer. See Section 15 —“Certain Conditions of the Offer.”

United States Antitrust Compliance. Under the HSR Act, and the related rules and regulations that have been promulgated by the U.S. Federal Trade Commission (the “FTC”), certain acquisition transactions may not be consummated until certain information and documentary material has been furnished to the FTC and the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”) for review and certain waiting period requirements have been satisfied. These requirements apply to Offeror’s acquisition of Shares in the Offer and the Merger.

Under the HSR Act and the related rules and regulations promulgated thereunder by the FTC, the purchase of Shares in the Offer may not be completed until the expiration of a 15-calendar day waiting period following the filing of certain required information and documentary material concerning the Offer with the FTC and the Antitrust Division, unless the waiting period is earlier terminated by the FTC and the Antitrust Division. The period may be lengthened if the acquiring person voluntarily withdraws and re-files to restart the 15-day waiting period, or if the reviewing agency issues a formal request for additional information and documentary material.

Pursuant to the HSR Act, on November 20, 2018, each of Parent and ConvergeOne caused to be filed a Premerger Notification and Report Form under the HSR Act with the FTC and the Antitrust Division in connection with the purchase of Shares in the Offer and the Merger. Under the HSR Act, the required waiting period with respect to the Offer and the Merger will expire at 11:59 p.m., Eastern time, on the 15th calendar day, so long as such calendar day is not a weekend or US federal holiday, in which case the waiting period shall expire at 11:59 p.m. Eastern time on the next business day, after Parent caused the filing to be made, i.e., at 11:59 p.m. on December 5, 2018, unless earlier terminated by the FTC and the Antitrust Division, or Parent or ConvergeOne, as applicable, receives a request for additional information or documentary material prior to that time. If within the 15-calendar day waiting period either the FTC or the Antitrust Division issues a request for additional information or documentary material from Parent and ConvergeOne, the waiting period with respect to the Offer and the Merger would be extended for an additional period of ten calendar days following the date of Parent’s substantial compliance with that request, unless Parent and ConvergeOne otherwise agree with the FTC or the Antitrust Division to extend that ten calendar day period. The FTC or the Antitrust Division may terminate the additional ten-calendar day waiting period before its expiration. In practice, complying with a request for additional information and documentary material can take a significant period of time.

The FTC and the Antitrust Division may scrutinize the legality under the U.S. federal antitrust laws of proposed transactions, such as Offeror’s acquisition of Shares pursuant to the Offer and the Merger. At any time before or after Offeror’s acceptance for payment of Shares pursuant to the Offer, if the Antitrust Division or the FTC believes that the Offer would violate the U.S. federal antitrust laws by substantially lessening competition in any line of commerce affecting U.S. consumers, the FTC or the Antitrust Division could take any action under the U.S. federal antitrust laws that it considers necessary in the public interest, including seeking to enjoin the purchase of Shares in the Offer and the Merger, ordering the divestiture of Shares purchased in the Offer or ordering the divestiture of substantial assets of Parent, ConvergeOne or any of their respective subsidiaries or affiliates. Under certain circumstances, U.S. state attorneys general and private parties as well as state attorneys general also may bring legal actions under the U.S. federal antitrust laws seeking similar relief or seeking conditions to the completion of the Offer. While Offeror believes that the consummation of the Offer will not violate any U.S. federal antitrust laws, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if a challenge is made, what the result will be.

Based upon an examination of publicly available and other information relating to ConvergeOne’s services and offerings, Parent and Offeror believe that the acquisition of Shares in the Offer and the Merger should not violate applicable antitrust laws. Nevertheless, Parent and Offeror cannot be certain that a challenge to the Offer and the Merger on antitrust grounds will not be made, or, if such challenge is made, what the result will be.

 

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CFIUS. Parent, Offeror and ConvergeOne have agreed to submit to the Committee on Foreign Investment in the United States (“CFIUS”) a declaration pursuant to 31 C.F.R. § 801.401 (the “Declaration”). CFIUS reviews foreign acquisitions, mergers and takeovers of U.S. businesses to ensure there are no unresolved national security issues that will result from such acquisitions. Parent and ConvergeOne submitted the Declaration to CFIUS on November 19, 2018, and the CFIUS review period is expected to commence shortly thereafter. A condition to the Offer is that 45 days must elapse after the date that the Declaration is submitted, which date is January 3, 2019.

Appraisal Rights. No appraisal rights are available to the holders of Shares in connection with the Offer. If the Merger is consummated, appraisal rights will be available in connection with the Merger as further described below, but, although the availability of appraisal rights depends on the Merger being consummated, stockholders who wish to exercise such appraisal rights must do so no later than the time of the consummation of the Offer, even though the Merger will not have been consummated as of such time. If the Merger is consummated, the holders of Shares immediately prior to the Merger Effective Time who (1) did not tender their Shares in the Offer, (2) demand appraisal in accordance with the procedures set forth in Section 262 of the DGCL and (3) do not thereafter withdraw their demand for appraisal of such Shares or otherwise lose their appraisal rights, in each case in accordance with the DGCL, will be entitled to have their Shares appraised by the Delaware Court of Chancery and receive payment of the “fair value” of such Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, at the rate specified in Section 262 of the DGCL.

The “fair value” of any Shares could be based upon considerations other than, or in addition to, the price paid in the Offer and the market value of such Shares. Holders of Shares should recognize that the value so determined could be higher or lower than, or the same as, the Offer Price or the consideration payable in the Merger (which is equivalent in amount to the Offer Price). Moreover, we may argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of such Shares is less than such amount.

Under Section 262 of the DGCL, where a merger is approved under Section 251(h), either a constituent corporation before the effective date of the merger, or the surviving corporation within ten days thereafter, will notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and will include in such notice a copy of Section 262 of the DGCL. The Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262 of the DGCL.

As will be described more fully in the Schedule 14D-9, if a stockholder elects to exercise appraisal rights under Section 262 of the DGCL, such stockholder must do all of the following:

 

   

within the later of the consummation of the Offer and 20 days after the mailing of the Schedule 14D-9, deliver to ConvergeOne a written demand for appraisal of Shares held, which demand must reasonably inform ConvergeOne of the identity of the stockholder and that the stockholder is demanding appraisal;

 

   

not tender their Shares in the Offer;

 

   

continuously hold of record the Shares from the date on which the written demand for appraisal is made through the Merger Effective Time;

 

   

In the event that any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his rights to appraisal as provided in the DGCL, the Shares of such stockholder will be converted into the right to receive the Offer Price, without any interest thereon and less any withholding taxes.

The foregoing summary of the appraisal rights of stockholders under the DGCL does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262 of the

 

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DGCL. The proper exercise of appraisal rights requires strict and timely adherence to the applicable provisions of the DGCL.

A copy of Section 262 of the DGCL is included as Annex IV to the Schedule 14D-9. The information provided above is for informational purposes only with respect to your alternatives if the Merger is consummated. If you tender your Shares pursuant to the Offer, you will not be entitled to exercise appraisal rights with respect to your Shares but, instead, subject to the Offer Conditions, you will receive the Offer Price for your Shares.

Stockholder Approval Not Required. Section 251(h) of the DGCL provides that stockholder approval of a merger is not required if certain requirements are met, including, among others, that (1) the acquiring company consummates a tender offer for any and all of the outstanding common stock of the company to be acquired that, absent Section 251(h) of the DGCL, would be entitled to vote on the merger and (2) following the consummation of such tender offer, the acquiring company owns at least such percentage of the stock of the company to be acquired that, absent Section 251(h) of the DGCL, would be required to adopt the merger. If the Minimum Condition is satisfied and we accept Shares for payment pursuant to the Offer, we will hold a sufficient number of Shares to ensure that ConvergeOne will not be required to submit the adoption of the Merger Agreement to a vote of holder of Shares. Following the consummation of the Offer and subject to the satisfaction of the remaining conditions set forth in the Merger Agreement, Offeror, Parent and ConvergeOne will take all necessary and appropriate action to effect the Merger as promptly as practicable without a meeting of holders of Shares in accordance with Section 251(h) the DGCL.

18. Fees and Expenses.

Offeror has retained Innisfree M&A Incorporated to act as the Information Agent and Continental Stock Transfer & Trust Company to act as the Depositary and Paying Agent in connection with the Offer. As part of the services included in such retention, the Information Agent may contact holders of Shares by personal interview, mail, telephone, telecopy, telegraph, electronic mail and other methods of electronic communication and may request brokers, dealers, commercial banks, trust companies and other nominees to forward materials relating to the Offer to beneficial owners of Shares.

The Information Agent and the Depositary and Paying Agent each will receive reasonable and customary compensation for their respective services in connection with the Offer, and subject to certain limits, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith.

Except as set forth above, neither Parent nor Offeror will pay any fees or commissions to any broker or dealer or to any other person (other than to the Depositary and Paying Agent and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks, trust companies and other nominees will, upon request, be reimbursed by Offeror for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers.

19. Miscellaneous.

The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, we may, in our discretion, take such action as we deem necessary to make the Offer comply with the laws of any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction in compliance with applicable laws. In those jurisdictions where applicable laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Offeror by one or more registered brokers or dealers licensed under the laws of such jurisdiction to be designated by Offeror.

 

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No person has been authorized to give any information or to make any representation on behalf of Parent or Offeror not contained herein or in the Letter of Transmittal, and, if given or made, such information or representation must not be relied upon as having been authorized. No broker, dealer, bank, trust company, fiduciary or other person will be deemed to be the agent of Parent, Offeror, the Depositary and Paying Agent or the Information Agent for purposes of the Offer.

Parent and Offeror have filed with the SEC a Tender Offer Statement on Schedule TO pursuant to Rule 14d-3 of the Exchange Act, together with exhibits furnishing certain additional information with respect to the Offer, and may file amendments thereto. A copy of such documents, and any amendments thereto, may be examined at, and copies may be obtained from, the SEC in the manner set forth under Section 8 —“Certain Information Concerning Parent, Offeror and CVC VII”.

ConvergeOne has filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the recommendation of the ConvergeOne Board with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. A copy of such documents, and any amendments thereto, may be examined at, and copies may be obtained from, the SEC in the manner set forth under Section 7 —“Certain Information Concerning ConvergeOne”.

PVKG Merger Sub, Inc.

November 21, 2018

 

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SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF

PARENT, OFFEROR AND CONTROLLING ENTITIES

1. PVKG Merger Sub, Inc.

PVKG Merger Sub, Inc. (“Offeror”) is a Delaware corporation. Offeror was formed on November 2, 2018 solely for the purpose of completing the Offer and the Merger and has conducted no business activities other than activities incidental to its formation or in connection with the transactions contemplated by the Merger Agreement. Until immediately prior to the time Offeror purchases Shares pursuant to the Offer, it is not anticipated that Offeror will have any significant assets or liabilities or engage in activities other than those incidental to their formation, capitalization and the transactions contemplated by the Offer and/or the Merger. Offeror is a direct wholly owned subsidiary of Parent (as defined below). The current business address of Offeror is c/o CVC Advisors (U.S.) Inc., 712 Fifth Avenue, 43rd Floor, New York, New York 10019, and the current business phone number is (212) 265-6222.

Directors and Executive Officers of Offeror. The following table sets forth the name, business address and telephone number, citizenship, present principal occupation and employment history and past material occupations, positions, offices or employment for at least the past five years of each of the directors, executive officers and control persons of Offeror.

 

Name, Country of Citizenship and
Position

  

Current Business Address and
Telephone Number

  

Present Principal Occupation or Employment;
Material Positions Held During at Least
the Past Five Years

Lars C. Haegg

Norway

Director; President

   712 Fifth Avenue, 43rd Floor
New York, New York 10019
(212) 265-6222
   Mr. Haegg became a director and officer of Offeror, Parent and PVKG Intermediate Holdings Inc. in 2018. He joined CVC Capital Partners (“CVC”) in 2012, and prior to joining CVC, he spent more than fourteen years with Investcorp Bank B.S.C. at which he held the position of Head of Post-Acquisition activities in North America. Prior to joining Investcorp Bank B.S.C., Mr. Haegg worked at McKinsey & Company where he served retail, media and technology clients. He holds an M.B.A from Harvard Business School and a Bachelor in Business Administration from the University of Texas, Austin.

James P. Christopoulos

United States

Director; Secretary and Treasurer

   712 Fifth Avenue, 43rd Floor
New York, New York 10019
(212) 265-6222
   Mr. Christopoulos became a director and officer of Offeror, Parent and PVKG Intermediate Holdings Inc. in 2018. He joined CVC in 2014 where he is a Managing Director. Prior to joining CVC, Mr. Christopoulos was a Principal at Investcorp Bank B.S.C. Prior to joining Investcorp Bank B.S.C., he worked at UBS. Mr. Christopoulos holds a Bachelor in Economics from Columbia University.

 

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2. PVKG Intermediate Holdings Inc.

PVKG Intermediate Holdings Inc. (“Parent”) is a Delaware corporation. Parent was formed on November 2, 2018, solely for the purpose of completing the Offer and the Merger and has conducted no business activities other than activities incidental to its formation or in connection with the transactions contemplated by the Merger Agreement. Until immediately prior to the time Offeror purchases Shares pursuant to the Offer, it is not anticipated that Parent will have any significant assets or liabilities or engage in activities other than those incidental to their formation, capitalization and the transactions contemplated by the Offer and/or the Merger. The current business address of Parent is c/o CVC Advisors (U.S.) Inc., 712 Fifth Avenue, 43rd Floor, New York, New York 10019, and the current business phone number is (212) 265-6222.

Directors and Executive Officers of Parent. The following table sets forth the name, business address and telephone number, citizenship, present principal occupation and employment history and past material occupations, positions, offices or employment for at least the past five years of each of the directors, executive officers and control persons of Parent.

 

Name, Country of Citizenship and Position

  

Current Business Address and
Telephone Number

  

Present Principal
Occupation or Employment;
Material Positions Held
During at Least the Past Five Years

Lars C. Haegg

Norway

Director; President

   712 Fifth Avenue, 43rd Floor
New York, New York 10019
(212) 265-6222
   See respective information under “Directors and Executive Officers of the “Offeror” in Section 1 of this Schedule I.

James P. Christopoulos

United States

Director; Secretary and Treasurer

   712 Fifth Avenue, 43rd Floor
New York, New York 10019
(212) 265-6222
   See respective information under “Directors and Executive Officers of the “Offeror” in Section 1 of this Schedule I.

 

3.

CVC Capital Partners VII (A) L.P.

    

CVC Capital Partners Investment Europe VII L.P.

    

CVC Capital Partners VII Associates L.P.

Each of CVC Capital Partners VII (A) L.P., CVC Capital Partners Investment Europe VII L.P. and CVC Capital Partners VII Associates L.P. (collectively, “CVC VII”) is a Jersey limited partnership. The general partner for each CVC VII entity is CVC Capital Partners VII Limited, a Jersey limited company (“CVC VII GP”). The current business address of each CVC VII entity is c/o CVC Capital Partners VII Limited, 1 Waverley Place, Union Street, St. Helier, Jersey JE1 1SG, Channel Islands, and the current business phone number of each CVC VII entity is +44 (0) 1534 850750.

CVC VII indirectly holds its investment in Parent through PVKG Investment Holdings Inc., a Delaware corporation (“PVKG Investment Holdings”). PVKG Investment Holdings is a direct wholly owned subsidiary of PVKG Investment US L.P. (“PVKG Investment US”), which is controlled by PVKG Investment US G.P. LLC (“PVKG US GP”), a Delaware limited liability company and a wholly owned subsidiary of PVKG Jersey L.P., a Jersey limited partnership (“PVKG Jersey LP”). PVKG US G.P. is a wholly owned subsidiary of PVKG Jersey LP, which is controlled by PVKG Jersey GP Limited, a Jersey limited company (“PVKG Jersey GP”). Each of PVKG Jersey GP and PVKG Jersey LP are subsidiaries of CVC VII, which is controlled by CVC VII GP.

CVC VII is a private investment fund focused on making investments in a variety of industries. The principal business activity of PVKG Investment Holdings is serving as a holding company for Parent. The principal business activities of PVKG Investment US is serving as a holding company for PVKG Investment Holdings.

 

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The principal business activities of PVKG US GP is serving as the general partner of PVKG Investment US. The principal business of PVKG Jersey LP is serving as a holding company for PVKG Investment US and PVKG US GP. The principal business activity of PVKG Jersey GP is serving as the general partner of PVKG Jersey LP. The principal business activity of CVC VII GP is serving as the general partner of CVC VII.

Directors and Executive Officers of CVC VII GP. The following table sets forth the name, business address and telephone number, citizenship, present principal occupation and employment history and past material occupations, positions, offices or employment for at least the past five years of each of the directors, executive officers and control persons of CVC VII GP.

 

Name, Country of Citizenship and

Position

  

Current Business Address and
Telephone Number

  

Present Principal Occupation or Employment;
Material Positions Held During at  Least
the Past Five Years

Mark A. R. Grizzelle

United Kingdom

Director

   111 Strand, London WC2R 0AG United Kingdom
+44 0207 420 4200
   Mr. Grizzelle is a Senior Adviser to CVC. He retired from CVC in March 2017 at which time he was a Partner and Group Finance and Administration Director. Mr. Grizzelle holds a degree in Business Economics and Accountancy from Southampton University, United Kingdom.

Carl J. Hansen

United Kingdom and
New Zealand

Director

   3rd Floor, Sir Walter Raleigh House, 48-50 The Esplanade, St Helier, Jersey JE2 3QB
+44 (0) 1534 828 750
   Mr. Hansen joined CVC in 2012. Mr. Hansen is a Managing Director and the Money Laundering Reporting Officer of CVC Advisers Jersey Limited (“CVC Jersey”), and is a member on the board and TCB Committee of CVC Jersey. He is also a member and Chair of all of CVC’s Investment Committees and Portfolio Committees and serves on the boards of a number of companies in the CVC network and CVC portfolio companies, including general partners of, and advisers to, CVC funds. Mr. Hansen is a lawyer with over 29 years of experience in corporate and commercial transactions in a number of jurisdictions globally. Mr. Hansen holds a BA and LLB from the University of Natal, South Africa and an MBA from Victoria University, Wellington, New Zealand.

 

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Name, Country of Citizenship and

Position

  

Current Business Address and
Telephone Number

  

Present Principal Occupation or Employment;
Material Positions Held During at  Least
the Past Five Years

Steven F. Koltes

United States

Director

   3rd Floor, Sir Walter Raleigh House, 48-50 The Esplanade, St Helier, Jersey JE2 3QB
+44 (0) 1534 828 750
   Mr. Koltes joined CVC in 1988. He is a Co-Founder and Co-Chairman of CVC and is a member on the main CVC boards, including the board of Credit Partners. He is also a member on all of CVC’s Investment Committees and is a member on the CVC Asia Private Equity Board and the Asia Portfolio Committee. Mr. Koltes holds a BA from Middlebury College.

Jean-Rémy A. R. Roussel

France

Director

   20 Avenue Monterey, Luxembourg L-2163 Luxembourg
+352 26 47 83 68
   Mr. Roussel joined CVC in 2008. He is a Managing Partner and Head of the Operations team at CVC. Mr. Roussel is on the board of the CVC advisory business and is a member on the Europe/North America Private Equity Board, the Europe/North America and StratOps Investment Committees, the Europe/North America and StratOps Portfolio Committees and the Operations and Risk Committee. Mr. Roussel holds a Bachelor’s in Business Administration from the University of Michigan and an MBA from Harvard Business School.

W. Brian Scholfield

United Kingdom and Canada

Director

   3rd Floor, Sir Walter Raleigh House, 48-50 The Esplanade, St Helier, Jersey JE2 3QB
+44 (0) 1534 828 750
   Mr. Scholfield joined CVC in 2012. Mr. Scholfield is a Managing Director and the Compliance Officer of CVC Jersey, and is a member on the board and TCB Committee of CVC Jersey. He is also a member on all of CVC Investment Committees and serves on the boards of a number of companies in the CVC network and CVC portfolio companies, including general partners of CVC funds. Mr. Scholfield is a lawyer with over 30 years of experience in corporate, securities, funds and commercial transactions in a number of jurisdictions globally. Mr. Scholfield holds a BA and Juris Doctor from the University of Toronto, Canada.

 

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Name, Country of Citizenship and

Position

  

Current Business Address and
Telephone Number

  

Present Principal Occupation or Employment;
Material Positions Held During at  Least
the Past Five Years

Rupert D. E. Walker

United Kingdom

Director

   1 Waverley Place, Union Street,
St. Helier, Jersey
JE1 1SG
Channel Islands
+44 (0) 1534 850750
   Mr. Walker is a Principal and the sole ultimate beneficial owner of Saltgate Limited and was formerly a Managing Director. Mr. Walker serves on the boards of a number of CVC companies including general partners of other CVC funds. He is also an alternate director of CVC Advisers Private Equity Limited, an investment advisor. Mr. Walker is a lawyer with over 30 years of experience of international fund, corporate and financing transactions. Mr. Walker holds a LLB (Hons) from the University of Nottingham.

Frederick I. Watt

United Kingdom

Director

   111 Strand, London WC2R 0AG United Kingdom
+44 0207 420 4200
   Mr. Watt joined CVC in 2007. Mr. Watt is a Managing Partner and Chief Operating Officer of CVC. Mr. Watt is a member on the main CVC boards. He is a member on (i) the Europe/North America, Asia and StratOps Investment Committees, (ii) all of the CVC Portfolio Committees, (iii) the Human Resources Committee, (iv) the Operations and Risk Committee, (v) the Ethics Committee and (vi) the CVC Credit Partners Advisory Board. Mr. Watt is a member on the Institute of Chartered Accountants of Scotland and was educated at Caledonian University, Glasgow, Scotland.

 

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The Letter of Transmittal any other required documents should be sent or delivered by each stockholder or its, his or her broker, dealer, commercial bank, trust company or other nominee to the Depositary and Paying Agent at one of its addresses set forth below:

The Depositary and Paying Agent for the Offer is:

 

 

LOGO

 

If delivering by first class mail:    If delivering by facsimile transmission:    If delivering by registered mail or courier:
Continental Stock Transfer & Trust Company    (for eligible institutions only)    Continental Stock Transfer & Trust Company

1 State Street Plaza, 30th Floor

New York, NY 10004

   (212) 616-7616   

1 State Street Plaza, 30th Floor

New York, NY 10004

Attn: Compliance Department    For confirmation or information:    Attn: Compliance Department
   Tel: (917) 262-2378   

Questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent at its telephone number and address set forth below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

 

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders may call toll free: (888) 750-5834

Banks and brokers may call collect: (212) 750-5833

Exhibit (a)(1)(B)

Letter of Transmittal

To Tender Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 Per Share, Net in Cash,

Pursuant to the Offer to Purchase dated November 21, 2018

by

PVKG Merger Sub, Inc.

(Offeror)

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

(Parent of Offeror)

(Names of Filing Persons (identifying status as Offeror, Issuer or Other Person)

The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

The Depositary and Paying Agent for the Offer is:

Continental Stock Transfer & Trust Company

 

If delivering by first class mail:

   If delivering by facsimile

transmission:

   If delivering by registered mail or
courier:

Continental Stock Transfer & Trust Company

1 State Street Plaza, 30th Floor

New York, NY 10004

Attn: Compliance Department

   (for eligible institutions only)

 

(212) 616-7616

 

For confirmation or information:

 

Tel: (917) 262-2378

 

   Continental Stock Transfer & Trust

Company

1 State Street Plaza, 30th Floor

New York, NY 10004

Attn: Compliance Department

 

DESCRIPTION OF SHARES TENDERED  

Name(s) and Address(es) of Registered

Owner(s) (If blank, please fill in exactly as name(s)

appear(s) on share certificate(s))

 

Shares Tendered

(Attach additional list if necessary)

 
    

Share

Certificate

Number(s)*

  

Total Number of

Shares Represented
By Shares
Certificate(s)*

     Number of
Shares
Tendered**
 
                       
                       
                       
    Total Shares (Including Shares held electronically through the Direct Registration System at the Transfer Agent (DRS))

 

        

*  Need not be completed by book-entry stockholders.

**  Unless otherwise indicated, it will be assumed that all shares of common stock, par value $0.0001 per share of ConvergeOne represented by certificates described above are being tendered hereby. See Instruction 4.

   

   


Delivery of this Letter of Transmittal to an address other than as set forth above will not constitute a valid delivery to Continental Stock Transfer & Trust Company (the “Depositary and Paying Agent”). You must sign this Letter of Transmittal in the appropriate space provided therefor below, with signature guaranteed, if required. Also, if required, you must complete the IRS Form W-9 included in this Letter of Transmittal or, if you are not a United States person (as defined for U.S. federal income tax purposes), an appropriate IRS Form W-8, as applicable. The instructions set forth in this Letter of Transmittal should be read carefully before you tender any of your Shares (as defined below) pursuant to the Offer (as defined below).

Delivery of documents to the Book-Entry Transfer Facility (as defined in Section 2 — “Acceptance for Payment and Payment of Shares” of the Offer to Purchase) does not constitute delivery to the Depositary and Paying Agent.

The Offer (as defined below) is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, Offeror (as defined below) may, in its discretion, take such action as Offeror deems necessary to make the Offer comply with the laws of any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction in compliance with applicable laws. In those jurisdictions where applicable laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Offeror by one or more registered brokers or dealers licensed under the laws of such jurisdiction to be designated by Offeror.

This Letter of Transmittal is to be used by holders of Shares of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), if (1) certificates representing Shares are being tendered or (2) unless an Agent’s Message (as defined below) is utilized, delivery of Shares is to be made by book-entry transfer of such Shares into the Depositary and Paying Agent’s account at The Depository Trust Company pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” of the Offer to Purchase.

Stockholders wishing to tender Shares pursuant the Offer who are record holders but whose Share Certificates are not available, who cannot deliver such stock certificate(s) to the Depositary and Paying Agent, who cannot complete the procedure for delivery by book-entry transfer on a timely basis or who otherwise cannot deliver all required documents to the Depositary and Paying Agent, in any case prior to 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018) (such time and date, the “Expiration Date” unless Offeror, in accordance with the Merger Agreement (as defined in the Introduction of the Offer to Purchase), extends the period during which the Offer is open, in which event “Expiration Date” will mean the latest time and date at which the Offer, as so extended, will expire), must tender their Shares pursuant to a Notice of Guaranteed Delivery according to the guaranteed delivery procedure set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of the Offer to Purchase in order to participate in the Offer. See Instruction 2.


Additional Information If Shares Are Being Delivered by Book-Entry Transfer or If Shares Are Being Delivered Pursuant to a Notice of Guaranteed Delivery

Check here if tendered Shares are being delivered by book-entry transfer to an account maintained by the Depositary and Paying Agent with the Book-Entry Transfer Facility and complete the following (only financial institutions that are participants in the system of the Book-Entry Transfer Facility may deliver Shares by book-entry transfer):

Name of Tendering Institution:                                                                                                                                                                                        

DTC Participant Number:                                                                                                                                                                                                  

Transaction Code Number:                                                                                                                                                                                                

 

Check here if tendered Shares are being delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary and Paying Agent, and complete the following:

Name(s) of Registered Owner(s):                                                                                                                                                                                    

Date of Execution of Notice of Guaranteed Delivery:                                                                                                                                             

Name of Institution which Guaranteed Delivery:                                                                                                                                                      

If delivery is by book-entry transfer, also give the following information:

Name of Tendering Institution:                                                                                                                                                                                        

DTC Participant Number:                                                                                                                                                                                                  

Transaction Code Number:                                                                                                                                                                                                


NOTE: SIGNATURES MUST BE PROVIDED BELOW.

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.

Ladies and Gentlemen:

The undersigned hereby tenders to PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), the above described shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), pursuant to Offeror’s offer to purchase (the “Offer”) all of the issued and outstanding Shares for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined in the Introduction of the Offer to Purchase), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 21, 2018 (the “Offer to Purchase”), the receipt of which is hereby acknowledged, and in this Letter of Transmittal.

Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms and conditions of any such extension or amendment), and subject to, and effective upon, the acceptance for payment of, and payment for, Shares validly tendered herewith and not properly withdrawn prior to the expiration of the Offer in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Offeror all right, title and interest in and to all Shares that are being tendered hereby (and any and all dividends, distributions, rights, other Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect thereof on or after November 21, 2018 (collectively, “Distributions”)). In addition, the undersigned irrevocably constitutes and appoints Continental Stock Transfer & Trust Company (the “Depositary and Paying Agent”) as the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest in the Shares (and any and all Distributions) tendered by this Letter of Transmittal), to (1) to deliver certificates representing Shares (the “Share Certificates”) (and any and all Distributions), or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by the Book-Entry Transfer Facility (as defined in Section 2 — “Acceptance for Payment and Payment of Shares” of the Offer to Purchase), together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Offeror; (2) present such Shares (and any and all Distributions) for transfer on the books of ConvergeOne and (3) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms and subject to the conditions of the Offer.

By executing this Letter of Transmittal (or taking action resulting in the delivery of an Agent’s Message ), the undersigned hereby irrevocably appoints the designees of Offeror, and each of them, as the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to (1) vote at any annual or special meeting of ConvergeOne’s stockholders or any adjournment or postponement thereof or otherwise in such manner as each such attorney-in-fact and proxy or its, his or her substitute shall in its, his or her sole discretion deem proper with respect to and (2) otherwise act as each such attorney-in-fact and proxy or its, his or her substitute shall in its, his or her sole discretion deem proper with respect to, all Shares (and any and all Distributions) tendered hereby and accepted for payment by Offeror prior to the time of any vote or other action. This appointment will be effective if and when, and only to the extent that, Offeror accepts such Shares for payment pursuant to the Offer. This power of attorney and proxy are irrevocable and coupled with an interest in the tendered Shares (and any and all Distributions), and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke any prior powers of attorney and proxies granted by the undersigned at any time with respect to such Shares (and any and all Distributions), and no subsequent powers of attorney, proxies, consents or revocations may be given by the undersigned with respect thereto (and, if given, will be deemed ineffective). Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Offeror’s acceptance for payment of such Shares, Offeror or its designees must be able to exercise full voting, consent and other rights, to the extent permitted under applicable law, with respect to such Shares (and any and all Distributions), including voting at any meeting of ConvergeOne’s stockholders.

The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer all Shares tendered hereby (and any and all Distributions) and that, when the same are accepted for payment by Offeror, Offeror will acquire good, marketable and unencumbered title to such Shares (and any and all Distributions), free


and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned hereby represents and warrants that the undersigned is the registered owner of the Shares or the Share Certificate(s) have been endorsed to the undersigned in blank or the undersigned is a participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Shares. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary and Paying Agent or Offeror to be necessary or desirable to complete the sale, assignment and transfer of any and all Shares tendered hereby (and any and all Distributions). In addition, the undersigned shall remit and transfer promptly to the Depositary and Paying Agent for the account of Offeror all Distributions in respect of any and all Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Offeror shall be entitled to all rights and privileges as owner of each such Distribution and, unless such Distribution is transferred to Offeror, may deduct from the purchase price of Shares tendered hereby or deduct from such purchase price the amount or value of such Distribution as determined by Offeror in its sole discretion.

It is understood that the undersigned will not receive payment for the Shares unless and until the Shares are accepted for payment and until the Share Certificate(s) owned by the undersigned are received by the Depositary and Paying Agent at the address set forth above, together with such additional documents as the Depositary and Paying Agent may require, or, in the case of Shares held in book-entry form, ownership of Shares is validly transferred on the account books maintained by the Book-Entry Transfer Facility, and until the same are processed for payment by the Depositary and Paying Agent. It is understood that the method of delivery of the Shares, the Share Certificate(s) and all other required documents (including delivery through the Book-Entry Transfer Facility) is at the option and risk of the undersigned and that the risk of loss of such Shares, Share Certificate(s) and other documents shall pass only after the Depositary and Paying Agent has actually received the Shares or Share Certificate(s) (including, in the case of a book-entry transfer, by Book-Entry Confirmation (as defined below)).

All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, the tender of Shares hereby is irrevocable.

The undersigned understands that the valid tender of Shares pursuant to any of the procedures described in the Offer to Purchase and in the instructions hereto will constitute the undersigned’s acceptance of the terms and conditions of the Offer. Offeror’s acceptance of such Shares for payment will constitute a binding agreement between the undersigned and Offeror upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, upon the terms and subject to the conditions of any such extension or amendment). The undersigned recognizes that under certain circumstances set forth in the Offer, Offeror may not be required to accept for payment any Shares tendered hereby.

Unless otherwise indicated herein under “Special Payment Instructions,” please issue the check for the purchase price in the name(s) of, and/or return any Share Certificates representing Shares not tendered or accepted for payment to, the registered owner(s) appearing under “Description of Shares Tendered.” Similarly, unless otherwise indicated under “Special Delivery Instructions,” please mail the check for the purchase price, and/or return any Share Certificates representing Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to, the address(es) of the registered owner(s) appearing under “Description of Shares Tendered.” In the event that both the “Special Delivery Instructions” and the “Special Payment Instructions” are completed, please issue the check for the purchase price, and/or issue or return any Share Certificates representing Shares not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name of, and deliver such check and/or return such Share Certificates (and any accompanying documents, as appropriate) to, the person or persons so indicated. Unless otherwise indicated herein in the box titled “Special Payment Instructions,” please credit any Shares tendered hereby or by an Agent’s Message and delivered by book-entry transfer, but which are not purchased, by crediting the account at DTC designated above. The undersigned recognizes that the Offeror has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered owner thereof if the Offeror does not accept for payment any of the Shares so tendered.


SPECIAL PAYMENT INSTRUCTIONS

(See Instructions 1, 5, 6 and 7)

To be completed ONLY if Share Certificate(s) not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned or if Shares tendered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at DTC other than that designated above.

 

Issue to:   

☐ Check

 

☐ Certificate

 

Name:         
   (Please Print)

 

Address:      

    

    

    

    
(Include Zip Code)

    

    
(Tax Identification or Social Security Number)
(Also complete, as appropriate, the enclosed IRS Form W-9)

SPECIAL DELIVERY INSTRUCTIONS

(See Instructions 1, 5, 6 and 7)

To be completed ONLY if Share Certificate(s) not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown in the box titled “Description of Shares Tendered” above.

 

Deliver to:   

☐ Check

 

☐ Certificate

 

Name:      
   (Please Print)

 

Address:      

    

    

    

    
(Include Zip Code)

    

    
(Tax Identification or Social Security Number)
(Also complete, as appropriate, the enclosed IRS Form W-9)


IMPORTANT

STOCKHOLDER—YOU MUST SIGN HERE

(U.S. Holders Please Also Complete the Enclosed IRS Form W-9)

(Non-U.S. Holders Please Obtain and Complete IRS Form W-8BEN, W-8BEN-E, W-8ECI or Other

Applicable IRS Form W-8)

 

 

(Signature(s) of Stockholder(s)) — ALL REGISTERED STOCKHOLDERS MUST SIGN

Dated:                             

(Must be signed by registered owner(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered owner(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5. For information concerning signature guarantees, see Instruction 1.)

 

Name(s):      
    
(Please Print) — ALL REGISTERED HOLDERS MUST PRINT

 

Capacity (full title): 

(See Instruction 5)

    

 

Address:      

    

    
(Include Zip Code)

 

Daytime Area Code and Telephone Number:      

 

Tax Identification or Social Security Number: 

(See IRS Form W-9 enclosed herewith) 

    

GUARANTEE OF SIGNATURE(S)

(For Use by Eligible Institutions Only — See Instructions 1 and 5)

 

Name of Firm:

 

 

 

Address:

 

 

 

(Include Zip Code)

 

Authorized Signature:

 

 

 

Name:

 

 

(Please Type or Print)

 

Daytime Area Code and Telephone Number:

 

 

 

 

Dated:

 

 

 

 

Place medallion guarantee in space below:


INSTRUCTIONS

Forming Part of the Terms and Conditions of the Offer

1. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal (1) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Instruction 1, includes any participant in the Book-Entry Transfer Facility’s systems whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled “Special Payment Instructions” or the box entitled “Special Delivery Instructions” in this Letter of Transmittal or (2) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program (each, an “Eligible Institution”). See Instruction 5.

2. Requirements of Tender. This Letter of Transmittal is to be completed if (1) Share Certificates are being tendered or (2) unless an Agent’s Message is utilized, delivery of Shares is to be made by book-entry transfer of such Shares into the Depositary and Paying Agent’s account at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” of the Offer to Purchase. For any Eligible Institution, a manually executed facsimile of this document may be used in lieu of the original. The following must be received by the Depositary and Paying Agent at one of its addresses set forth herein before the Offer expires: (1) Share Certificates representing all physically tendered Shares or confirmation of a book-entry transfer of such Shares (a “Book-Entry Confirmation”) into the Depositary and Paying Agent’s account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares”; (2) the Letter of Transmittal, properly completed and duly executed (or, with respect to an Eligible Institution, a manually executed facsimile thereof) or an Agent’s Message (as defined below) in connection with a book-entry delivery of Shares and (3) any other documents required by this Letter of Transmittal. Please do not send your Share Certificates directly to the Offeror, Parent or ConvergeOne.

Stockholders wishing to tender Shares pursuant to the Offer who are record holders but whose Share Certificates are not available, who cannot deliver such Share Certificate(s) to the Depositary and Paying Agent, who cannot complete the procedure for delivery by book-entry transfer on a timely basis, or who otherwise cannot deliver all required documents to the Depositary and Paying Agent, in any case before the Expiration Date, may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of the Offer to Purchase. Pursuant to such procedure: (1) such tender must be made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Offeror, must be received by the Depositary and Paying Agent at one of its addresses set forth herein before the Offer expires and (3) Share Certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all those Shares), together with this properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof), with any required signature guarantees, and any other required documents, must be received by the Depositary and Paying Agent within two Nasdaq Global Market trading days after the date of execution of the Notice of Guaranteed Delivery.

A properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof) must accompany each such delivery of Share Certificates to the Depositary and Paying Agent.

The term “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and Paying Agent and forming a part of a Book-Entry Confirmation, stating that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering Shares that are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Offeror may enforce such agreement against such participant. The term “Agent’s Message” also includes any hard copy printout evidencing such message generated by a computer terminal maintained at the Depositary and Paying Agent’s office.

The method of delivery of this Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the option and the risk of the tendering stockholder and the delivery


will be deemed made (and risk of loss will pass) only when actually received by the Depositary and Paying Agent (including, in the case of book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery prior to the expiration of the Offer.

Beneficial owners should be aware that their broker, dealer, commercial bank, trust company or other nominee may establish its own earlier deadline for participation in the Offer. Accordingly, beneficial owners wishing to participate in the Offer should contact their broker, dealer, commercial bank, trust company or other nominee as soon as possible in order to determine the times by which such owner must take action in order to participate in the Offer.

Offeror will not accept any alternative, conditional or contingent tenders, and no fractional Shares will be purchased. By executing this Letter of Transmittal, the tendering stockholder waives any right to receive any notice of the acceptance for payment of Shares.

3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers, the number of Shares represented by such Share Certificate(s) and/or the number of Shares tendered should be listed on a separate schedule attached hereto and separately signed on each page in the same manner as this Letter of Transmittal.

4. Partial Tenders (applicable to certificate stockholders only). If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary and Paying Agent are to be tendered, fill in the number of Shares which are to be tendered in the column titled “Number of Shares Tendered” in the box titled “Description of Shares Tendered.” In such cases, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) but not tendered will be sent to the registered owner, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary and Paying Agent will be deemed to have been tendered unless otherwise indicated.

5. Signatures on Letter of Transmittal; Stock Powers and Endorsements.

(1) If this Letter of Transmittal is signed by the registered holder(s) of Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the books of the Depositary and Paying Agent) without alteration, enlargement or any change whatsoever.

(2) If any Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal.

(3) If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Depositary and Paying Agent of the authority of such person to so act must be submitted and all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. Proper evidence of authority includes a power of attorney, a letter of testamentary or a letter of appointment.

(4) If this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of Share Certificates or separate stock powers are required unless payment is to be made to, or Share Certificates representing Shares not tendered or accepted for payment are to be issued in the name of, a person other than the registered owner(s). Signatures on such Share Certificates or stock powers must be guaranteed by an Eligible Institution.

(5) If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Share(s) listed, the Share Certificate(s) must be endorsed or accompanied by the appropriate stock powers, in either case, signed exactly as the name or names of the registered owner(s) or holder(s) appear(s) on the Share Certificate(s). Signatures on such Share Certificates or stock powers must be guaranteed by an Eligible Institution.

6. Stock Transfer Taxes. Offeror or any successor entity thereto will pay or cause to be paid all stock transfer taxes with respect to the transfer and sale of any Shares to it or its order pursuant to the Offer (for the avoidance of doubt, transfer


taxes do not include U.S. federal, state, local or foreign income tax or backup withholding taxes), unless (1) a transfer tax is imposed based on income or for any reason other than the tender of Shares in the Offer, in which case those transfer taxes, whether imposed on the registered holder(s) or any other person(s), will not be payable to the tendering holder(s) or (2) payment of the purchase price is to be made to any person(s) other than the registered holder(s), in which case the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person(s)) payable on account of the transfer to such other person(s) will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to Offeror of the payment of such taxes, or exemption therefrom, is submitted.

7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or Share Certificates representing Shares not tendered or accepted for payment are to be issued or returned to, a person other than the signer(s) of this Letter of Transmittal or if a check and/or such certificates are to be mailed to a person other than the signer(s) of this Letter of Transmittal or to an address other than that shown in the box titled “Description of Shares Tendered” above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders delivering Shares tendered hereby or by Agent’s Message by book-entry transfer may request that Shares not purchased be credited to an account maintained at the Book-Entry Transfer Facility as such stockholder may designate in the box titled “Special Payment Instructions” herein. If no such instructions are given, all such Shares not purchased will be returned by crediting the same account at the Book-Entry Transfer Facility as the account from which such Shares were delivered.

If you choose to give “Special Payment Instructions” or “Special Delivery Instructions” stock transfer taxes may be deducted from amounts otherwise payable for Shares purchased in the Offer. See Instruction 6.

8. IRS Form W-9; Backup Withholding; Taxpayer Identification Number; FATCA. In order to avoid U.S. federal backup withholding (currently at a rate of 24 percent) on payments pursuant to the Offer, each tendering stockholder or payee that is a United States person (as defined for U.S. federal income tax purposes), must provide the Depositary and Paying Agent with such stockholder’s or payee’s correct taxpayer identification number (“TIN”) and certify, under penalties of perjury, that such number is correct and that such stockholder or payee is not subject to such backup withholding and that such stockholder is a United States person by completing the enclosed IRS Form W-9. If a tendering stockholder or payee does not have a TIN, such stockholder or payee should consult the instructions to the IRS Form W-9 for instructions on applying for a TIN and apply for a TIN immediately. If the stockholder or payee does not provide such stockholder’s or payee’s TIN to the Depositary and Paying Agent by the time of payment, backup withholding will apply. Certain stockholders or payees (including, among others, certain corporations, non-resident foreign individuals and foreign entities) may not be subject to these backup withholding and reporting requirements. A tendering stockholder who is not a United States person (as defined for U.S. federal income tax purposes) (A “Non-U.S. Holder”) should complete, sign and submit to the Depositary and Paying Agent the appropriate IRS Form W-8. An IRS Form W-8BEN, Form W-8BEN-E or Form W-8ECI (or other applicable IRS Form W-8) may be obtained from the Depositary and Paying Agent or downloaded from the Internal Revenue Service’s website at the following address: http://www.irs.gov. Failure to complete the IRS Form W-9 or appropriate IRS Form W-8 will not, by itself, cause Shares to be deemed invalidly tendered, but may require the Depositary and Paying Agent to withhold a portion of the amount of any payments made of the Offer Price pursuant to the Offer.

Please consult your tax advisor for further guidance regarding the completion of IRS Form W-9 or the appropriate IRS Form W-8 to claim exemption from backup withholding, or contact the Depositary and Paying Agent.

NOTE: FAILURE TO COMPLETE AND RETURN IRS FORM W-9 OR THE APPROPRIATE IRS FORM W-8 MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ANY PAYMENTS MADE TO YOU.

Pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as amended, and the U.S. Treasury regulations promulgated thereunder (the provisions commonly known as FATCA”), if a Non-U.S. Holder tenders Shares pursuant to the Offer after December 31, 2018, the gross proceeds from such sale to “foreign financial institutions” and “non-financial foreign entities” (as specifically defined under the FATCA rules) may be subject to withholding at a rate of 30 percent unless specified conditions are met and such Non-U.S. Holder properly establishes its exemption from such withholding tax by providing a properly executed applicable IRS Form W-8 evidencing such exemption. Non-U.S. Holders should consult with their tax advisors regarding the possible implications of these rules on their tender of Shares pursuant to the Offer.


9. Irregularities. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Offeror in its sole discretion, which determinations shall be final and binding on you. Offeror reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of Offeror’s counsel, be unlawful. Offeror also reserves the absolute right to waive any defect or irregularity in the tender of any Shares by any particular stockholder, regardless of whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived to the satisfaction of Offeror. None of Parent, Offeror, ConvergeOne, the Depositary and Paying Agent, Innisfree M&A Incorporated (the “Information Agent”) or any other person is or will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

10. Requests for Assistance or Additional Copies. Questions or requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery should be directed to the Information Agent at its telephone number and address set forth below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer materials should be directed to the Information Agent.

11. Lost, Destroyed, Mutilated or Stolen Share Certificates. If any Share Certificate has been lost, destroyed, mutilated or stolen, the stockholder should promptly notify ConvergeOne’s stock transfer agent, Continental Stock Transfer & Trust Company (the “Transfer Agent”), Attn: Lost Securities Department at 1 State Street Plaza, 30th Floor, New York, New York 10004 or by email at [email protected]. The stockholder will then be instructed as to the steps that must be taken in order to replace the Share Certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, mutilated, destroyed or stolen Share Certificates have been followed. You are urged to contact the Transfer Agent immediately in order to receive further instructions and for a determination of whether you will need to post a bond and to permit timely processing of this documentation. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Share Certificates have been followed.

12. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement (as defined in the Introduction of the Offer to Purchase) and the applicable rules and regulations of the Securities and Exchange Commission, the conditions of the Offer may be waived by Parent or the Offeror in whole or in part at any time and from time to time in its sole discretion.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY EXECUTED FACSIMILE COPY THEREOF) OR AN AGENT’S MESSAGE, TOGETHER WITH SHARE CERTIFICATE(S) OR BOOK-ENTRY CONFIRMATION OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY AND PAYING AGENT PRIOR TO THE EXPIRATION DATE.

IMPORTANT TAX INFORMATION

Under U.S. federal income tax laws, a stockholder who is a United States person (as defined for U.S. federal income tax purposes) whose tendered Shares are accepted for payment is generally required to provide the Depositary and Paying Agent (as payer) with such stockholder’s correct TIN on the attached IRS Form W-9 or otherwise establish a basis for exemption from backup withholding. A TIN is generally an individual stockholder’s social security number or a stockholder’s employer identification number. If the Depositary and Paying Agent is not provided with the correct TIN, a penalty may be imposed by the Internal Revenue Service, and payments made with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Failure to comply truthfully with the backup withholding requirements also may result in the imposition of criminal and/or civil fines and penalties.

Certain stockholders (including, among others, certain corporations, non-resident foreign individuals and foreign entities) may not be subject to these backup withholding requirements. Exempt stockholders should furnish their TIN, enter


any applicable “exempt payee codes” in the “Exemptions” box of IRS Form W-9, and sign, date and return the IRS Form W-9 to the Depositary and Paying Agent. A foreign person, including an entity, may qualify as an exempt recipient by submitting to the Depositary and Paying Agent a properly completed IRS Form W-8BEN, Form W-8BEN-E or Form W-8ECI (or other applicable IRS Form W-8) signed under penalties of perjury, attesting to that stockholder’s foreign status. The appropriate IRS Form W-8 can be obtained from the Depositary and Paying Agent or downloaded from the Internal Revenue Service’s website at the following address: http://www.irs.gov.

If backup withholding applies, the Depositary and Paying Agent is required to withhold and pay over to the Internal Revenue Service a portion of any payment made to a stockholder. Backup withholding is not an additional federal income tax. Rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service, provided that the required information is properly furnished to the Internal Revenue Service.

Pursuant to FATCA, if a Non-U.S. Holder tenders Shares pursuant to the Offer after December 31, 2018, the gross proceeds from such sale to “foreign financial institutions” and “non-financial foreign entities” (as specifically defined under the FATCA rules) may be subject to withholding at a rate of 30 percent unless specified conditions are met and such Non-U.S. Holder properly establishes its exemption from such withholding tax by providing a properly executed applicable IRS Form W-8 evidencing such exemption. Non-U.S. Holders should consult with their tax advisors regarding the possible implications of these rules on their tender of Shares pursuant to the Offer.

Purpose of Form W-9

To prevent U.S. federal backup withholding on payments that are made to a stockholder, including any purchase price of Shares, as the case may be, with respect to Shares purchased pursuant to the Offer, the stockholder is required to provide the Depositary and Paying Agent with his correct TIN by completing the attached IRS Form W-9 and certifying that (1) the TIN provided on IRS Form W-9 is correct (or that such stockholder is awaiting a TIN); (2) the stockholder is exempt from backup withholding, or the stockholder has not been notified by the Internal Revenue Service that the stockholder is subject to backup withholding as a result of failure to report all interest or dividends or the Internal Revenue Service has notified the stockholder that the stockholder is no longer subject to backup withholding and (3) the stockholder is a United States person (as defined for U.S. federal income tax purposes) (including a U.S. resident alien).

A nonexempt stockholder may write “Applied For” in the space provided for the TIN in Part 1 of the attached IRS Form W-9 if such stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. In the event that such holder fails to provide a TIN to the Depositary and Paying Agent, the Depositary and Paying Agent must backup withhold on payments made to such holder.

What Number to Give the Depositary and Paying Agent

The tendering stockholder is required to give the Depositary and Paying Agent the TIN, generally the social security number or employer identification number, of the record holder of Shares tendered hereby. If Shares are in more than one name or are not in the name of the actual owner, consult the enclosed IRS Form W-9 for additional guidance on which number to report.


   

Form  W-9

 

(Rev. October 2018)

Department of the Treasury

Internal Revenue Service

 

Request for Taxpayer

Identification Number and Certification

 

u Go to www.irs.gov/FormW9 for instructions and the latest information.

 

Give Form to the

requester. Do not

send to the IRS.

 

Print or type

See

Specific Instructions

on page 3.

 

 

 

 1  Name (as shown on your income tax return). Name is required on this line; do not leave this line blank.

 

    
 

 

 2  Business name/disregarded entity name, if different from above

 

                        
 

 3  Check appropriate box for federal tax classification of the person whose name is entered on line 1. Check only one of the
following seven boxes.

 

     

Exemptions (codes apply only to
certain entities, not individuals; see
instructions on page 3):

 

Exempt payee code (if any)                     

 

Exemption from FATCA reporting

code (if any)                                     

 

(Applies to accounts maintained outside the U.S.)

 

    Individual/sole proprietor or
       single-member LLC    

 

    C Corporation         S Corporation         Partnership         Trust/estate        
 

Limited liability company. Enter the tax classification (C=C corporation, S=S corporation, P=Partnership) u                                     

 

Note: Check the appropriate box in the line above for the tax classification of the single-member owner. Do not check LLC
if the LLC is classified as a single-member LLC that is disregarded from the owner unless the owner of the LLC is another
LLC that is not disregarded from the owner for U.S. federal tax purposes. Otherwise, a single-member LLC that is
disregarded from the owner should check the appropriate box for the tax classification of its owner.

 

Other (see instructions) u

 

 

   
 

 

 5  Address (number, street, and apt. or suite no.) See instructions.

 

      

 

  Requester’s name and address (optional)

 

 

 6  City, state, and ZIP code

 

         
    

 

 7  List account number(s) here (optional)

 

                    

 

 

Part I

    

 

 

Taxpayer Identification Number (TIN)

Enter your TIN in the appropriate box. The TIN provided must match the name given on line 1 to avoid backup withholding. For individuals, this is generally your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the instructions for Part I, later. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN, later.

 

 

    

 

 

 

Social security number

 

                     
             

-  

          -                  
  or
Note: If the account is in more than one name, see the instructions for line 1. Also see What Name and Number To Give the Requester for guidelines on whose number to enter.    

 

Employer identification number

     
                       
                -                                
Part II      Certification

Under penalties of perjury, I certify that:

 

1.   The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and

 

2.   I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and

 

3.   I am a U.S. citizen or other U.S. person (defined below); and

 

4.   The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct.

Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN. See the instructions for Part II, later.

 

Sign
Here
      Signature of
    U.S. person  
u
     Date   u

 

General Instructions

Section references are to the Internal Revenue Code unless otherwise noted.

Future developments. For the latest information about developments related to Form W-9 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/FormW9.

Purpose of Form

An individual or entity (Form W-9 requester) who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) which may be your social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN), to report on an information return the amount paid to you, or other amount reportable on an information return. Examples of information returns include, but are not limited to, the following.

• Form 1099-INT (interest earned or paid)

• Form 1099-DIV (dividends, including those from stocks or mutual funds)

• Form 1099-MISC (various types of income, prizes, awards, or gross proceeds)

• Form 1099-B (stock or mutual fund sales and certain other transactions by brokers)

• Form 1099-S (proceeds from real estate transactions)

• Form 1099-K (merchant card and third party network transactions)

• Form 1098 (home mortgage interest), 1098-E (student loan interest), 1098-T (tuition)

• Form 1099-C (canceled debt)

• Form 1099-A (acquisition or abandonment of secured property)

Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN.

If you do not return Form W-9 to the requester with a TIN, you might be subject to backup withholding. See What is backup withholding, later.

 

 

    Cat. No. 10231X  

Form W-9 (Rev. 10-2018)

 


Form W-9 (Rev. 10-2018)

Page 2

 

 

By signing the filled-out form, you:

1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),

2. Certify that you are not subject to backup withholding, or

3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners’ share of effectively connected income, and

4. Certify that FATCA code(s) entered on this form (if any) indicating that you are exempt from the FATCA reporting, is correct. See What is FATCA reporting, later, for further information.

Note: If you are a U.S. person and a requester gives you a form other than Form W-9 to request your TIN, you must use the requester’s form if it is substantially similar to this Form W-9.

Definition of a U.S. person. For federal tax purposes, you are considered a U.S. person if you are:

• An individual who is a U.S. citizen or U.S. resident alien;

• A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States;

• An estate (other than a foreign estate); or

• A domestic trust (as defined in Regulations section 301.7701-7).

Special rules for partnerships. Partnerships that conduct a trade or business in the United States are generally required to pay a withholding tax under section 1446 on any foreign partners’ share of effectively connected taxable income from such business. Further, in certain cases where a Form W-9 has not been received, the rules under section 1446 require a partnership to presume that a partner is a foreign person, and pay the section 1446 withholding tax. Therefore, if you are a U.S. person that is a partner in a partnership conducting a trade or business in the United States, provide Form W-9 to the partnership to establish your U.S. status and avoid section 1446 withholding on your share of partnership income.

In the cases below, the following person must give Form W-9 to the partnership for purposes of establishing its U.S. status and avoiding withholding on its allocable share of net income from the partnership conducting a trade or business in the United States.

• In the case of a disregarded entity with a U.S. owner, the U.S. owner of the disregarded entity and not the entity;

• In the case of a grantor trust with a U.S. grantor or other U.S. owner, generally, the U.S. grantor or other U.S. owner of the grantor trust and not the trust; and

• In the case of a U.S. trust (other than a grantor trust), the U.S. trust (other than a grantor trust) and not the beneficiaries of the trust.

Foreign person. If you are a foreign person or the U.S. branch of a foreign bank that has elected to be treated as a U.S. person, do not use Form W-9. Instead, use the appropriate Form W-8 or Form 8233 (see Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities).

Nonresident alien who becomes a resident alien. Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a “saving clause.” Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the payee has otherwise become a U.S. resident alien for tax purposes.

If you are a U.S. resident alien who is relying on an exception contained in the saving clause of a tax treaty to claim an exemption from U.S. tax on certain types of income, you must attach a statement to Form W-9 that specifies the following five items.

1. The treaty country. Generally, this must be the same treaty under which you claimed exemption from tax as a nonresident alien.

2. The treaty article addressing the income.

3. The article number (or location) in the tax treaty that contains the saving clause and its exceptions.

4. The type and amount of income that qualifies for the exemption from tax.

5. Sufficient facts to justify the exemption from tax under the terms of the treaty article.

Example. Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under U.S. law, this student will

become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first Protocol to the U.S.-China treaty (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would attach to Form W-9 a statement that includes the information described above to support that exemption.

If you are a nonresident alien or a foreign entity, give the requester the appropriate completed Form W-8 or Form 8233.

Backup Withholding

What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS 28% of such payments. This is called “backup withholding.” Payments that may be subject to backup withholding include interest, tax-exempt interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, payments made in settlement of payment card and third party network transactions, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.

You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.

Payments you receive will be subject to backup withholding if:

1. You do not furnish your TIN to the requester,

2. You do not certify your TIN when required (see the instructions for Part II for details),

3. The IRS tells the requester that you furnished an incorrect TIN,

4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or

5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only).

Certain payees and payments are exempt from backup withholding. See Exempt payee code, later, and the separate Instructions for the Requester of Form W-9 for more information.

Also see Special rules for partnerships, earlier.

What is FATCA Reporting?

The Foreign Account Tax Compliance Act (FATCA) requires a participating foreign financial institution to report all United States account holders that are specified United States persons. Certain payees are exempt from FATCA reporting. See Exemption from FATCA reporting code, later, and the Instructions for the Requester of Form W-9 for more information.

Updating Your Information

You must provide updated information to any person to whom you claimed to be an exempt payee if you are no longer an exempt payee and anticipate receiving reportable payments in the future from this person. For example, you may need to provide updated information if you are a C corporation that elects to be an S corporation, or if you no longer are tax exempt. In addition, you must furnish a new Form W-9 if the name or TIN changes for the account; for example, if the grantor of a grantor trust dies.

Penalties

Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

Misuse of TINs. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties.

 

 


Form W-9 (Rev. 10-2018)

Page 3

 

 

Specific Instructions

Line 1

You must enter one of the following on this line; do not leave this line blank. The name should match the name on your tax return.

If this Form W-9 is for a joint account (other than an account maintained by a foreign financial institution (FFI)), list first, and then circle, the name of the person or entity whose number you entered in Part I of Form W-9. If you are providing Form W-9 to an FFI to document a joint account, each holder of the account that is a U.S. person must provide a Form W-9.

a. Individual. Generally, enter the name shown on your tax return. If you have changed your last name without informing the Social Security Administration (SSA) of the name change, enter your first name, the last name as shown on your social security card, and your new last name.

Note: ITIN applicant: Enter your individual name as it was entered on your Form W-7 application, line 1a. This should also be the same as the name you entered on the Form 1040/1040A/1040EZ you filed with your application.

b. Sole proprietor or single-member LLC. Enter your individual name as shown on your 1040/1040A/1040EZ on line 1. You may enter your business, trade, or “doing business as” (DBA) name on line 2.

c. Partnership, LLC that is not a single-member LLC, C corporation, or S corporation. Enter the entity’s name as shown on the entity’s tax return on line 1 and any business, trade, or DBA name on line 2.

d. Other entities. Enter your name as shown on required U.S. federal tax documents on line 1. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on line 2.

e. Disregarded entity. For U.S. federal tax purposes, an entity that is disregarded as an entity separate from its owner is treated as a “disregarded entity.” See Regulations section 301.7701-2(c)(2)(iii). Enter the owner’s name on line 1. The name of the entity entered on line 1 should never be a disregarded entity. The name on line 1 should be the name shown on the income tax return on which the income should be reported. For example, if a foreign LLC that is treated as a disregarded entity for U.S. federal tax purposes has a single owner that is a U.S. person, the U.S. owner's name is required to be provided on line 1. If the direct owner of the entity is also a disregarded entity, enter the first owner that is not disregarded for federal tax purposes. Enter the disregarded entity's name on line 2, “Business name/disregarded entity name.” If the owner of the disregarded entity is a foreign person, the owner must complete an appropriate Form W-8 instead of a Form W-9. This is the case even if the foreign person has a U.S. TIN.

Line 2

If you have a business name, trade name, DBA name, or disregarded entity name, you may enter it on line 2.

Line 3

Check the appropriate box on line 3 for the U.S. federal tax classification of the person whose name is entered on line 1. Check only one box on line 3.

 

   

IF the entity/person on line 1 is

a(n) . . .

  THEN check the box for . . .
  • Corporation   Corporation
 

• Individual

 

• Sole proprietorship, or

 

• Single-member limited liability company (LLC) owned by an individual and disregarded for U.S. federal tax purposes.

  Individual/sole proprietor or single-member LLC
 

• LLC treated as a partnership for U.S. federal tax purposes,

 

• LLC that has filed Form 8832 or 2553 to be taxed as a corporation, or

 

• LLC that is disregarded as an entity separate from its owner but the owner is another LLC that is not disregarded for U.S. federal tax purposes.

  Limited liability company and enter the appropriate tax classification. (P= Partnership; C= C corporation; or S= S corporation)
  • Partnership   Partnership
  • Trust/estate   Trust/estate

Line 4, Exemptions

If you are exempt from backup withholding and/or FATCA reporting, enter in the appropriate space on line 4 any code(s) that may apply to you.

Exempt payee code.

•  Generally, individuals (including sole proprietors) are not exempt from backup withholding.

•  Except as provided below, corporations are exempt from backup withholding for certain payments, including interest and dividends.

•  Corporations are not exempt from backup withholding for payments made in settlement of payment card or third party network transactions.

•  Corporations are not exempt from backup withholding with respect to attorneys’ fees or gross proceeds paid to attorneys, and corporations that provide medical or health care services are not exempt with respect to payments reportable on Form 1099-MISC.

The following codes identify payees that are exempt from backup withholding. Enter the appropriate code in the space in line 4.

1—An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2)

2—The United States or any of its agencies or instrumentalities

3—A state, the District of Columbia, a U.S. commonwealth or possession, or any of their political subdivisions or instrumentalities

4—A foreign government or any of its political subdivisions, agencies, or instrumentalities

5—A corporation

6—A dealer in securities or commodities required to register in the United States, the District of Columbia, or a U.S. commonwealth or possession

7—A futures commission merchant registered with the Commodity Futures Trading Commission

8—A real estate investment trust

9—An entity registered at all times during the tax year under the Investment Company Act of 1940

10—A common trust fund operated by a bank under section 584(a)

11—A financial institution

12—A middleman known in the investment community as a nominee or custodian

13—A trust exempt from tax under section 664 or described in section 4947

The following chart shows types of payments that may be exempt from backup withholding. The chart applies to the exempt payees listed above, 1 through 13.

 

IF the payment is for . . .   THEN the payment is exempt
for . . .
Interest and dividend payments   All exempt payees except for 7
Broker transactions   Exempt payees 1 through 4 and 6 through 11 and all C corporations. S corporations must not enter an exempt payee code because they are exempt only for sales of noncovered securities acquired prior to 2012.
Barter exchange transactions and patronage dividends   Exempt payees 1 through 4
Payments over $600 required to be reported and direct sales over $5,0001   Generally, exempt payees 1 through 52
Payments made in settlement of payment card or third party network transactions   Exempt payees 1 through 4
1 

See Form 1099-MISC, Miscellaneous Income, and its instructions.

2 

However, the following payments made to a corporation and reportable on Form 1099-MISC are not exempt from backup withholding: medical and health care payments, attorneys’ fees, gross proceeds paid to an attorney reportable under section 6045(f), and payments for services paid by a federal executive agency.

 

 


Form W-9 (Rev. 10-2018)

Page 4

 

 

Exemption from FATCA reporting code. The following codes identify payees that are exempt from reporting under FATCA. These codes apply to persons submitting this form for accounts maintained outside of the United States by certain foreign financial institutions. Therefore, if you are only submitting this form for an account you hold in the United States, you may leave this field blank. Consult with the person requesting this form if you are uncertain if the financial institution is subject to these requirements. A requester may indicate that a code is not required by providing you with a Form W-9 with “Not Applicable” (or any similar indication) written or printed on the line for a FATCA exemption code.

A—An organization exempt from tax under section 501(a) or any individual retirement plan as defined in section 7701(a)(37)

B—The United States or any of its agencies or instrumentalities

C—A state, the District of Columbia, a U.S. commonwealth or possession, or any of their political subdivisions or instrumentalities

D—A corporation the stock of which is regularly traded on one or more established securities markets, as described in Regulations section 1.1472-1(c)(1)(i)

E—A corporation that is a member of the same expanded affiliated group as a corporation described in Regulations section 1.1472-1(c)(1)(i)

F—A dealer in securities, commodities, or derivative financial instruments (including notional principal contracts, futures, forwards, and options) that is registered as such under the laws of the United States or any state

G—A real estate investment trust

H—A regulated investment company as defined in section 851 or an entity registered at all times during the tax year under the Investment Company Act of 1940

I—A common trust fund as defined in section 584(a)

J—A bank as defined in section 581

K—A broker

L—A trust exempt from tax under section 664 or described in section 4947(a)(1)

M—A tax exempt trust under a section 403(b) plan or section 457(g) plan

Note: You may wish to consult with the financial institution requesting this form to determine whether the FATCA code and/or exempt payee code should be completed.

Line 5

Enter your address (number, street, and apartment or suite number). This is where the requester of this Form W-9 will mail your information returns. If this address differs from the one the requester already has on file, write NEW at the top. If a new address is provided, there is still a chance the old address will be used until the payor changes your address in their records.

Line 6

Enter your city, state, and ZIP code.

Part I. Taxpayer Identification Number (TIN)

Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below.

If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN.

If you are a single-member LLC that is disregarded as an entity separate from its owner, enter the owner’s SSN (or EIN, if the owner has one). Do not enter the disregarded entity’s EIN. If the LLC is classified as a corporation or partnership, enter the entity’s EIN.

Note: See What Name and Number To Give the Requester, later, for further clarification of name and TIN combinations.

How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local SSA office or get this form online at www.SSA.gov. You may also get this form by calling 1-800-772-1213. Use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN, or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can apply for an EIN online by

accessing the IRS website at www.irs.gov/Businesses and clicking on Employer Identification Number (EIN) under Starting a Business. Go to www.irs.gov/Forms to view, download, or print Form W-7 and/or Form SS-4. Or, you can go to www.irs.gov/OrderForms to place an order and have Form W-7 and/or SS-4 mailed to you within 10 business days.

If you are asked to complete Form W-9 but do not have a TIN, apply for a TIN and write “Applied For” in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester.

Note: Entering “Applied For” means that you have already applied for a TIN or that you intend to apply for one soon.

Caution: A disregarded U.S. entity that has a foreign owner must use the appropriate Form W-8.

Part II. Certification

To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if item 1, 4, or 5 below indicates otherwise.

For a joint account, only the person whose TIN is shown in Part I should sign (when required). In the case of a disregarded entity, the person identified on line 1 must sign. Exempt payees, see Exempt payee code, earlier.

Signature requirements. Complete the certification as indicated in items 1 through 5 below.

1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.

2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.

3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.

4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments made in settlement of payment card and third party network transactions, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).

5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), ABLE accounts (under section 529A), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.

What Name and Number To Give the Requester

 

For this type of account:   Give name and SSN of:
  1.     Individual   The individual
  2.     Two or more individuals (joint account) other than an account maintained by an FFI   The actual owner of the account or, if combined funds, the first individual on the account1
  3.    

Two or more U.S. persons

(joint account maintained by an FFI)

  Each holder of the account
  4.     Custodialaccount of a minor (Uniform Gift to Minors Act)   The minor2
  5.     a. The usual revocable savings trust (grantor is also trustee)   The grantor-trustee1
  b. So-called trust account that is not a legal or valid trust under state law   The actual owner1
 

 


Form W-9 (Rev. 10-2018)

Page 5

 

 

For this type of account:   Give name and SSN of:
  6.     Sole proprietorship or disregarded entity owned by an individual   The owner3
  7.     Grantortrust filing under Optional Form 1099 Filing Method 1 (see Regulations section 1.671-4(b)(2)(i)(A))   The grantor*
For this type of account:   Give name and EIN of:
  8.     Disregarded entity not owned by an individual   The owner
  9.     A valid trust, estate, or pension trust   Legal entity4
  10.     Corporation or LLC electing corporate status on Form 8832 or Form 2553   The corporation
  11.     Association, club, religious, charitable, educational, or other tax-exempt organization   The organization
  12.     Partnership or multi-member LLC   The partnership
  13.     A broker or registered nominee   The broker or nominee
  14.     Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments   The public entity
  15.     Grantor trust filing under the Form 1041 Filing Method or the Optional Form 1099 Filing Method 2 (see Regulations section 1.671-4(b)(2)(i)(B))   The trust

1 List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person’s number must be furnished.

2 Circle the minor’s name and furnish the minor’s SSN.

3 You must show your individual name and you may also enter your business or DBA name on the “Business name/disregarded entity” name line. You may use either your SSN or EIN (if you have one), but the IRS encourages you to use your SSN.

4 List first and circle the name of the trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Also see Special rules for partnerships, earlier.

*Note: The grantor also must provide a Form W-9 to trustee of trust.

Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

Secure Your Tax Records From Identity Theft

Identity theft occurs when someone uses your personal information such as your name, SSN, or other identifying information, without your permission, to commit fraud or other crimes. An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund.

To reduce your risk:

• Protect your SSN,

• Ensure your employer is protecting your SSN, and

• Be careful when choosing a tax preparer.

If your tax records are affected by identity theft and you receive a notice from the IRS, respond right away to the name and phone number printed on the IRS notice or letter.

If your tax records are not currently affected by identity theft but you think you are at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Theft Hotline at 1-800-908-4490 or submit Form 14039.

For more information, see Pub. 5027, Identity Theft Information for Taxpayers.

Victims of identity theft who are experiencing economic harm or a systemic problem, or are seeking help in resolving tax problems that have not been resolved through normal channels, may be eligible for Taxpayer Advocate Service (TAS) assistance. You can reach TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059.

Protect yourself from suspicious emails or phishing schemes. Phishing is the creation and use of email and websites designed to mimic legitimate business emails and websites. The most common act is sending an email to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft.

The IRS does not initiate contacts with taxpayers via emails. Also, the IRS does not request personal detailed information through email or ask taxpayers for the PIN numbers, passwords, or similar secret access information for their credit card, bank, or other financial accounts.

If you receive an unsolicited email claiming to be from the IRS, forward this message to [email protected]. You may also report misuse of the IRS name, logo, or other IRS property to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484. You can forward suspicious emails to the Federal Trade Commission at [email protected] or report them at www.ftc.gov/complaint. You can contact the FTC at www.ftc.gov/idtheft or 877-IDTHEFT (877-438-4338). If you have been the victim of identity theft, see www.IdentityTheft.gov and Pub. 5027.

Visit www.irs.gov/IdentityTheft to learn more about identity theft and how to reduce your risk.

Privacy Act Notice

Section 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons (including federal agencies) who are required to file information returns with the IRS to report interest, dividends, or certain other income paid to you; mortgage interest you paid; the acquisition or abandonment of secured property; the cancellation of debt; or contributions you made to an IRA, Archer MSA, or HSA. The person collecting this form uses the information on the form to file information returns with the IRS, reporting the above information. Routine uses of this information include giving it to the Department of Justice for civil and criminal litigation and to cities, states, the District of Columbia, and U.S. commonwealths and possessions for use in administering their laws. The information also may be disclosed to other countries under a treaty, to federal and state agencies to enforce civil and criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. You must provide your TIN whether or not you are required to file a tax return. Under section 3406, payers must generally withhold a percentage of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to the payer. Certain penalties may also apply for providing false or fraudulent information.

 

 


The Depositary and Paying Agent for the Offer is:

Continental Stock Transfer & Trust Company

 

If delivering by first class mail:   

If delivering by facsimile

transmission:

   If delivering by registered mail or courier:
Continental Stock Transfer & Trust Company    (for eligible institutions only)    Continental Stock Transfer & Trust Company

1 State Street Plaza, 30th Floor

New York, NY 10004

   (212) 616-7616   

1 State Street Plaza, 30th Floor

New York, NY 10004

Attn: Compliance Department    For confirmation or information:    Attn: Compliance Department
   Tel: (917) 262-2378   

Questions or requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent at its telephone number and address set forth below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

 

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders may call toll free: (888) 750-5834

Banks and brokers may call collect: (212) 750-5833

Exhibit (a)(1)(C)

Notice of Guaranteed Delivery

for

Offer to Purchase

All Outstanding Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 Per Share, Net in Cash,

Pursuant to the Offer to Purchase dated November 21, 2018

by

PVKG Merger Sub, Inc.

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

 

The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if (1) certificates representing shares of common stock, par value $0.0001 per share (the “Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation, are not available; (2) the procedure for book-entry transfer of the Shares cannot be completed prior to 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018) (such time and date, the “Expiration Date” unless Offeror, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event “Expiration Date” will mean the latest time and date at which the Offer, as so extended, will expire) or (3) time will not permit all required documents to reach Continental Stock Transfer & Trust Company (the “Depositary and Paying Agent”) before the Expiration Date. This Notice of Guaranteed Delivery may be delivered by facsimile transmission or mail to the Depositary and Paying Agent. See Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of the Offer to Purchase (as defined below). Please be advised that submissions received after normal business hours may be subject to a fee from the paying agent.

The Depositary and Paying Agent for the Offer is:

Continental Stock Transfer & Trust Company

 

If delivering by first class mail:

  

If delivering by facsimile

transmission:

   If delivering by registered mail or
courier:
Continental Stock Transfer & Trust Company    (for eligible institutions only)    Continental Stock Transfer & Trust
Company

1 State Street Plaza, 30th Floor

New York, NY 10004

   (212) 616-7616    1 State Street Plaza, 30th Floor

New York, NY 10004

Attn: Compliance Department    For confirmation or information:    Attn: Compliance Department
   Tel: (917) 262-2378   

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.

THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN “ELIGIBLE INSTITUTION” (AS DEFINED IN SECTION 2 OF THE OFFER TO PURCHASE) UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.


The Eligible Institution (as defined in Section 2 — “Acceptance for Payment and Payment for Shares” of the Offer to Purchase) that completes this Notice of Guaranteed Delivery must communicate the guarantee to the Depositary and Paying Agent and must deliver a properly completed and duly executed Letter of Transmittal or an Agent’s Message (as defined in Section 3 —“Procedures for Tendering Shares” of the Offer to Purchase) and certificates for Shares or book-entry Shares that are the subject of this Notice of Guaranteed Delivery to the Depositary and Paying Agent within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution.

Ladies and Gentlemen:

The undersigned hereby tenders to PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and a wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), pursuant to Offeror’s offer to purchase (the “Offer”) all of the issued and outstanding shares of common stock, par value $0.0001 per share (the “Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined in the Introduction of the Offer to Purchase), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 21, 2018 (the “Offer to Purchase”) and the related letter of transmittal that accompanies the Offer to Purchase (the “Letter of Transmittal”), receipt of which is hereby acknowledged, the number of Shares, specified below, pursuant to the guaranteed delivery procedure set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of the Offer to Purchase.

 

Number of Shares Tendered:   

 

Share Certificate Number(s) (if available):  

 

Check here and complete the information below if Shares will be tendered by book entry transfer:    ☐   
Name of Tendering Institution:   

 

DTC Participating Number (if applicable):   

 

Transaction Code Number (if applicable) Date:   

 

Name(s) of Record Holder(s):   

 

     (Please Type or Print)
Address(es):   

 

     (Including Zip Code)
Area Code and Tel. No.:   

 

     (Daytime Telephone Number)
Signature of Holder(s):   

 


GUARANTEE

(Not to be used for signature guarantees)

The undersigned, a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program (each, an “Eligible Institution”), hereby guarantees that either the certificates representing the Shares tendered hereby, in proper form for transfer, or timely confirmation of a book-entry transfer of such Shares into the Depositary and Paying Agent’s account at The Depository Trust Company (pursuant to the procedures set forth in Section 3 — “Procedures for Tendering Shares” of the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message (as defined in Section 3 — “Procedures for Tendering Shares” of the Offer to Purchase)) and any other documents required by the Letter of Transmittal, will be received by the Depositary and Paying Agent at one of its addresses set forth above within two Nasdaq Global Market trading days after the date of execution hereof.

 

Name of Firm:

  

 

Address:

  

 

   (Including Zip Code)

Area Code and Tel. No.:

  

 

Authorized Signature:

  

 

Name:

  

 

     (Please Type or Print)

Title:

  

 

Dated:

  

 

The Eligible Institution that completes this form must communicate the guarantee to the Depositary and Paying Agent and must deliver the Letter of Transmittal or an Agent’s Message to the Depositary and Paying Agent within the time period indicated above. Failure to do so could result in a financial loss to such Eligible Institution.

NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES REPRESENTING TENDERED SHARES ARE TO BE DELIVERED WITH THE LETTER OF TRANSMITTAL.

Exhibit (a)(1)(D)

Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees with Respect to the

Offer to Purchase

All Outstanding Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 Per Share, Net in Cash,

Pursuant to the Offer to Purchase dated November 21, 2018

by

PVKG Merger Sub, Inc.

(Offeror)

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

 

The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

November 21, 2018

To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:

We have been engaged by PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and a wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), to act as Information Agent in connection with Offeror’s offer to purchase (the “Offer”) all of the issued and outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined herein), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the offer to purchase, dated November 21, 2018 (the “Offer to Purchase”), and the related letter of transmittal that accompanies the Offer to Purchase (the “Letter of Transmittal”) enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whom you hold shares registered in your name or in the name of your nominee.

The Offer is subject to certain conditions described in Section 15 — “Certain Conditions of the Offer” of the Offer to Purchase. The Offer is not subject to any financing condition.

For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents:

 

  1.

The Offer to Purchase, dated November 21, 2018;

 

  2.

The Solicitation/Recommendation Statement on Schedule 14D-9 of ConvergeOne;

 

  3.

The related Letter of Transmittal for your use in accepting the Offer and tendering Shares and for the information of your clients, together with the included IRS Form W-9;

 

  4.

A notice of guaranteed delivery to be used to accept the Offer if Shares and all other required documents cannot be delivered to Continental Stock Transfer & Trust Company (the “Depositary and Paying Agent”) by 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018) (such time and date, the “Expiration Date” unless Offeror, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event “Expiration Date” will mean the latest time and date at which the Offer, as so extended, will expire), or if the procedure for book-entry transfer cannot be completed by the Expiration Date (the “Notice of Guaranteed Delivery”);


  5.

A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients’ instructions with regard to the Offer; and

 

  6.

A return envelope addressed to the Depositary and Paying Agent for your use only.

The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of November 6, 2018 (as it may be amended or supplemented from time to time in accordance with its terms, the “Merger Agreement”), by and among Parent, Offeror and ConvergeOne, pursuant to which, either (1) on the same date as the date on which the Offer is consummated or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of such Offer consummation date, then on the first business day on which such condition is satisfied or waived, Offeror will merge with and into ConvergeOne (the “Merger”), with ConvergeOne continuing as the surviving corporation in the Merger and as a wholly owned subsidiary of Parent. At the effective time of the Merger (the “Merger Effective Time”), each Share outstanding immediately prior to the Merger Effective Time (other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares (as defined in the Summary Term Sheet of the Offer to Purchase) or any Shares held by any person who is entitled to and properly demands statutory appraisal of his or her Shares under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) in connection with the Merger) will be converted into the right to receive an amount in cash equal to the Offer Price, without interest and less any withholding of taxes required by applicable law.

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn, if and when Offeror gives oral or written notice to the Depositary and Paying Agent of Offeror’s acceptance for payment of such Shares pursuant to the Offer. Payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary and Paying Agent of (1) certificate(s) representing those Shares or confirmation of a book-entry transfer of such Shares (a “Book-Entry Confirmation”) into the Depositary and Paying Agent’s account at The Depository Trust Company pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of the Offer to Purchase; (2) the Letter of Transmittal, properly completed and duly executed (or, with respect to a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program (each, an “Eligible Institution”), a manually executed facsimile thereof), with any required signature guarantees, or an Agent’s Message (as defined in Section 2“Acceptance for Payment and Payment for Shares” of the Offer to Purchase) in connection with a book-entry transfer of shares and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when the foregoing documents with respect to Shares are actually received by the Depositary and Paying Agent. Under no circumstances will Offeror pay interest on the Offer Price to be paid for any Shares, regardless of any extension of the Offer or delay in making payment.

Offeror is not aware of any state where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Offeror becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares, Offeror will take all actions to have such a statute declared inapplicable to the Offer. If, after a good faith effort, Offeror cannot comply with the state statute, Offeror will not make the Offer to, nor will Offeror accept tenders from or on behalf of, the holders of Shares in that state.

After careful consideration, the ConvergeOne board of directors (the “ConvergeOne Board”), acting upon the unanimous recommendation of the Special Transaction Committee of the ConvergeOne Board, has unanimously adopted resolutions (1) determining that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interest of, ConvergeOne and the holders of Shares, (2) resolving that the Merger Agreement and the Merger will be governed by and effected under Section 251(h) and other relevant provisions of the DGCL, (3) declaring it advisable for ConvergeOne to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, (4) authorizing and approving the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the transactions contemplated thereby,


including the Offer and the Merger and (5) resolving to recommend that the holders of Shares accept the Offer and tender their Shares to Offeror pursuant to the Offer.

For Shares to be validly tendered pursuant to the Offer, the Depositary and Paying Agent must receive the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all those Shares), together with a properly completed and duly executed Letter of Transmittal (or, with respect to Eligible Institutions, a manually executed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message in lieu of the Letter of Transmittal), and any other required documents, within two Nasdaq Global Market trading days after the date of execution of the Notice of Guaranteed Delivery. Shares tendered by a Notice of Guaranteed Delivery will not be deemed validly tendered for purposes of satisfying the Minimum Condition (as defined in the Summary Term Sheet of the Offer to Purchase) unless and until the Shares to which such Notice of Guaranteed Delivery relates are delivered to the Depositary and Paying Agent.

Except as set forth in the Offer to Purchase, neither Parent nor Offeror will pay any fees or commissions to any broker or dealer or to any other person (other than to the Depositary and Paying Agent and Innisfree M&A Incorporated, the information agent for the Offer (the “Information Agent”), in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks, trust companies and other nominees will, upon request, be reimbursed by Offeror for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers.

Your prompt action is requested. We urge you to contact your clients as promptly as possible. The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

Questions and requests for assistance or for additional copies of the enclosed materials may be directed to the undersigned at the address and telephone number set forth in the Offer to Purchase. Additional copies of the enclosed materials will be furnished at Offeror’s expense.

Very truly yours,

Innisfree M&A Incorporated

Nothing contained herein or in the enclosed documents shall render you the agent of Parent, Offeror, ConvergeOne, the Information Agent or the Depositary and Paying Agent or any affiliate of any of them or authorize you or any other person to use any document or make any statement on behalf of any of them in connection with the Offer, other than the enclosed documents and the statements contained therein.

Exhibit (a)(1)(E)

Letter to Clients with Respect to the

Offer to Purchase

All Outstanding Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 Per Share, Net in Cash,

Pursuant to the Offer to Purchase dated November 21, 2018

by

PVKG Merger Sub, Inc.

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

November 21, 2018

To Our Clients:

Enclosed for your consideration are the Offer to Purchase, dated November 21, 2018 (the “Offer to Purchase”), and the related letter of transmittal that accompanies the Offer to Purchase (the “Letter of Transmittal”) in connection with the offer by PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and a wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), to purchase (the “Offer”) all of the issued and outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined herein), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal enclosed herewith.

We or our nominees are the holder of record of Shares held for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal accompanying this letter is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account.

We request instructions as to whether you wish us to tender any or all of the Shares held by us or our nominees for your account, upon the terms and subject to the conditions set forth in the enclosed Offer to Purchase and the Letter of Transmittal.

Please note carefully the following:

1. The Offer Price is $12.50 per Share net to you in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and conditions of the Offer to Purchase and the related Letter of Transmittal.

2. The Offer is being made for all the issued and outstanding Shares.

3. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of November 6, 2018 (as it may be amended or supplemented from time to time in accordance with its terms, the “Merger Agreement”), by and among Parent, Offeror and ConvergeOne, pursuant to which, either (1) on the same date as the date on which the Offer is consummated or (2) if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied or waived as of the date of such Offer consummation date, then on the first business day on


which such condition is satisfied or waived, Offeror will merge with and into ConvergeOne (the “Merger”), with ConvergeOne continuing as the surviving corporation in the Merger and as a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, the Merger will become effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by the parties and specified therein (such time, the “Merger Effective Time”). At the Merger Effective Time, each Share outstanding immediately prior to the Merger Effective Time (other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares (as defined in the Summary Term Sheet of the Offer to Purchase) or any Shares held by any person who is entitled to and properly demands statutory appraisal of his or her Shares under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) in connection with the Merger) will be converted into the right to receive an amount in cash equal to the Offer Price, without interest and less any withholding of taxes required by applicable law.

4. After careful consideration, the ConvergeOne board of directors (the “ConvergeOne Board”), acting upon the unanimous recommendation of the Special Transaction Committee of the ConvergeOne Board, has unanimously adopted resolutions (1) determining that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interest of, ConvergeOne and the holders of Shares, (2) resolving that the Merger Agreement and the Merger will be governed by and effected under Section 251(h) and other relevant provisions of the DGCL, (3) declaring it advisable for ConvergeOne to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, (4) authorizing and approving the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Offer and the Merger and (5) resolving to recommend that the holders of Shares accept the Offer and tender their Shares to Offeror pursuant to the Offer.

5. The Offer and the withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018) (such time and date, the “Expiration Date” unless Offeror, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event “Expiration Date” will mean the latest time and date at which the Offer, as so extended, will expire). Except as otherwise described in Section 4 — “Withdrawal Rights” of the Offer to Purchase, previously tendered Shares may be properly withdrawn at any time prior to the Expiration Date and, unless previously accepted for payment by Offeror pursuant to the Offer, may also be withdrawn at any time after January 20, 2019, which is the 60th day from the commencement of the Offer, unless such Shares have already been accepted for payment pursuant to the Offer.

6. The Offer is subject to certain conditions described in Section 15 — “Certain Conditions of the Offer” of the Offer to Purchase. The Offer is not subject to any financing condition.

7. Tendering stockholders who are registered holders of their Shares and tender directly to Continental Stock Transfer & Trust Company, the depositary for the Offer (the “Depositary and Paying Agent”), will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Offeror pursuant to the Offer. However, U.S. federal backup withholding at a rate of 24 percent may be required, unless the required taxpayer identification information is provided or an exemption is available. See the Letter of Transmittal for more information. Any transfer taxes applicable to the sale of Shares to Offeror pursuant to the Offer will be paid by Offeror, except as otherwise provided in the Letter of Transmittal.

If you wish to have us tender any or all your Shares, please so instruct us by completing, executing, detaching and returning to us the Instruction Form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the Instruction Form.

Your prompt action is requested. Your Instruction Form should be forwarded to us in ample time to permit us to submit a tender on your behalf before the Expiration Date.

The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Offeror by one or more registered brokers or dealers that are licensed under the laws of such jurisdiction.


Instructions with Respect to the

Offer to Purchase

All Outstanding Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 Per Share, Net in Cash,

Pursuant to the Offer to Purchase dated November 21, 2018

by

PVKG Merger Sub, Inc.

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

The Offer and withdrawal rights will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless the Offer is extended.

The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated November 21, 2018 (the “Offer to Purchase”), and the related letter of transmittal that accompanies the Offer to Purchase (the “Letter of Transmittal”), in connection with the offer by PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and a wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), to purchase (the “Offer”) all of the issued and outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined in the Introduction of the Offer to Purchase), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal.

The undersigned hereby instruct(s) you to tender to Offeror the number of Shares indicated below or, if no number is indicated, all Shares held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. The undersigned understands and acknowledges that all questions as to the validity, form and eligibility (including time of receipt) and acceptance for payment of any lender of Shares made on behalf of the undersigned will be determined by Offeror in its sole discretion.

The method of delivery of this document is at the election and risk of the tendering stockholder. If delivery is by mail, then registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.


  Dated:

      

  Number of Shares to be Tendered:

      

Shares*

  Account Number:

      

Signature(s):                                                                              

  Capacity**:

      

  Dated:

      
    

Please Type or Print Name(s) above

 

 

Please Type or Print Address(es) above (Including Zip Code)

 

 

Area Code and Telephone Number

 

 

Taxpayer Identification or Social Security Number(s)

 

*

Unless otherwise indicated, you are deemed to have instructed us to tender all Shares held by us for your account.

**

Please provide if signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or other person acting in a fiduciary or representative capacity.

Please return this form to the brokerage firm or other nominee maintaining your account.

Exhibit (a)(1)(F)

This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made only by the Offer to Purchase, dated November 21, 2018, and the related Letter of Transmittal (as defined below) and any amendments or supplements thereto, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. Offeror (as defined below) may, in its discretion, take such action as it deems necessary to make the Offer comply with the laws of any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction in compliance with applicable laws. In those jurisdictions where applicable laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Offeror by one or more registered brokers or dealers licensed under the laws of such jurisdiction to be designated by Offeror.

Notice of Offer to Purchase

All Outstanding Shares of Common Stock

of

ConvergeOne Holdings, Inc.

at

$12.50 Per Share, Net in Cash,

Pursuant to the Offer to Purchase dated November 21, 2018

by

PVKG Merger Sub, Inc.,

a wholly owned subsidiary of

PVKG Intermediate Holdings Inc.

PVKG Merger Sub, Inc., a Delaware corporation (“Offeror”) and wholly owned subsidiary of PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), is making an offer to purchase all outstanding shares of common stock, par value $0.0001 per share (“Shares”), of ConvergeOne Holdings, Inc., a Delaware corporation (“ConvergeOne”), for a price per Share of $12.50 (such amount, as it may be adjusted from time to time upon the terms and subject to the conditions set forth in the Merger Agreement (as defined below), the “Offer Price”), net to the seller in cash, without interest and less any withholding of taxes required by applicable law, upon the terms and subject to the conditions set forth in the Offer to Purchase (the “Offer to Purchase”) and the related letter of transmittal that accompanies the Offer to Purchase (the “Letter of Transmittal” which, together with the Offer to Purchase, as each may be amended or supplemented from time to time in accordance with the Merger Agreement, collectively constitute the “Offer”). Offeror was formed by Parent solely for purposes of entering into the transactions with ConvergeOne described in the Offer to Purchase. Each of CVC Capital Partners VII (A) L.P., a Jersey limited partnership, CVC Capital Partners Investment Europe VII L.P., a Jersey limited partnership, and CVC Capital Partners VII Associates L.P., a Jersey limited partnership, is an indirect stockholder of Parent.

Tendering stockholders who are record holders of their Shares and tender directly to Continental Stock Transfer & Trust Company, the depositary and paying agent for the Offer (the “Depositary and


Paying Agent”), will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Offeror pursuant to the Offer. Stockholders who hold their Shares through a broker, dealer, commercial bank, trust company or other nominee should consult such broker, dealer, commercial bank, trust company or other nominee as to whether it charges any service fees or commissions.

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON DECEMBER 19, 2018 (ONE MINUTE AFTER 11:59 P.M., EASTERN TIME, ON DECEMBER 19, 2018), UNLESS THE OFFER IS EXTENDED.

The Offer is being made in connection with the Agreement and Plan of Merger, dated as of November 6, 2018 (the “Merger Agreement”), by and among Parent, Offeror and ConvergeOne, pursuant to which, on the same date on which the Offer is consummated or if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied as of such date, then on the first business day on which such condition is satisfied or waived, Offeror will merge with and into ConvergeOne (the “Merger”), with ConvergeOne surviving the Merger as a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, the Merger will become effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by the parties and specified therein (such time, the “Merger Effective Time”). At the Merger Effective Time, each Share issued and outstanding immediately prior to the Merger Effective Time (other than Shares held by ConvergeOne (or held in ConvergeOne’s treasury), Shares held by Parent, Offeror or any other direct or indirect subsidiary of Parent or ConvergeOne, the Rollover Shares (as defined below) or any Shares held by any person who is entitled to and properly demands statutory appraisal of his, her or its Shares under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) in connection with the Merger) will be converted into the right to receive an amount in cash, without interest, equal to $12.50 per Share, without interest and less any withholding of taxes required by applicable law.

The Offer is conditioned upon, among other things, (i) the satisfaction of the Minimum Condition (as defined below), (ii) there not having been issued by any court of competent jurisdiction and remaining in effect any temporary restraining order, preliminary or permanent injunction or other order preventing the acquisition of or payment for Shares pursuant to the Offer and there not having been taken any action, or any legal requirement or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger, by any governmental body directly or indirectly prohibiting, or making illegal, the acquisition of, or payment for, Shares pursuant to the Offer, or the consummation of the Merger, (iii) any consent, approval or clearance with respect to, or termination or expiration of any applicable mandatory waiting period (or any extension thereof) imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) having been obtained, received, terminated or expired, (iv) since the date of the Merger Agreement, there not having occurred and been continuing any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on ConvergeOne, and (v) the occurrence of the date that is 45 days after the date on which the parties submit to the Committee on Foreign Investment in the United States, a declaration pursuant to 31 C.F.R. § 801.401. The Offer is also subject to other conditions set forth in Section 15 — “Certain Conditions of the Offer” of the Offer to Purchase (such other conditions, together with the conditions described above, the “Offer Conditions”). The Offer is not subject to any financing condition. The term “Minimum Condition” is defined in Section 15 — “Certain Conditions of the Offer” of the Offer to Purchase and generally requires that there be validly tendered (and not properly withdrawn) that number of Shares (excluding Shares tendered pursuant to notices of guaranteed delivery that have not yet been “received” (as such term is defined in Section 251(h)(6)(f) of the DGCL)) that, considered together with the Rollover Shares and all other Shares (if any) otherwise beneficially owned by Parent or any of its wholly owned


Subsidiaries (including Offeror), would represent one Share more than 50% of the total number of Shares outstanding at the time of the expiration of the Offer. For purposes of calculating whether the Minimum Condition has been satisfied, the number of Shares outstanding at the time of the expiration of the Offer will (i) include, without duplication, (a) Shares issuable in respect of ConvergeOne options for which the holders have validly exercised such ConvergeOne options and satisfied all of the requirements for their exercise prior to the expiration of the Offer, even if the ConvergeOne option holders do not receive Shares resulting from such exercise prior to the expiration of the Offer and (b) Shares issuable in respect of ConvergeOne warrants for which the holders have validly exercised such ConvergeOne warrants and satisfied all of the requirements for their exercise prior to the expiration of the Offer, even if the ConvergeOne warrant holders do not receive Shares resulting from such exercise prior to the expiration of the Offer and (ii) exclude Shares held in treasury by ConvergeOne as of the expiration of the Offer or any other Shares acquired by ConvergeOne prior to the expiration of the Offer (including any such Shares acquired in connection with tax withholding or payment of the exercise price for the exercise of ConvergeOne options), even if ConvergeOne does not receive the Shares so acquired prior to the expiration of the Offer.

Certain holders of Shares (the “Rollover Stockholders”), including John A. McKenna, Jr., Jeffrey Nachbor, Paul Maier and John F. Lyons, have agreed to exchange a portion of their Shares (the “Rollover Shares”) for equity interests in PVKG Investment Holdings Inc., a Delaware corporation and the direct parent of Parent, and have agreed not to tender the Rollover Shares pursuant to the Offer.

In addition, concurrently with the execution of the Merger Agreement, certain stockholders of ConvergeOne have entered into a Tender and Support Agreement (the “Support Agreement”) that requires Clearlake Capital Partners III (Master), L.P. (“Clearlake”) and the other holders of Shares parties thereto (the “Significant Stockholders”), subject to the terms of the Support Agreement discussed in Section 11 — “The Transaction Agreements” of the Offer to Purchase, among other things, to tender all of the Shares (other than the Rollover Shares) owned by such Significant Stockholders as of the date of the Support Agreement or otherwise acquired prior to the termination of the Support Agreement, within ten business days after the commencement of the Offer. Clearlake and the other signatories collectively beneficially owned approximately 68% of the Shares (with such tender and support obligations subject to reduction to 39.99% upon an adverse recommendation change by the ConvergeOne board of directors) outstanding as of November 1, 2018.

The ConvergeOne board of directors, acting upon the unanimous recommendation of the Special Transaction Committee of the ConvergeOne board of directors, has unanimously adopted resolutions (i) determining that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to, and in the best interest of, ConvergeOne and the holders of Shares, (ii) resolving that the Merger Agreement and the Merger will be governed by and effected under Section 251(h) and other relevant provisions of the DGCL, (iii) declaring it advisable for ConvergeOne to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, (iv) authorizing and approving the execution, delivery and performance by ConvergeOne of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Offer and the Merger, and (v) resolving to recommend that the holders of Shares accept the Offer and tender their Shares to Offeror pursuant to the Offer.

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended in accordance with the Merger Agreement, the terms and conditions of any such extension or amendment), Offeror will accept for payment and pay for all Shares validly tendered prior to the Expiration Date (as defined below) of the Offer and not properly withdrawn.


For purposes of the Offer, Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Offeror gives oral or written notice to the Depositary and Paying Agent of Offeror’s acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price for such Shares with the Depositary and Paying Agent, which will act as agent for tendering stockholders for the purpose of receiving payments from Offeror and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. If Offeror extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Offeror’s rights under the Offer, the Depositary and Paying Agent may, nevertheless, on behalf of Offeror, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described in Section 4 — “Withdrawal Rights” of the Offer to Purchase and as otherwise required by Rule 14e-1(c) promulgated under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”).

In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary and Paying Agent of (i) certificate(s) representing those Shares or confirmation of a book-entry transfer of such Shares into the Depositary and Paying Agent’s account at The Depository Trust Company pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” of the Offer to Purchase, (ii) the Letter of Transmittal, properly completed and duly executed (or, with respect to a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program and the Stock Exchanges Medallion Program (each, an “Eligible Institution”), a manually executed facsimile thereof), with any required signature guarantees, or an Agent’s Message (as defined in Section 2 — “Acceptance for Payment and Payment for Shares” of the Offer to Purchase) in connection with a book-entry transfer of shares and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when the foregoing documents with respect to Shares are actually received by the Depositary and Paying Agent. Under no circumstances will Offeror pay interest on the Offer Price to be paid for any Shares, regardless of any extension of the Offer or delay in making payment.

The Offer will expire at 12:00 midnight, Eastern time, on December 19, 2018 (one minute after 11:59 p.m., Eastern time, on December 19, 2018), unless Offeror, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event the expiration time and date of the Offer is the latest time and date at which the Offer, as so extended, expires (such time and date, including any such extensions, the “Expiration Date”).

Subject to the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and the provisions of the Merger Agreement, Offeror expressly reserves the right to (i) increase the Offer Price, (ii) waive any Offer Conditions and (iii) make any other changes in the terms and conditions of the Offer. However, unless otherwise provided by the Merger Agreement, Offeror will not, without the prior written consent of ConvergeOne, (i) decrease the Offer Price, (ii) change the form of consideration payable in the Offer, (iii) decrease the maximum number of Shares sought to be purchased in the Offer, (iv) impose conditions or requirements to the Offer in addition to the Offer Conditions, (v) amend or modify any of the Offer Conditions in a manner that adversely affects, or could reasonably be expected to adversely affect, any holder of Shares that would, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the Offer or prevent, materially delay or materially impair the ability of Parent or Offeror to consummate the Offer, the Merger or the other transactions contemplated by the Merger Agreement, (vi) change or waive the Minimum Condition, (vii)


extend or otherwise change the Expiration Date in a manner other than as required or permitted by the Merger Agreement or (viii) provide any “subsequent offering period” within the meaning of Rule 14d-11 promulgated under the Exchange Act. The Merger Agreement provides that, subject to the parties’ termination rights under the Merger Agreement, (i) if, as of the scheduled Expiration Date, any Offer Condition is not satisfied and has not been waived, Offeror may, in its discretion (and without the consent of ConvergeOne or any other person), extend the Offer on one or more occasions, for an additional period of up to ten business days per extension (or such other duration as may be agreed to by Parent and ConvergeOne), to permit such Offer Condition to be satisfied, (ii) Offeror must extend the Offer from time to time for (a) any period required by any legal requirement, any interpretation or position of the SEC or its staff or the Nasdaq Global Market applicable to the Offer and (b) for periods of up to ten business days per extension, until any waiting period (and any extension thereof) applicable to the consummation of the Offer under the HSR Act has expired or been terminated, and (iii) if, at any then-scheduled Expiration Date, any Offer Condition is not satisfied and has not been waived, at the request of ConvergeOne, Offeror must extend the Offer on one or more occasions for an additional period specified by ConvergeOne of up to ten business days per extension (or such other duration as may be agreed to by Parent and ConvergeOne), to permit such Offer Condition to be satisfied. Offeror will not, however, (i) be required to extend the Offer beyond the earliest to occur of (the “Extension Deadline”) (a) the valid termination of the Merger Agreement and (b) February 4, 2019 and (ii) be permitted to extend the Offer beyond the Extension Deadline without the prior written consent of ConvergeOne. We are prohibited from terminating the Offer prior to any scheduled Expiration Date without the prior written consent of ConvergeOne except in the event that the Merger Agreement is terminated pursuant to its terms.

Any extension of the Offer will be followed by a public announcement of the extension no later than 9:00 a.m., Eastern time, on the next business day after the day on which the Offer was otherwise scheduled to expire. During any extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder’s Shares.

Pursuant to Section 251(h) of the DGCL and due to the obligations of Parent, Offeror and ConvergeOne under the Merger Agreement, Offeror expects the Merger to occur either on the same date on which the Offer is consummated or if the condition relating to the absence of certain restraints on the consummation of the Merger under the Merger Agreement has not been satisfied as of such date, then on the first business day on which such condition is satisfied or waived. Following consummation of the Offer and subject to the satisfaction or waiver of the conditions to the Merger, Offeror, Parent and ConvergeOne will take all necessary and appropriate action to effect the Merger without a meeting of ConvergeOne’s stockholders in accordance with Section 251(h) of the DGCL.

Shares tendered pursuant to the Offer may be properly withdrawn at any time prior to the Expiration Date and, unless previously accepted for payment by Offeror pursuant to the Offer, may also be withdrawn at any time after January 20, 2019, which is the 60th day from the commencement of the Offer, unless such Shares have already been accepted for payment pursuant to the Offer. For a withdrawal to be proper and effective, a written or, with respect to Eligible Institutions, facsimile transmission, notice of withdrawal must be timely received by the Depositary and Paying Agent at one of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares.

All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Offeror, in its sole discretion, which determination will be final and binding upon the tendering party.


Offeror reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of Offeror’s counsel, be unlawful. Offeror also reserves the absolute right to waive any defect or irregularity in the tender of any Shares by any particular stockholder, regardless of whether or not similar defects or irregularities are waived in the case of other stockholders. None of Parent, Offeror, ConvergeOne, the Depositary and Paying Agent, the Information Agent (as defined below), or any other person is or will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

The exchange of Shares for cash pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes. Stockholders are urged to consult their tax advisors to determine the particular tax consequences to them (including the application and effect of any U.S. federal estate or gift tax rules, or any state, local or non-U.S. income and other tax laws) of tendering their Shares pursuant to the Offer, exchanging their Shares in the Merger or exercising appraisal rights. See Section 5 — “Material United States Federal Income Tax Consequences” of the Offer to Purchase for a discussion of certain material U.S. federal income tax consequences of tendering Shares pursuant to the Offer or exchanging Shares in the Merger.

The information required to be disclosed by Rule 14d-6(d)(1) promulgated under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. ConvergeOne has provided Offeror with ConvergeOne’s stockholder list and security position listings for the purpose of disseminating the Offer to Purchase and related documents to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on ConvergeOne’s stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and other nominees whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing.

THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.

Questions or requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to Innisfree M&A Incorporated, the information agent for the Offer (the “Information Agent”), at its telephone number and address set forth below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

Except as set forth in the Offer to Purchase, neither Parent nor Offeror will pay any fees or commissions to any broker or dealer or to any other person (other than to the Depositary and Paying Agent and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks, trust companies and other nominees will, upon request, be reimbursed by Offeror for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers.

The Information Agent for the Offer is:

 

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders may call toll free: (888) 750-5834

Banks and Brokers may call collect: (212) 750-5833

November 21, 2018

Exhibit (b)(1)

 

DEUTSCHE BANK

SECURITIES INC.

DEUTSCHE BANK AG

NEW YORK BRANCH

60 Wall Street

New York, New York 10005

 

UBS AG,

STAMFORD

BRANCH

600 Washington

Boulevard

Stamford,

Connecticut 06901

 

UBS SECURITIES

LLC

1285 Avenue of the

Americas

New York,

New York 10019

  

Wells Fargo Bank,

N.A.
100 Park Avenue
Suite 1400
New York,

New York 10017

CONFIDENTIAL

November 6, 2018

PVKG Merger Sub, Inc.

c/o CVC Advisors (U.S.), Inc.

712 Fifth Avenue, 43rd Floor

New York, New York 10019

Attention:         Adil Seetal and Emma Barrier

Project Viking

$250 million Senior Secured ABL Facility

$925 million Senior Secured First Lien Term Loan Facility

$75 million Senior Secured Delayed Draw Term Loan Facility

$350 million Senior Secured Second Lien Term Loan Facility

Commitment Letter

Ladies and Gentlemen:

PVKG Merger Sub, Inc., an entity organized under the laws of the State of Delaware (“you” or “Acquisition Sub”), formed at the direction of CVC Advisors (U.S.), Inc. (together with its affiliates and any funds, partnerships or other co-investment vehicles managed, advised or controlled by CVC Advisors (U.S.), Inc. or any of its affiliates and any subsidiaries of such affiliates, funds, partnerships or other co-investment vehicles (but excluding, in each case, Holdings (as defined below) and its subsidiaries and any portfolio companies in which such funds, partnerships or other co-investment vehicles hold an investment), “CVC” or the “Sponsor”), has advised Wells Fargo Bank, National Association (“Wells Fargo”), Deutsche Bank Securities Inc. (“DBSI”), Deutsche Bank AG New York Branch (“DBNY”) and UBS AG, Stamford Branch (“UBS”) and UBS Securities LLC (“UBS Securities” together with Wells Fargo, DBSI, DBNY and UBS, each an “Initial Commitment Party” and together with each Additional Arranger appointed in accordance with the provisions of Section 2 below, the “Commitment Parties”) that you intend to acquire, directly or indirectly, the company previously identified to us and code named “Viking” (the “Company”) and to consummate the other transactions described in Exhibit A hereto. Capitalized terms used but not defined herein have the meanings assigned to them in the Exhibits attached hereto.

 

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1. Commitments.

In connection with the Transactions, Wells Fargo (in such capacity, an “Initial ABL Lender”) hereby commits to provide 100% of the $250.0 million ABL Facility on the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit B hereto (the “ABL Term Sheet”). In connection with the Transactions, each of DBNY and UBS (in such capacity, an “Initial Term Lender”, and together with each Additional Arranger appointed in accordance with the provisions of Section 2 below, the “Initial Term Lenders”) (the Initial ABL Lender and Initial Term Lenders, each an “Initial Lender”) hereby, severally and not jointly, commits to provide 50% and 50%, respectively, of each of (a) $925.0 million Initial First Lien Facility (as such amount may be reduced as a result of the Initial Term Loan Reduction (if any) or, at the option of Acquisition Sub, be increased to fund any “OID,” upfront fees or similar amounts in respect of First Lien Facilities in connection with the Flex Provisions (as defined in the Term Fee Letter (as defined below))) on the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit C hereto (the “First Lien Term Sheet”), (b) $75 million Delayed Draw Term Loan Facility on terms set forth in the First Lien Term Sheet and (c) $350.0 million Second Lien Facility (as such amount may be reduced as a result of the Second Lien Reduction (if any) or, at the option of Acquisition Sub, be increased to fund any “OID,” upfront fees or similar amounts in respect of the Second Lien Facility in connection with the Flex Provisions (as defined in the Term Fee Letter)) on the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit D, hereto (the “Second Lien Term Sheet” and together with the ABL Term Sheet and First Lien Term Sheet, each, a “Term Sheet” and collectively, the “Term Sheets”), and in each case subject only to the satisfaction or waiver by the Lead Arrangers of the conditions set forth in Section 6 of this letter (together with the Exhibits hereto, the “Commitment Letter”).

2. Titles and Roles.

It is agreed that (a) Wells Fargo will act as a lead arranger and bookrunner for the ABL Facility (Wells Fargo in such capacity, “ABL Lead Arranger”), (b) Wells Fargo Commercial Distribution Finance, LLC (or such other affiliate of, and designated by, Wells Fargo) will act as sole administrative agent and collateral agent (in such capacities, the “ABL Administrative Agent”) for the ABL Facility, (c) DBSI and UBS Securities, together with each Additional Arranger appointed in accordance with the provisions of this Section 2, will act as a lead arranger and bookrunner for each of the Term Facilities (DBSI and UBS Securities, in such capacities, “Term Loan Lead Arrangers” and, together with the ABL Lead Arranger, the “Lead Arrangers”; provided that term Lead Arrangers as used herein shall mean the ABL Lead Arranger with respect to the ABL Facility or the Term Lead Arrangers with respect to the Term Facilities, as the context may require), (d) DBNY will act as sole administrative agent and collateral agent (in such capacities, the “First Lien Administrative Agent”) for the First Lien Facilities and (e) UBS will act as sole administrative agent (in such capacity, the “Second Lien Administrative Agent” and, together with the ABL Administrative Agent and the First Lien Administrative Agent, the “Administrative Agents”) for the Second Lien Facility. It is further agreed that DBSI will have “left side” designation and will appear on the top left of the cover page of any marketing materials in respect of all of the First Lien Facilities, and will hold the roles and responsibilities conventionally

 

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associated with such “left” placement. It is further agreed that UBS Securities will have “immediate right” designation and will appear on the right of DBSI on the cover page of any marketing materials in respect of all of the First Lien Facilities, and will hold the roles and responsibilities conventionally associated with such “immediate right” placement. It is further agreed that UBS Securities will have “left side” designation and will appear on the top left of the cover page of any marketing materials in respect of the Second Lien Facility, and will hold the roles and responsibilities conventionally associated with such “left” placement. It is further agreed that DBSI will have “immediate right” designation and will appear on the right of UBS Securities on the cover page of any marketing materials in respect of the Second Lien Facility, and will hold the roles and responsibilities conventionally associated with such “immediate right” placement. It is further agreed that Wells Fargo will have “left side” designation and will appear on the top left of the cover page of any marketing materials in respect of the ABL Facility, and will hold the roles and responsibilities conventionally associated with such “left” placement. You may, within ten (10) business days after the date of your acceptance of this Commitment Letter, appoint, one or more entities as additional agents, co-agents, lead arrangers, joint bookrunners or managers (any such agent, co-agent, lead arranger, joint bookrunner or manager, an “Additional Arranger”) or confer other titles in respect of any Term Facility, in a manner and with economics determined by you (it being understood that, to the extent you appoint an Additional Arranger or confer other titles in respect of any Term Facility, the economics allocated to, and the commitment amounts of, the Lead Arrangers on the date hereof in respect of such Term Facility will be proportionately reduced by the amount of the economics allocated to, and the commitment amount of, such Additional Arranger (or its affiliate), in each case, upon the execution by such Additional Arranger of customary joinder documentation (which may be in the form of an amendment and restatement of the Commitment Letter) and, thereafter, each such Additional Arranger shall constitute a “Lead Arranger”, in respect of such Term Facility, under this Commitment Letter and under the Term Fee Letter (as defined below)); provided that, (i) each Additional Arranger shall assume a portion of the commitment of the Initial Commitment Party under each Term Facility on a pro rata basis, (ii) in no event shall any Additional Arranger receive more economics than the Term Lead Arranger on the date hereof with respect to the Term Facilities and (iii) the aggregate economics allocated to all such Additional Arrangers under the Term Facilities will not exceed 40% of the aggregate economics in respect of the Term Facilities payable to the Term Lead Arrangers). Your rights in the immediately preceding sentence is referred to herein as the “Designation Right.”

It is agreed that, except as contemplated above, no other agents, co-agents, arrangers or bookrunners will be appointed, no other titles will be awarded and no compensation (other than compensation expressly contemplated by this Commitment Letter and the Fee Letters referred to below) will be paid to any Lender (as defined below) in order to obtain its commitment to participate in the Facilities unless you and the applicable Lead Arrangers on the date hereof shall so agree, except with respect to titles as provided under the section entitled “Syndication Agent and Documentation Agent” in each of Exhibits B, C and D hereto.

3. Syndication.

In connection with the above, the applicable Lead Arrangers reserve the right, prior to or after the Closing Date (as defined below), to syndicate all or a portion of the commitments of the Initial Lenders under the Facilities hereunder to a group of banks, financial institutions and other institutional lenders identified by the applicable Lead Arrangers in consultation with you and reasonably acceptable to the applicable Lead Arrangers and you (your

 

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consent not to be unreasonably withheld, delayed or conditioned) including, without limitation, any relationship lenders designated by you and reasonably acceptable to the applicable Lead Arrangers (together with the Initial Lenders, the “Lenders”); provided that the Commitment Parties will not syndicate, participate to or otherwise assign any of their respective commitments to (i) competitors of the Company or any of its subsidiaries that are identified by you in writing to the Lead Arrangers on the date hereof on or prior to the Closing Date or to the applicable Administrative Agent after the Closing Date, (ii) certain banks, financial institutions, other institutional lenders and investors and other entities that are identified by you in writing to the Lead Arrangers on the date hereof on or prior to the date hereof or (iii) any affiliate of any person identified in clause (i) or (ii) that is reasonably identifiable as such on the basis of such affiliate’s name or otherwise identified in writing by the Borrower from time to time (other than any such affiliate of any person identified in clause (i) above that is a bank, financial institution or fund (other than a Disqualified Institution (as defined below) under clause (ii)) that regularly invests in commercial loans or similar extensions of credit in the ordinary course of business and for which no personnel involved with the relevant competitor (A) make investment decisions or (B) have access to non-public information relating to the Company or any person that forms part of the Company’s business (including its subsidiaries)) (all such competitors, banks, financial institutions and other entities referred to in clauses (i) through (iii), the “Disqualified Institutions”) and no Disqualified Institution may become a Lender or have any commitment or right (including a participation right, but only to the extent that the Lenders have received or had made available to them a list of Disqualified Institutions prior to the execution of such participation right) with respect to any loans under the Facilities; provided that any such Disqualified Institutions identified after the date hereof shall not apply retroactively to disqualify any persons that have previously acquired an assignment or participation in a Facility as to that assignment or participation. Notwithstanding the applicable Lead Arrangers’ right to syndicate the Facilities and receive commitments with respect thereto (except for assignments to Additional Arrangers pursuant to Section 2 above, in respect of the amount allocated to such Additional Arrangers), the Commitment Parties will not be relieved, released or novated from their obligations hereunder (including their obligation to fund the Facilities on the date of the consummation of the Acquisition with the proceeds of the initial funding under any of the Facilities (the date of such funding, the “Closing Date”)) in connection with any syndication, assignment or participation of the Facilities, including their commitments in respect thereof, until after the initial funding under the Facilities has occurred, except with respect to the Designation Rights contemplated by Section 2 above, no assignment or novation will become effective with respect to all or any portion of the Commitment Parties’ commitments in respect of the Facilities until the initial funding of the Facilities has occurred, unless you otherwise agree in writing, the Commitment Parties will retain exclusive control over all rights and obligations with respect to their commitments in respect of the Facilities, including all rights with respect to consents, modifications, supplements, waivers and amendments, until the initial funding under the Facilities has occurred; provided that, notwithstanding any other provisions of the Fee Letters and this Commitment Letter, the Lead Arrangers and Commitment Parties shall (i) permit any Debt Fund Affiliate (as defined in Exhibit B) or other Affiliated Lender (as defined in Exhibit B) (the “Sponsor Related Funds”) to purchase, pursuant to any order placed by any such Sponsor Related Funds on or prior to the date of allocation of the applicable First Lien Facility and Second Lien Facility, up to 10% of the such Term Facilities on the same terms as offered to other parties in the applicable syndication (the “Preferential Allocation”) and (ii) not be entitled to receive the portion of the commitment, underwriting, arrangement, funding and conversion fees that relate to the debt (after

 

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taking into account any portion of the arrangement or other fees that the Commitment Parties have paid to Lenders in connection with the syndication of the applicable Facility) that such Sponsor Related Funds have placed an order to purchase (and, if already paid, will rebate such portion of the applicable fees as provided below) (such portion of the applicable fee as may be retained or rebated by the last sentence of this paragraph, the “Preferential Allocation-Related Fee Amount”). It is understood and agreed that all of such Preferential Allocation-Related Fee Amount shall be retained by you (or to the extent such Preferential Allocation-Related Fee Amounts are otherwise paid on the Closing Date, shall be rebated to you). In addition, with respect to the Preferential Allocation, nothing in this Commitment Letter, the Fee Letters or otherwise shall constitute an express or implied agreement or understanding that any Sponsor Related Fund will purchase any Facility.

We agree that the Commitment Parties’ commitments hereunder are several, not joint, and not conditioned upon the syndication of, or receipt of commitments in respect of, the Facilities and in no event will the commencement or successful completion of syndication of the Facilities constitute a condition to the availability of the Facilities (including on the Closing Date). The applicable Lead Arrangers intend to commence syndication efforts promptly upon the execution of this Commitment Letter and, as part of such syndication efforts, it is the applicable Lead Arrangers’ intent to have Lenders commit to the Facilities prior to the Closing Date (subject to the limitations set forth in the preceding paragraph). It is understood and agreed by the parties hereto that each of the Facilities may be separately syndicated. Until the earlier of (a) the date on which a Successful ABL Syndication (in the case of the ABL Facility) or a Successful Syndication (in the case of the Term Facilities) (as defined in the Fee Letters, as applicable, referred to below) is achieved and (b) the date that is thirty (30) days after the Closing Date, as applicable (each such earlier date, the “Syndication Date”), you agree to assist the applicable Lead Arrangers in completing a timely syndication that is reasonably satisfactory to the applicable Lead Arrangers and you. Such assistance will be limited to, upon request of the applicable Lead Arrangers (and with respect to any matters set forth below relating to the Company or any of its subsidiaries, such assistance shall be subject to any applicable limitation on your rights set forth in the Acquisition Agreement), (i) your using commercially reasonable efforts to ensure that any syndication efforts benefit from the Sponsor’s existing lending and investment banking relationships and, to the extent practical and appropriate, the Company’s existing banking relationships, (ii) direct contact between appropriate members of senior management, certain representatives and certain non-legal advisors of Acquisition Sub, on the one hand, and the proposed Lenders, on the other hand (and your using commercially reasonable efforts to arrange for contact between appropriate members of senior management of the Company, on the one hand, and the proposed lenders, on the other hand), in all such cases at times to be mutually agreed, (iii) your assistance (including the use of commercially reasonable efforts to cause the Company to assist) in the preparation of a customary confidential information memorandum (the “Information Memorandum”) for each of the Facilities and other customary marketing materials to be used in connection with the syndication of the Facilities, (iv) your using commercially reasonable efforts to obtain, at your expense, prior to or concurrently with the launch of general syndication of the Term Facilities, public ratings (but not specific ratings) for the Initial First Lien Facility and Second Lien Facility from each of S&P Global Ratings (together with any successor thereto, “S&P”) and Moody’s Investors Service, Inc. (“Moodys”), and a public corporate credit rating (but not a specific rating) and a public corporate family rating (but not a specific rating) in respect of the Borrower after giving effect to the Transactions from each of S&P

 

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and Moody’s, (v) the hosting, with the applicable Lead Arrangers, of a reasonable number (to be mutually agreed) of meetings or conference calls with prospective Lenders (limited to one in person general “bank meeting”) at reasonable times and locations to be mutually agreed and upon reasonable advance notice, (vi) using commercially reasonable efforts to assist the ABL Administrative Agent and its designees to obtain inventory appraisals and field examinations as promptly as practicable and (vii) (x) your providing (and your using commercially reasonable efforts to cause the Company to provide) to the applicable Lead Arrangers all customary information reasonably available to you with respect to the Borrower, the Company and each of their respective subsidiaries and the Transactions, including customary financial information and projections (including financial estimates, financial models, forecasts and other forward-looking information, the “Projections”), as the applicable Lead Arrangers may reasonably request in connection with the structuring, arrangement or syndication of the Facilities and (y) your using commercially reasonable efforts to ensure that, prior to the Syndication Date, there will not be any competing issues, offerings, placements or arrangements of debt securities or syndicated credit facilities by or on behalf of you or any of your subsidiaries (and your using commercially reasonable efforts to cause the Company to ensure that there will not be any competing issues, offerings, placements or arrangements of debt securities or syndicated credit facilities of the Company or its subsidiaries) being offered, placed or arranged (other than the Facilities (or any increase thereto), ordinary course working capital facilities, local facilities, ordinary course capital leases, purchase money indebtedness and equipment financings, deferred purchase price obligations, obligations under the Acquisition Agreement, indebtedness of the Company and its subsidiaries disclosed or otherwise permitted under the Acquisition Agreement or other indebtedness that has otherwise been consented to by the Lead Arrangers) without the consent of the Term Lead Arrangers (such consent not to be unreasonably withheld, delayed or conditioned), if such issuance, offering, placement or arrangement would materially and adversely impair the primary syndication of the First Lien Facilities and the Second Lien Facility prior to the Syndication Date. For the avoidance of doubt, you will not be required to provide any information to the extent that the provision thereof would violate any law, rule or regulation, or any obligation of confidentiality binding upon, or waive any privilege that may be asserted by, you, the Sponsor, the Company or any affiliate of any of them (provided that in the event that you do not provide information in reliance on the exclusions in this sentence, you shall use commercially reasonable efforts to provide notice to the Lead Arrangers promptly upon obtaining knowledge that such information is being withheld and you shall use your commercially reasonable efforts to communicate, to the extent permitted, the applicable information in a way that would not violate such restrictions and to eliminate such restrictions).

Notwithstanding anything to the contrary contained in this Commitment Letter, the Fee Letters or any other letter agreement or undertaking concerning the financing of the Transactions to the contrary, neither the commencement nor the completion of any syndication of the Facilities (including the Successful ABL Syndication or Successful Syndication, as applicable (each as defined in the Fee Letters, as applicable)), nor your compliance with the provisions of the foregoing paragraph (including commercially reasonable efforts to obtain the ratings referenced above) will constitute a condition to the commitments hereunder or the funding of the Facilities (including on the Closing Date). Notwithstanding anything to the contrary, the only financial statements that may be required by the Lead Arranger to be provided in connection with the syndication of the Facilities shall be those required to be delivered pursuant to paragraph 3(a) of Exhibit E hereto. Your obligations under this Commitment Letter to use commercially reasonable efforts to cause the Company or its subsidiaries or their respective management or affiliates to take (or to refrain from taking)

 

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any action is subject to the terms of the Acquisition Agreement and will not require you, under any circumstances, to commence any litigation or to take any action that is not practical, appropriate or reasonable in light of the circumstances or is in contravention of the terms of the Acquisition Agreement, including terminating the Acquisition Agreement.

Except as otherwise expressly provided herein, the applicable Lead Arrangers will, in consultation with you, manage all aspects of any syndication of the Facilities, including decisions as to the selection of institutions (subject to your prior consent (not to be unreasonably withheld, delayed or conditioned)and shall exclude Disqualified Institutions) to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate (subject to your prior consent (not to be unreasonably withheld, delayed or conditioned) and shall exclude Disqualified Institutions), the allocation of the commitments among the Lenders (subject to your prior consent (not to be unreasonably withheld, delayed or conditioned)) and the amount and distribution of fees among the Lenders.

4. Information.

You hereby represent and warrant that (with respect to information provided by or relating to the Company, its subsidiaries or their respective operations or assets, to your knowledge), (a) all written factual information and written factual data (other than (i) the Projections, (ii) information of a general economic or industry specific nature and (iii) third-party memos or reports furnished to us (such written information and data other than that set forth in the immediately preceding clauses (i) through (iii), the “Information”) that have been or will be made available to any Commitment Party by or on behalf of you or the Sponsor, when taken as a whole after giving effect to all supplements and updates provided thereto, is or will be, when furnished, supplemented or updated, correct in all material respects and does not or will not, when furnished, supplemented or updated, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all supplements and updates thereto) and (b) the Projections that have been or will be made available to us by or on behalf of you or the Sponsor, when taken as a whole, have been or will be prepared in good faith based upon assumptions that are believed by you to be reasonable at the time made and at the time furnished to us, it being understood by the Commitment Parties and the Lead Arrangers that (i) the Projections are merely a prediction as to future events and are not to be viewed as facts, (ii) the Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of you, the Company and/or the Sponsor, (iii) no assurance can be given that any particular Projections will be realized and (iv) actual results may differ and such differences may be material.

You agree that, if at any time prior to later of the Syndication Date and the Closing Date, you become aware that any of the representations and warranties in the preceding sentence would be incorrect in any material respect if the Information and the Projections were being furnished, and such representations and warranties were being made, at such time, then you will (or, with respect to any such the Information and Projections relating to the Company, its subsidiaries or their respective operations or assets, use your commercially reasonable efforts to cause the Company to (subject to any applicable limitation on your rights set forth in the Acquisition Agreement)) promptly supplement such Information and Projections, as applicable, so

 

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that such representations and warranties are (with respect to information relating to the Company, its subsidiaries or their respective operations or assets, to your knowledge) correct in all material respects under those circumstances, and such supplementation shall cure any breach of such representation. In arranging and syndicating the Facilities, the Commitment Parties will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof and do not assume responsibility for the accuracy or completeness of the Information or Projections. For the avoidance of doubt, the accuracy of the representations set forth above in this paragraph is not a condition precedent to the commitments hereunder or the funding of the Facilities on the Closing Date.

You hereby acknowledge that (a) the Lead Arrangers may make the Information, Projections and other customary offering and marketing material and presentations, including the Information Memorandum (such Information, Projections, other customary offering and marketing material and the Information Memorandum, collectively with the Term Sheets, the “Information Materials”), available on a confidential basis to a proposed syndicate of Lenders (other than Disqualified Institutions) by posting the Information Materials on Merrill DataSite, IntraLinks, Debt X, SyndTrak Online or another similar electronic system, in each case, subject to a market standard “click through” or similar confidentiality agreement reasonably approved by you or the Borrower and (b) certain of the Lenders may be “public side” Lenders (i.e., Lenders that wish to receive only information that (i) is publicly available, (ii) is not material with respect to you, Holdings, the Borrower, the Company, your and their respective subsidiaries or your and their respective securities for purposes of United States federal and state securities laws (collectively, “Securities Laws”) or (iii) constitutes information of the type that would be publicly available if the Company was a public reporting company (as reasonably determined by you) (collectively, “Public Side Information” and each Lender who wishes to receive only Public Side Information, a “Public Lender”).

At the reasonable request of the applicable Lead Arrangers, you agree to assist (and to use commercially reasonable efforts to cause the Company to assist) us in preparing an additional version of the Information Memorandum to be used by Public Lenders in connection with the syndication of the Facilities that will include only Public Side Information.

It is understood that in connection with your assistance described above, (i) to the extent reasonably requested by the applicable Lead Arrangers, you agree to deliver (or cause the Company to deliver) a customary authorization letter to be included in each Information Memorandum that authorizes the distribution of such Information Memorandum to prospective Lenders and includes a representation that the public-side version contains only Public Side Information and also contains a representation substantially similar to the one in the first sentence of Section 4 above in respect of the information contained in such Information Memorandum; (ii) each Information Memorandum will exculpate us and our affiliates, you and your affiliates, the Investors and their respective affiliates and the Company and its affiliates with respect to any liability related to the use or content of such Information Memorandum or any related marketing materials; (iii) the public-side version of the Information Memorandum may include the following information, except to the extent you notify us to the contrary (including by email) and provided that you shall have been given a reasonable opportunity to review such public-side version and comply with Securities Laws prior to any distribution thereof: (A) drafts and final Facilities Documentation, related

 

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definitive documentation (if any) and customary marketing term sheets that have been approved by you, (B) administrative materials prepared by the Lead Arrangers for prospective Lenders (such as a lender meeting invitation, allocations and funding and closing memoranda) and (C) notification of changes in the terms of any of the Facilities; (iv) at our request, you agree to identify information to be distributed to Public Lenders by clearly and conspicuously marking the same as “PUBLIC”; and (v) we and the proposed Lenders will be entitled to treat any Information and Projections that are not specifically identified as “PUBLIC” as being suitable for posting only on the portion of the Platform not available to or accessible by Public Lenders.

5. Fees.

As consideration for the commitments of the Initial Lenders hereunder and for the agreement of the Lead Arrangers to perform the services described herein, you agree to pay (or cause to be paid) the fees set forth in the Term Sheets, in the Term Fee Letter dated the date hereof and delivered herewith with respect to the Term Facilities (the “Term Fee Letter”), and in the ABL Fee Letter dated the date hereof and delivered herewith with respect to the ABL Facility (the “ABL Fee Letter”, and together with the Term Fee Letter, the “Fee Letters”), if and to the extent payable in accordance with the terms thereof. Once paid, except as provided herein, in the Fee Letters or as otherwise agreed in writing, such fees will not be refundable under any circumstances. Notwithstanding anything to the contrary herein or otherwise, if the Transactions are not consummated and the Closing Date does not occur, no fees, costs or expenses (other than amounts payable pursuant to clause (a) in the first paragraph of Section 7 below, but not any fees, costs, expenses or disbursements of counsel pursuant to clause (b) of that paragraph), will be payable or reimbursable by you pursuant to this Commitment Letter, the Fee Letters or any other agreement entered into between you and any Lead Arranger, any Administrative Agent, any Commitment Party and/or any of their respective affiliates with respect to the ABL Facility, the First Lien Facilities or the Second Lien Facility (other than the First Lien Facilities Alternative Transaction Fee or the Second Lien Facility Alternative Transaction Fee (each as defined in the Term Fee Letter) or in connection with any Break-up Fee (each as defined in the applicable Fee Letters), in each case solely to the extent such fees or expenses would be required to be paid or reimbursed pursuant to the terms of the Fee Letters).

6. Conditions.

The commitments of each Commitment Party hereunder with respect to the Facilities (including to fund the Facilities on the Closing Date), and the agreements of each Lead Arranger to perform the services described herein, are subject solely to the satisfaction (or waiver by the Lead Arrangers) of the following conditions: (a) (i) with respect to the ABL Facility, the execution by you of a credit agreement with respect to such ABL Facility, (ii) with respect to the First Lien Facilities, the execution by you of a credit agreement with respect to such First Lien Facilities and (iii) with respect to the Second Lien Facility, the execution by you of a credit agreement with respect to the Second Lien Facility (all such credit agreements, together with the applicable Closing Deliverables as defined in Exhibit E hereto, the “Facilities Documentation”), in each case, initially prepared by counsel to the Borrower in accordance with the Term Sheets (subject to the exercise of any applicable Flex Provisions (as defined in the Term Fee Letter)); (b) subject to the Certain Funds Provisions (as defined below), the Specified Acquisition Agreement Representations (as defined below) and Specified

 

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Representations (as defined below) will be true and correct in all material respects; and (c) the conditions set forth in Exhibit E hereto; it being understood that (A) there are no conditions (implied or otherwise) to the commitments hereunder (including compliance with the terms of the Commitment Letter, the Fee Letters and the Facilities Documentation) other than as set forth in the foregoing clauses (a) through (c) and upon satisfaction (or waiver by the Lead Arrangers) of such conditions and the initial funding under the Facilities will occur, (B) neither the Company nor any of its subsidiaries shall be required to execute any Facilities Documentation prior to, or that becomes effective prior to, the consummation of the Acquisition and the funding of the Facilities and (C) the execution and delivery of the Facilities Documentation by the Company and its subsidiaries is not a condition precedent to the initial availability of any Facility; provided that the Company and its subsidiaries that are Loan Parties must execute and deliver the Facilities Documentation to which it is a party (and all customary legal opinions from counsel, customary evidence of authorization with respect to any officers executing such documentation, organizational documents and good standing certificates (to the extent applicable) for such Loan Parties in the jurisdiction of organization and customary secretary’s and officer’s certificate must be delivered) substantially concurrently with the consummation of the Acquisition, but in no event will they be required to do so prior to the date or time that the Acquisition is required to be consummated pursuant to the terms of the Acquisition Agreement (the “Acquisition Date”) and such signature pages evidencing such documentation shall be provided in escrow to the Lead Arrangers prior to the consummation of the Acquisition and shall be released from escrow upon the funding of the Facilities and consummation of the Acquisition (which signature pages may be executed by individuals that will be officers and/or directors of the Company and its subsidiaries that are Loan Parties upon consummation of the Acquisition, whether or not such individuals are officers and/or directors of such entities prior to the consummation of the Acquisition).

Notwithstanding anything in this Commitment Letter (including the immediately preceding paragraph), the Fee Letters, the Facilities Documentation or any other agreement or other undertaking concerning the financing of the Transactions to the contrary, (a) the only representations and warranties that will be made on the Closing Date and the only representations and warranties the accuracy of which will be a condition to the initial availability of the Facilities on the Closing Date will be (i) such of the representations and warranties made with respect to the Company and its subsidiaries by the Company in the Acquisition Agreement to the extent a breach of such representations and warranties is materially adverse to the interests of the Lenders (the “Specified Acquisition Agreement Representations”); provided that, notwithstanding anything set forth in this Commitment Letter, the Fee Letters, the Facilities Documentation or any other agreement or other undertaking concerning the financing of the Transactions to the contrary, a failure of any Specified Acquisition Agreement Representation to be true and correct will not result in a failure of a condition to the availability of the Facilities on the Closing Date or a Default or Event of Default under the Facilities, unless such failure gives rise to a right by you (or your affiliates) to terminate (or decline to consummate the Acquisition under) the Acquisition Agreement (after giving effect to any applicable notice and cure provisions) as a result of a breach of such representation and warranty and (ii) the Specified Representations (as defined below), and (b) the terms of the Facilities Documentation and the Closing Deliverables will be subject to the Documentation Principles, and in any event will be in a form such that they do not impair the availability of the Facilities on the Closing Date if the conditions expressly set forth in the immediately preceding paragraph are satisfied (or waived by

 

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the Lead Arrangers); it being understood that to the extent any Collateral (other than Collateral on which a lien may be perfected by the filing of a financing statement under the applicable Uniform Commercial Code and any equity interests of the Acquisition Sub evidenced by certificates (other than any such certificate that has not been received by you prior to the Closing Date, to the extent you have used commercially reasonable efforts to procure delivery thereof, in which case, in the case of the Company, such certificate may instead be delivered within 10 business days after the later of the date the Company is delisted and the Closing Date (or such later date as the First Lien Administrative Agent may agree (with the ABL Administrative Agent and the Second Lien Administrative Agent deemed to so agree)), in each case, that have been timely provided on or prior to the initial funding on the Closing Date) securing the Facilities does not attach or become perfected on the Closing Date after your use of your commercially reasonable efforts to do so, such creation, validity or perfection will not constitute a condition precedent to the initial availability of the Facilities and will not affect the size of any Facility and will not result in a default under any Facility, but will instead be required within 90 days after the Closing Date pursuant to arrangements to be mutually agreed (subject to extensions mutually agreed by the First Lien Administrative Agent (in the case of Fixed Asset Collateral) or the ABL Administrative Agent (in the case of Current Asset Collateral) (with, in each case, other Administrative Agents deemed to so agree) and the Initial Borrower). For purposes hereof, “Specified Representations” means the representations and warranties of the Initial Borrower, the Company, Holdings and Guarantors as set forth in the applicable Facilities Documentation relating to their organizational existence and status of the Loan Parties, their organizational power and authority (only as to their execution, delivery and performance of the applicable Facilities Documentation), their due authorization, execution, delivery and enforceability against the Initial Borrower, the Company, Holdings and the other Guarantors of the applicable Facilities Documentation, solvency on a consolidated basis as of the Closing Date consistent with the solvency certificate attached as Annex I to Exhibit E to this Commitment Letter, no conflicts of the applicable Facilities Documentation (limited to their execution, delivery and performance of the applicable Facilities Documentation, incurrence of the debt thereunder and the granting of guarantees and security interests in respect thereof) with their charter documents, compliance of the applicable Facilities Documentation with Federal Reserve margin regulations, validity, perfection and priority of the liens in the Collateral (subject to the preceding provisions of this paragraph and to permitted liens (including any liens permitted pursuant to the Acquisition Agreement)), the Investment Company Act, the PATRIOT ACT and the use of proceeds not violating AML and Sanctions Laws or Anti-Corruption Laws. This paragraph and the provisions herein are referred to as the “Certain Funds Provisions.”

7. Indemnity.

You agree (a) to indemnify and hold harmless each Commitment Party, its respective affiliates and the respective officers, directors, employees, agents, controlling persons, equityholders, partners, members and other representatives of each of the foregoing (each, an “Indemnified Person”), from and against any and all losses, claims, damages and liabilities of any kind or nature and reasonable, documented and invoiced out-of-pocket fees and expenses, joint or several, to which any such Indemnified Person may become subject to the extent arising out of, resulting from or in connection with, any claim, litigation, investigation or proceeding (including any inquiry or investigation) relating to any of the foregoing (any of the foregoing, a “Proceeding”)) in connection with this Commitment Letter, the Fee Letters, the Transactions, the Facilities or the use of the proceeds thereof, regardless

 

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of whether any such Indemnified Person is a party thereto and whether or not such Proceeding is brought by you, your equityholders, your affiliates, creditors or any other third person, and to reimburse each such Indemnified Person promptly following written demand (together with reasonably detailed backup documentation supporting such reimbursement request) for any reasonable, documented and invoiced out-of-pocket legal expenses of one firm of counsel for all such Indemnified Persons, taken as a whole, and, in the case of a conflict of interest, one additional firm of counsel to the similarly situated affected Indemnified Persons taken as a whole, and, if necessary, of a single local counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all such Indemnified Persons, taken as a whole, and other reasonable, documented and invoiced out-of-pocket fees and expenses incurred in connection with investigating or defending any of the foregoing; provided that the foregoing indemnity will not, as to any Indemnified Person, apply to any loss, claim, damage, liability, cost or expense to the extent (i) it has been determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from (A) the willful misconduct, bad faith or gross negligence of such Indemnified Person or any Related Person (as defined below) of such Indemnified Person or (B) a material breach of the obligations of such Indemnified Person or any Related Person of such Indemnified Person under this Commitment Letter, the Fee Letters or the Facilities Documentation or (ii) resulting from any Proceeding between or among Indemnified Persons or any Related Persons that does not involve an action or omission by you or your affiliates (other than claims against any Commitment Party in its capacity or in fulfilling its role as the agent or arranger or any other similar role under the Facilities (excluding its role as a Lender)) and (b) if the Transactions are consummated and the Closing Date occurs, to reimburse the Commitment Parties on the Closing Date, upon presentation of a summary statement, for all reasonable, documented and invoiced out-of-pocket expenses, due diligence expenses (including expenses in connection with field examinations and inventory appraisals), syndication expenses, travel expenses and reasonable fees, disbursements and other charges of counsel to the Commitment Parties specified in each of the Term Sheets, and of a single local counsel to the Commitment Parties in each appropriate material jurisdiction (which may include a single special counsel acting in multiple jurisdictions), in each case, incurred in connection with the Facilities and the preparation, negotiation and enforcement of this Commitment Letter, the Fee Letters, the Facilities Documentation and any security arrangements in connection therewith. The foregoing provisions in this paragraph will be superseded, in each case, to the extent covered thereby, by the applicable provisions contained in the applicable Facilities Documentation upon execution thereof and thereafter will have no further force and effect. For purposes hereof, a “Related Person” of an Indemnified Person means any of such Indemnified Person (including but not limited to in its capacities as a Commitment Party or a Lead Arranger or any Lender) and their respective controlled affiliates and controlling persons and its or their respective directors, officers, employees, partners, agents acting at the direction of such Indemnified Person, controlled affiliate or controlling person and members thereof.

Notwithstanding any other provision of this Commitment Letter, (a) none of you, the Indemnified Persons, the Company, the Borrower, the Investors or any of your or their respective affiliates or the respective directors, officers, employees, advisors and agents of the foregoing will be liable for any damages arising from the use by others of information or other materials obtained through internet, electronic, telecommunications or other information transmission systems, except to the extent that such damages have resulted from the willful misconduct, bad faith or gross negligence of such person or any Related Person of such person (as determined by a court of competent jurisdiction in a final non-appealable judgment) and (b) none

 

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of you, the Indemnified Persons, the Company, the Borrower, the Investors or any of your or their respective affiliates or the respective directors, officers, employees, advisors and agents of the foregoing will be liable for any indirect, special, punitive or consequential damages (including, without limitation, any loss of profits, business or anticipated savings) in connection with this Commitment Letter, the Fee Letters, the Transactions (including the Facilities and the use of proceeds thereunder), or with respect to any activities related to the Facilities, including the preparation of this Commitment Letter, the Fee Letters and the Facilities Documentation; provided that nothing contained in this paragraph will limit your indemnification obligations set forth herein to the extent such indirect, special, punitive or consequential damages are included in any third party claim with respect to which the applicable Indemnified Person is entitled to indemnification under the first paragraph of this Section 7. Notwithstanding the foregoing, each Indemnified Person will be obligated to refund and return promptly any and all amounts paid by you under the immediately preceding paragraph to such Indemnified Person for any such losses, claims, damages, liabilities and expenses to the extent it has been determined by a court of competent jurisdiction in a final, non-appealable judgment that such Indemnified Person is not entitled to payment of such amounts in accordance with the terms hereof.

You will not be liable for any settlement of any Proceeding effected without your written consent (which consent will not be unreasonably withheld, delayed or conditioned), but if settled with your written consent or if there is a final and non-appealable judgment by a court of competent jurisdiction against any Indemnified Person in any such Proceeding, you agree to indemnify and hold harmless such Indemnified Person in the manner set forth above.

You will not, without the prior written consent of any Indemnified Person (which consent shall not be unreasonably withheld, delayed or conditioned (it being understood that it is reasonable for any Indemnified Person to withhold consent if such settlement does not satisfy clauses (a) and (b) of this paragraph)), effect any settlement of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by such Indemnified Person unless such settlement (a) includes an unconditional release of such Indemnified Person from all liability arising out of such Proceedings and (b) does not include any statement as to, or any admission of, fault, culpability, wrongdoing or a failure to act by or on behalf of such Indemnified Person.

8. Sharing of Information, Absence of Fiduciary Relationships, Affiliate Activities.

You acknowledge that the Commitment Parties and their respective affiliates (any such entities, “Commitment Party Related Parties”) may be providing debt financing, equity capital or other services (including, without limitation, investment banking and financial advisory services, securities trading, hedging, financing and brokerage activities and financial planning and benefits counseling) to other persons in respect of which you, the Company and your and their respective affiliates may have conflicting interests regarding the transactions described herein and otherwise. No Commitment Party Related Party will use confidential information obtained from you, the Company or your or its affiliates or representatives by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you in connection with the performance by them or their respective affiliates of services for other persons, and no Commitment Party Related Party will furnish any such information to other persons in contravention of Section 9. You also acknowledge that no Commitment Party Related Party has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by them from other persons.

 

13


The Commitment Parties and their affiliates may have economic interests that conflict with those of you or the Company. You agree that the Commitment Parties will act under this Commitment Letter as independent contractors and that nothing in this Commitment Letter or the Fee Letters, as applicable, will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Commitment Party and you or the Company, your or their respective equityholders or your or their respective affiliates. You acknowledge and agree that (a) the transactions contemplated by this Commitment Letter and the Fee Letters are arm’s-length commercial transactions between the Commitment Parties and, if applicable, their affiliates, on the one hand, and you, on the other, (b) in connection therewith and with the process leading to such transactions, the Commitment Parties and their applicable affiliates (as the case may be) are acting solely as principals and not as agents or fiduciaries of you, the Company, your or their respective management, equityholders, creditors or affiliates, (c) the Commitment Parties and their applicable affiliates (as the case may be) have not assumed an advisory or fiduciary responsibility or any other obligation in favor of you or your affiliates with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether the Commitment Parties or any of their affiliates have advised or are currently advising you or the Company on other matters), except the obligations expressly set forth in this Commitment Letter and the Fee Letters, (d) you have consulted your own legal, accounting and financial advisory, regulatory and tax advisors to the extent you deem appropriate and (e) you are responsible for making your own independent judgment with respect to such transactions and the process leading thereto. You agree that you will not claim, and hereby waive any such claim, that the Commitment Parties or their affiliates, as the case may be, have rendered advisory services of any nature or respect, or owe a fiduciary or similar duty to you or your affiliates, in connection with such transaction or the process leading thereto.

9. Confidentiality.

You agree that you will not disclose, directly or indirectly, the Fee Letters or this Commitment Letter or the contents hereof to any person or entity without the prior written approval of the Lead Arrangers (such approval not to be unreasonably withheld, delayed or conditioned), except (a) to the Sponsor and the other Investors, your and their respective affiliates and the respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders of the foregoing, and to any other actual and potential co-investors who are directly involved in the consideration of this matter and have a need to know the information contained herein or therein, as applicable, are informed of the confidential nature of this Commitment Letter, the Fee Letters and the contents hereof and thereof and who are or have been advised of their obligation to keep the same confidential, (b) if the Initial Commitment Parties party thereto consent in writing to such proposed disclosure or (c) pursuant to the order of any court or administrative agency in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law or compulsory legal process or to the extent requested or required by governmental and/or regulatory authorities (in which case you agree, to the extent practicable and not prohibited by applicable law, to inform us promptly thereof prior to disclosure); provided that (i) you may disclose this Commitment Letter and its contents (but not the Fee Letters except as provided in clause (vi) below) to the Company, the Company’s

 

14


affiliates and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders, in each case, who are informed of the confidential nature of this Commitment Letter, the Fee Letters and the contents hereof and thereof and who are or have been advised of their obligation to keep the same confidential, (ii) you may disclose this Commitment Letter and its contents (but not the Fee Letters or its contents) in any syndication or other marketing materials in connection with the Facilities (including the Information Materials) or, to the extent required by applicable law, in connection with any public filing, (iii) you may disclose the Term Sheets and other Exhibits and annexes to this Commitment Letter, and the contents thereof, to any prospective, potential or actual Lenders, Swap Counterparties (as defined below) and their respective affiliates, and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders and to rating agencies in connection with obtaining ratings for the Borrower or the Facilities, (iv) you may disclose the aggregate fee amount contained in the Fee Letters as part of Projections, pro forma information or a generic disclosure of aggregate sources and uses related to fee amounts in connection with the Transactions in marketing materials for the Facilities or, to the extent required by applicable law, in any public filing, (v) you may make public disclosure of the existence and amount of the commitments hereunder and of the identities of the Administrative Agents, bookrunners, Lead Arrangers and any Additional Arranger, (vi) to the extent portions of the Fee Letters have been redacted in the manner described in the Acquisition Agreement (as in effect as of the date hereof), you may disclose the Fee Letters and the contents thereof to the Company, its affiliates and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members or partners on a confidential and need to know basis, (vii) you may disclose this Commitment Letter, the Fee Letters and the contents hereof and thereof to the extent this Commitment Letter, the Fee Letters and the contents hereof or thereof, as applicable, become publicly available other than by reason of disclosure by you in breach of this Commitment Letter, (viii) you may disclose this Commitment Letter, the Term Fee Letter and the contents hereof and thereof to any prospective, potential or actual Additional Arranger or any of its affiliates and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders, on a confidential and need-to-know basis, (ix) you may disclose this Commitment Letter, the Fee Letters and the contents hereof and thereof to the extent required by applicable law, rule or regulation, subpoena or other compulsory legal process (in which case, you agree, to the extent practicable and not prohibited by law, to inform us promptly thereof prior to disclosure), (x) this Commitment Letter and the contents hereof may be disclosed in any syndication of the Facilities or in any proxy statement or other public filing in connection with the Acquisition, (xi) you may disclose this Commitment Letter and the Fee Letters and the contents hereof and thereof to any prospective, potential or actual Swap Counterparty and their respective affiliates, and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders on a confidential and need to know basis, (xii) you may disclose the Term Sheets and the existence of the Commitment Letter may be disclosed to any rating agency in connection with the Transactions, (xiii) on a confidential basis, the Fee Letters and the contents thereof to the Company’s auditors for customary accounting purposes, including accounting for deferred financing costs, (xiv) you may disclose the Term Fee Letter and the contents thereof to any party to the ABL Fee Letter or any of its affiliates and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members,

 

15


partners, stockholders, controlling persons or equityholders, on a confidential and need-to-know basis and (xv) you may disclose this Commitment Letter, the Fee Letters and the contents hereof and thereof to enforce your rights and remedies hereunder or thereunder. Upon the entering into of the applicable Facilities Documentation, your obligations under this paragraph will terminate automatically and be superseded by the confidentiality provisions in the applicable Facilities Documentation upon the initial funding thereunder. Otherwise, the confidentiality provisions set forth in this paragraph shall survive the termination of this Commitment Letter and expire and will be of no further effect on the date occurring 18 months after the date hereof.

Each Commitment Party and its affiliates will use all information provided to it or such affiliates by or on behalf of you or the Sponsor hereunder or in connection with the Acquisition and the Transactions solely for the purpose of providing the services which are the subject of this Commitment Letter and shall treat confidentially all such information and will not publish, disclose or otherwise divulge such information; provided that nothing herein will prevent the Commitment Parties or their affiliates from disclosing any such information (a) pursuant to the order of any court or administrative agency or in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law or compulsory legal process (in which case the Commitment Parties agree (except with respect to any audit or examination conducted by bank accountants or any bank regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, to inform you promptly thereof prior to disclosure), (b) upon the request or demand of any regulatory authority having jurisdiction over the Commitment Parties or any of their affiliates (in which case the Commitment Parties agree (except with respect to any audit or examination conducted by bank accountants or any bank regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, to inform you promptly thereof prior to disclosure), (c) to the extent that such information becomes publicly available other than by reason of disclosure by the Commitment Parties or any of their affiliates or any related parties thereto in violation of any confidentiality obligations owing to you, the Company, any Investor or any of your or their respective affiliates (including those set forth in this paragraph), (d) to the extent that such information is received by the Commitment Parties from a third party that is not, to any Commitment Party’s knowledge, subject to contractual or fiduciary confidentiality obligations owing to you, the Company, any Investor or any of your or their respective affiliates or related parties, (e) to the Commitment Parties’ affiliates and to their and their respective affiliates’ respective officers, directors, employees, legal counsel, independent auditors, professionals and other experts or agents who need to know such information in connection with the Transactions and who are informed of the confidential nature of such information and who are subject to customary confidentiality obligations of professional practice or who are or have been advised to keep the same confidential (with the Commitment Parties responsible for such person’s compliance with this paragraph); provided that no disclosure will be made by the Commitment Parties, any of their affiliates or any of their respective employees, legal counsel, independent auditors, professionals or other experts or agents to any affiliates that are engaged as principals primarily in private equity, mezzanine financing or venture capital or engaged directly or indirectly in the sale of the Company and its subsidiaries as representatives of the Company (other than, in each case, such persons engaged by Acquisition Sub as part of the Acquisition) other than a limited number of senior employees who are required, in accordance with industry regulations or the Commitment Parties’ internal policies and procedures to act in a supervisory capacity and the Commitment Parties’ internal legal, compliance, risk management, credit or investment committee members, (f) to bona fide prospective, potential or actual Lenders, participants or assignees and to any

 

16


direct or indirect bona fide contractual counterparty to any swap or derivative transaction (each a “Swap Counterparty”) relating to the Borrower or any of its subsidiaries, in each case, other than Disqualified Institutions; provided that the disclosure of any such information to any Lenders, participants, assignees or Swap Counterparties or prospective or potential Lenders, participants, assignees or Swap Counterparties referred to above will be made subject to the acknowledgment and acceptance by such Lender, participant, assignee or Swap Counterparty or prospective or potential Lender, participant, assignee or Swap Counterparty that such information is being disseminated on a confidential basis (on substantially the terms set forth in this paragraph or as is otherwise reasonably acceptable to you and the Commitment Parties, including as expressly agreed in any Information Materials or other marketing materials) in accordance with the standard syndication processes of the Commitment Parties or customary market standards for dissemination of such type of information, (g) to rating agencies in connection with obtaining ratings for the Borrower or the Facilities, (h) for purposes of establishing a “due diligence” or similar defense in connection with or arising out of the making of loans pursuant to this Commitment Letter, (i) with your prior written consent or (j) to enforce their rights and remedies hereunder or under the Fee Letters. Upon the entering into of the Facilities Documentation, the Commitment Parties’ and their affiliates’, if any, obligations under this paragraph will terminate automatically and be superseded by the confidentiality provisions in the applicable Facilities Documentation upon the initial funding thereunder. Otherwise, the confidentiality provisions set forth in this paragraph shall survive the termination of this Commitment Letter and expire and will be of no further effect on the date occurring 18 months after the date hereof.

10. Miscellaneous.

This Commitment Letter and the commitments hereunder shall not be assignable by any party hereto (other than (a) by the Initial Lenders party hereto on the date hereof to any Additional Arranger in accordance with the final paragraph of Section 2 or (b) by you, to one or more newly created wholly owned holding companies organized in the United States and formed for purposes of consummating the Transactions and controlled, directly or indirectly, by the Sponsor, to the Company or one of its newly formed wholly owned holding company subsidiaries organized in the United States or to the Borrower, in each case, immediately prior to or otherwise substantially concurrently with (and subject to) the consummation of the Acquisition) without the prior written consent of each other party hereto (such consent not to be unreasonably withheld, delayed or conditioned) (and any attempted assignment without such consent shall be null and void). This Commitment Letter and the commitments hereunder are intended to be solely for the benefit of the parties hereto (and Indemnified Persons to the extent expressly set forth herein) and are not intended to and do not confer any benefits upon, or create any rights in favor of, any person other than the parties hereto (and Indemnified Persons to the extent expressly set forth herein). Subject to the limitations set forth in Sections 2 and 3 above, the Commitment Parties reserve the right to employ the services of their respective affiliates in providing services contemplated hereby and to allocate, in whole or in part, to their respective affiliates certain fees payable to the Commitment Parties in such manner as the Commitment Parties and their respective affiliates may agree in their sole discretion and, to the extent so employed, such affiliates shall be entitled to the benefits and protections afforded to, and subject to the provisions governing the conduct of, the Commitment Parties hereunder; provided that (a) no Commitment Party shall be relieved of any of its obligations hereunder, including in the event any affiliate through which it

 

17


performs its obligations fails to perform the same in accordance with the terms hereof, and (b) the Commitment Parties will be liable for the actions or inactions of any such person whose services are so employed. Except as otherwise provided herein, this Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by the Commitment Parties party hereto at such time and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission or other electronic transmission (e.g., a “PDF” or “TIFF”) will be effective as delivery of a manually executed counterpart hereof. This Commitment Letter (including the Exhibits hereto), together with the Fee Letters, (i) are the only agreements that have been entered into among the parties hereto with respect to the Facilities, and (ii) supersede all prior understandings, whether written or oral, among us with respect to the Facilities and set forth the entire understanding of the parties hereto with respect thereto. For all purposes of this Commitment Letter and the Fee Letters, the word “will” shall be construed to have the same meaning and effect as the word “shall.” THIS COMMITMENT LETTER AND ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, BUT NOT LIMITED TO THE VALIDITY, INTERPRETATION, CONSTRUCTION, BREACH, ENFORCEMENT OR TERMINATION HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK; PROVIDED THAT THE INTERPRETATION OF ANY PROVISION OF THE ACQUISITION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE DETERMINATION OF THE ACCURACY OF ANY REPRESENTATION OR WARRANTY (AND WHETHER AS A RESULT OF AN INACCURACY OF ANY SUCH REPRESENTATION OR WARRANTY GIVES RISE TO A RIGHT TO TERMINATE (OR DECLINE TO CONSUMMATE THE ACQUISITION UNDER) THE ACQUISITION AGREEMENT (AFTER GIVING EFFECT TO ANY APPLICABLE NOTICE AND CURE PROVISIONS)) OR THE SATISFACTION OF ANY CONDITION CONTAINED THEREIN OR ANY DETERMINATION OR DISPUTE CONCERNING A “MATERIAL ADVERSE EFFECT” (AS DEFINED IN THE ACQUISITION AGREEMENT)) THEREIN OR HEREIN SHALL BE GOVERNED BY THE DOMESTIC LAWS OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, AND SECTION 9.5 OF THE ACQUISITION AGREEMENT SHALL GOVERN WITH RESPECT THERETO.

Each of the parties hereto agrees that (a) this Commitment Letter is a binding and enforceable agreement, at law and in equity, to provide and fund the Facilities (and the financing contemplated thereby) on the terms in this Commitment Letter, subject only to the satisfaction or waiver by the Lead Arrangers of the conditions set forth in Section 6 and (b) the Fee Letters are a binding and enforceable agreement with respect to the subject matter contained therein; provided that nothing contained in this Commitment Letter obligates you or any of your affiliates to consummate any portion of the Transactions or to draw upon all or any portion of the Facilities.

 

18


EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER, THE FEE LETTERS OR THE PERFORMANCE OF SERVICES HEREUNDER OR THEREUNDER.

Each of the parties hereto hereby irrevocably and unconditionally (a) submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Commitment Letter, the Fee Letters or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such action or proceeding will be heard and determined in such New York State court or, to the extent permitted by law, in such federal court, (b) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Commitment Letter or the transactions contemplated hereby in any New York State or in any such federal court, (c) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court, and (d) agrees that a final judgment in any such suit, action or proceeding will be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other matter provided by law. Each of the parties hereto agrees that service of process, summons, notice or document by registered mail addressed to you or us at the addresses set forth above will be effective service of process for any suit, action or proceeding brought in any such court.

We hereby notify you that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”) and 31 C.F.R. § 1010.230 (as amended, the “Beneficial Ownership Regulation”), each of us and each of the Lenders may be required to obtain, verify and record information that identifies the Borrower and the Guarantors, which information may include their names, addresses, tax identification numbers and other information that will allow each of us and the Lenders to identify the Borrower and the Guarantors in accordance with the PATRIOT Act and the Beneficial Ownership Regulation. This notice is given in accordance with the requirements of the PATRIOT Act and the Beneficial Ownership Regulation and is effective for each of us and the Lenders.

The indemnification, information, compensation (if the Closing Date occurs and the provision is otherwise applicable), reimbursement (if the Closing Date occurs and the provision is otherwise applicable), sharing of information, absence of fiduciary relationships, no agency, affiliate activities, jurisdiction, governing law, venue, waiver of jury trial, until the later of the Closing Date and the Syndication Date, syndication (if applicable), and confidentiality provisions contained herein and in the Fee Letters will remain in full force and effect regardless of whether Facilities Documentation is executed and delivered and notwithstanding the termination or expiration of this Commitment Letter or the Initial Lenders’ commitments hereunder; provided that your obligations under this Commitment Letter (other than your obligations with respect to (a) assistance to be provided in connection with the syndication of such commitments (including supplementing and/or correcting Information and Projections) prior to the later of the Syndication Date and the Closing Date and (b) confidentiality of the Fee Letters and the contents thereof) will automatically terminate and be superseded by the provisions of the applicable Facilities Documentation upon the initial funding thereunder to the extent covered thereby, and you will automatically be released from all liability in connection therewith at such time. You may terminate this Commitment Letter and/or the Initial Lenders’ commitments with respect to the Facilities (or any portion thereof) hereunder at any time subject to the provisions of the preceding sentence.

 

19


Section headings used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Commitment Letter.

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms of this Commitment Letter and the applicable Fee Letter by returning to the Lead Arrangers (or in the case of the ABL Fee Letter, solely the ABL Lead Arranger), executed counterparts hereof and of the applicable Fee Letter not later than 11:59 p.m., New York City time, on November 19, 2018. The Initial Lenders’ commitments and the obligations of the Lead Arrangers hereunder will expire at such time in the event that the applicable Lead Arrangers have not received such executed counterparts in accordance with the immediately preceding sentence. If you do so execute and deliver to us this Commitment Letter and the applicable Fee Letter, we agree to hold our commitments available for you until the earliest of (i) after execution of the Acquisition Agreement and prior to the consummation of the Transactions, the date on which the Acquisition Agreement has terminated in accordance with its terms, (ii) the consummation of the Acquisition with or without the funding of the Facilities and (iii) five business days following 11:59 p.m. New York City time on the End Date (as defined in the Acquisition Agreement as in effect on the date hereof). Upon the occurrence of any of the events referred to in the preceding sentence, this Commitment Letter and the commitments of each Commitment Party hereunder and the agreement of the Lead Arrangers to provide the services described herein, shall automatically terminate unless the Commitment Parties will, in their discretion, agree to an extension in writing (including by email).

[Remainder of this page intentionally left blank]

 

20


We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions.

 

Very truly yours,
DEUTSCHE BANK SECURITIES INC.
By:  

/s/ Joseph Devine

  Name: Joseph Devine
  Title: Director
By:  

/s/ Nicholas Hayes

  Name: Nicholas Hayes
  Title: Managing Director
DEUTSCHE BANK AG NEW YORK BRANCH
By:  

/s/ Joseph Devine

  Name: Joseph Devine
  Title: Director
By:  

/s/ Nicholas Hayes

  Name: Nicholas Hayes
  Title: Managing Director

[SIGNATURE PAGE TO PROJECT VIKING COMMITMENT LETTER]


We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions.

 

Very truly yours,
UBS AG, STAMFORD BRANCH
By:  

/s/ Luke Bartolone

  Name: Luke Bartolone
  Title: Executive Director
By:  

/s/ Michael Lawton

  Name: Michael Lawton
  Title: Managing Director
UBS SECURITIES LLC
By:  

/s/ Luke Bartolone

  Name: Luke Bartolone
  Title: Executive Director
By:  

/s/ Michael Lawton

  Name: Michael Lawton
  Title: Managing Director

[SIGNATURE PAGE TO PROJECT VIKING COMMITMENT LETTER]


We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions.

 

Very truly yours,
WELLS FARGO BANK, N.A.
By:  

/s/ John Hanley

  Name: John Hanley
  Title: Senior Vice President
WELLS FARGO COMMERCIAL DISTRIBUTION FINANCE, LLC
By:  

/s/ John Hanley

  Name: John Hanley
  Title: Senior Vice President

[SIGNATURE PAGE TO PROJECT VIKING COMMITMENT LETTER]


Accepted and agreed to as of
the date first above written:
PVKG MERGER SUB, INC.
By:  

/s/ James Christopoulos

  Name: James Christopoulos
  Title: Secretary

[SIGNATURE PAGE TO PROJECT VIKING COMMITMENT LETTER]


EXHIBIT A

Project Viking

Transaction Description1

It is intended that:

(a) Acquisition Sub will directly or indirectly acquire (the “Acquisition”) the Company by:

 

  (i)

prior to the Closing Date, Acquisition Sub commencing a tender offer to purchase all of the shares of common stock of the Company (the “Tender Offer”) and, if any such shares are accepted for purchase pursuant to the terms of an Agreement and Plan of Merger, dated as of November 6, 2018 among Acquisition Sub, the Company, the sellers representative named therein and each other party thereto (together with exhibits, annexes and schedules thereto, in each case, as amended, supplemented waived, modified or consented to from time to time, the “Acquisition Agreement”) and the Tender Offer, purchasing such shares on or prior to the Closing Date prior to the Merger on the Closing Date; and

 

  (ii)

Acquisition Sub merging on the Closing Date pursuant to the Acquisition Agreement with and into the Company, with the Company surviving such merger as a direct or indirect wholly-owned subsidiary of Holdings (the “Merger”).

(b) The Sponsor and certain other equity investors (which may include members of the Company’s (and its affiliates) management and existing direct and indirect equity holders of the Company) arranged by or designated by the Sponsor (provided that the Sponsor will control the Initial Borrower on the Closing Date) (such equity investors together with the Sponsor, the “Investors”) will directly or indirectly contribute to Holdings or a direct or indirect parent of Holdings cash (with any such cash contributed or provided to a direct or indirect parent of Holdings to be subsequently contributed to Holdings) and/or retained or rollover equity in exchange for common equity (or qualified preferred equity or other equity or instruments, in either case, reasonably acceptable to the Lead Arrangers) of Holdings or a direct or indirect parent of Holdings, and the amount of such contributed cash, retained and/or rollover equity will not be less than 25.0% of the sum of (i) the aggregate gross proceeds of the loans borrowed on the Closing Date under the ABL Facility (excluding floorplan advances, letters of credit, amounts borrowed to cash collateralize letters of credit issued for the account of the Company or any of its subsidiaries or their respective businesses, amounts borrowed to fund any “OID,” upfront fees or similar amounts in connection with the Flex Provisions (as defined in the Term Fee Letter), amounts borrowed to fund working capital needs of the Company and its subsidiaries as of the Closing Date (including repayment of loans and existing floorplan advances, in each case under the Existing ABL

 

1 

Capitalized terms used but not defined in this Exhibit A have the meanings assigned to them in the Commitment Letter to which this Exhibit A is attached, including the other Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit A will be determined by reference to the context in which it is used.

 

A-1


Agreement) or to fund any working capital adjustment or purchase price adjustments under the Acquisition Agreement on the Closing Date), (ii) the aggregate gross proceeds of the loans borrowed on the Closing Date under the Initial First Lien Facility (as defined below) (excluding loans borrowed under the Initial First Lien Facility on the Closing Date to fund any “OID,” upfront fees or similar amounts in connection with the Flex Provisions (as defined in the Term Fee Letter)), (iii) the aggregate gross proceeds of the loans borrowed on the Closing Date under the Second Lien Facility (as defined below) (excluding loans borrowed under the Second Lien Facility on the Closing Date to fund any “OID,” upfront fees or similar amounts in connection with the Flex Provisions (as defined in the Term Fee Letter)) and (iv) the amount of such cash, retained and rollover equity contributed, in each case, on or prior to the Closing Date (collectively, the “Equity Contribution”).

(c) The Borrower will obtain $250.0 million (or such lower amount as Acquisition Sub may request, but not less than $200.0 million) in commitments under a senior secured revolving credit facility having the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit B to the Commitment Letter (the “ABL Facility”).

(d) The Borrower will obtain (i) $925.0 million (as such amount may be reduced as a result of the Initial Term Loan Reduction (if any) or, at the option of Acquisition Sub, be increased to fund any “OID,” upfront fees or similar amounts in respect of the Term Facilities in connection with the Flex Provisions (as defined in the Term Fee Letter)) (or such lower amount as Acquisition Sub may request) in aggregate principal amount of senior secured first lien term loans under the senior secured first lien term loan facility (the “Initial First Lien Facility”) and (ii) $75.0 million (as such amount may, at the option of the Acquisition Sub, be increased to fund any “OID,” upfront fees or similar amounts in connection with the Flex Provisions (as defined in the Term Fee Letter)) (or such lower amount as Acquisition Sub may request) in an aggregate principal amount of senior secured delayed draw term loans under the senior secured delayed draw term loan facility (the “Delayed Draw Term Loan Facility” and, together with the Initial First Lien Facility, the “First Lien Facilities”), in each case, having the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit C to the Commitment Letter.

(e) The Borrower will obtain $350.0 million (as such amount may be reduced as a result of the Second Lien Reduction (if any) or, at the option of Acquisition Sub, be increased to fund any “OID,” upfront fees or similar amounts in respect of the Second Lien Facility in connection with the Flex Provisions (as defined in the Term Fee Letter)) (or such lower amount as Acquisition Sub may request) in aggregate principal amount of senior secured second lien term loans under the senior secured second lien term loan facility (the “Second Lien Facility”, together with the First Lien Facilities, the “Term Facilities” and, together with the ABL Facility and the First Lien Facilities, the “Facilities”) having the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit D to the Commitment Letter.

(f) The proceeds of (i) the Equity Contribution, (ii) the initial borrowing under the (A) ABL Facility, (B) First Lien Facilities and (C) Second Lien Loan Facility and (iii) at the option of the Borrower, cash on hand at the Company and its subsidiaries on the Closing Date will be applied on the Closing Date (1) to pay the consideration in connection with the Acquisition (the “Acquisition Consideration”), (2) to finance the repayment, redemption, defeasance, discharge, refinancing or termination of the debt with respect to which Section 2.10 of the Acquisition Agreement requires repayment, redemption, defeasance, discharge, refinancing or termination in full on the Closing Date (collectively, the “Refinancing”), (3) to

 

A-2


cash collateralize or backstop letters of credit issued for the account of the Company or any of its subsidiaries or their respective businesses that will remain outstanding on the Closing Date (to the extent such letters of credit are not deemed issued under the ABL Facility on the Closing Date), (4) to pay for fees, costs and expenses related to the Transactions (such fees, costs and expenses, the “Transaction Costs”) and (5) as additional cash on the balance sheet of the Borrower and its Restricted Subsidiaries and for general corporate purposes.

The transactions described in clauses (a) through (e) above (including the payment of Transaction Costs) are collectively referred to herein as the “Transactions.” This Exhibit A, the term sheets attached to the Commitment Letter as Exhibits B, C and D, and the conditions set forth on Exhibit E are collectively referred to herein as the “Term Sheet.” The Term Sheets, each of which contains all material terms related to the Facilities, are the result of extensive negotiations among the parties hereto.

 

A-3


EXHIBIT B

Project Viking

ABL Facility

Summary of Principal Terms and Conditions1

 

Borrower:   

(i) Initially, Acquisition Sub (the “Initial Borrower”), all of the outstanding equity interests of which are owned by Holdings (as defined below) and (ii) immediately after giving effect to the Transactions, the Company (the “Borrower”).

 

The Borrower and each domestic Guarantor that owns assets included in the Borrowing Base (as defined below) will be a co-borrower under the ABL Facility. The Borrower and the Guarantors are collectively referred to as “Loan Parties.” As used herein, “Holdings” is a reference to the immediate parent company of the Borrower (after giving effect to the Transactions).

Transactions:    As set forth in Exhibit A to the Commitment Letter.
ABL Administrative Agent:    Wells Fargo Commercial Distribution Finance, LLC (or such other affiliate of, and designated by, Wells Fargo Bank, National Association) will act as sole and exclusive administrative agent and collateral agent for the ABL Facility (in such capacity, the “ABL Administrative Agent”) for a syndicate of banks, financial institutions and other entities reasonably acceptable to the Borrower and which syndicate will not include any Disqualified Institutions (together with the Initial Lenders, the “Lenders”).
Floorplan Facility Funding Agent:    Wells Fargo Commercial Distribution Finance, LLC (or such other affiliate of, and designated by, Wells Fargo Bank, National Association) will act as sole and exclusive floorplan facility funding agent for the ABL Facility (in such capacity, the “Floorplan Facility Funding Agent”).

 

1 

All capitalized terms used but not defined herein have the meanings assigned to them in the Commitment Letter to which this Exhibit B is attached, including the other Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit B will be determined by reference to the context in which it is used. In the event that any such capitalized term used in this Exhibit B is not defined in this Exhibit B or otherwise in the Commitment Letter, such term as used in this Exhibit B shall have meanings no less favorable than the meanings of such term or similar term in the ABL Sponsor Precedent or Bank Sponsor Precedent, as applicable, as modified by the Documentation Principles.

 

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Lead Arrangers and Bookrunners:    Wells Fargo Bank, National Association will act as lead arranger and a bookrunner for the ABL Facility (the “ABL Lead Arranger”) and will perform the duties customarily associated with such roles.
Syndication Agent and Documentation Agent:    The Borrower may designate additional financial institutions, reasonably acceptable to the Lead Arrangers, to act as syndication agent and documentation agent as provided in the Commitment Letter.
ABL Facility:   

A senior secured revolving facility (the “ABL Facility;” the commitments under the ABL Facility, the “Revolving Commitments”) in an aggregate principal amount of $250.0 million (the loans thereunder, together with (unless the context otherwise requires) the Swingline Loans referred to below, the “Revolving Loans”) on the terms and conditions set forth herein. The Revolving Loans will be available in U.S. dollars and such other currencies as the Borrower and the ABL Administrative Agent may agree.

 

Notwithstanding anything to the contrary herein, any obligation of the Floorplan Facility Funding Agent or the Lenders to fund any floorplan advances shall (other than on Closing Date) at the election of Floorplan Facility Funding Agent terminate upon notice to the Borrower in the event of the termination or modification of any vendor program or modification of any vendor program without the consent of Floorplan Facility Funding Agent.

Purpose:    Letters of Credit and proceeds of the Revolving Loans will be used (a) as described below under “Availability” on the Closing Date and (b) from and after the Closing Date, to finance the working capital needs of the Borrower and its subsidiaries and for general corporate purposes of the Borrower and its subsidiaries (including, without limitation, for capital expenditures, acquisitions, Restricted Payments, refinancing of indebtedness and any other transactions not prohibited by the ABL Facility Documentation).

 

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Documentation Principles:    The Facilities Documentation with respect to the ABL Facility (the “ABL Facility Documentation”) will be initially prepared by counsel to the Borrower and (a) with respect to customary asset based lending or floorplan financing facility provisions will be based upon and at least as favorable to the Borrower as the Credit Agreement dated as of June 20, 2017 (as amended on April 10, 2018 and as further amended to the date hereof) with respect to the existing asset based lending facility incurred by the Company (or its applicable subsidiaries) (the “Existing ABL Agreement” or the “ABL Sponsor Precedent”) or otherwise on terms as may be agreed between the Floorplan Facility Funding Agent and the Borrower and with respect to other provisions will be based upon, and at least as favorable to the Borrower as the First Lien Facility Documentation, (b) in the case of the First Lien Facilities Documentation, will take into account any additional flexibility beneficial to the Borrower provided for in other recent precedent of the Sponsor and, if reasonably acceptable to the ABL Lead Arranger, the Term Lead Arrangers and Borrower, in any recent precedent of first-tier private equity sponsors, (d) will include such modifications as are necessary to reflect the specific terms set forth in the Commitment Letter and the Fee Letters, as applicable, and to give due regard to the Sponsor Model, the operational and strategic requirements of the Borrower and its subsidiaries in light of their consolidated capital structure, size, geographic location, businesses and business practices, operations, financial accounting matters disclosed in the Acquisition Agreement and the proposed business plan, results of field examinations and the industry and practices of the Borrower and the Company and its subsidiaries, in each case, after giving effect to the Transactions, (e) will include appropriate modifications to reflect changes in law or accounting standards since the date of such precedents, and (f) will include appropriate modifications to reflect the operational and administrative requirements of the ABL Administrative Agent and letter of credit issuers (collectively, the “Documentation Principles”). The ABL Facility Documentation will contain only those payment provisions, conditions to borrowing, mandatory prepayments, representations and warranties, guarantee and collateral provisions, covenants and Events of Default (as defined below) expressly set forth in this Exhibit B, in each case, applicable to the Borrower and its Restricted Subsidiaries (and, where expressly provided in this Exhibit B, to Holdings) and with standards, qualifications, thresholds, exceptions, “baskets” and grace and cure periods consistent with the provisions of this

 

B-3


  

paragraph. Other than set forth herein, the financial definitions and financial ratio definitions in the ABL Facilities Documentation shall be based on, with respect to customary asset based lending facility financial definitions and financial ratio definitions not otherwise defined in the First Lien Facilities Documentation, the equivalent definitions of such terms in the ABL Sponsor Precedent, and with respect to other financial definitions and financial ratio definitions, the equivalent definitions in the First Lien Facilities Documentation, in each case, after giving effect to Documentation Principles. All leverage and ratio calculations shall exclude in any calculation floorplan facility advances or non-interest bearing obligations or other non-interest inventory financing facility advances or non-interest bearing obligations), but shall include all Revolving Loans under the ABL Facility. In addition all monetary baskets or thresholds (regardless of whether any such exception, threshold or “basket” specified herein refers to a builder component) will include grower builders based on, at the option of the Borrower as determined prior to the launch of general syndication of the First Lien Facilities, a percentage of Consolidated EBITDA (as defined below) of the Borrower and its Restricted Subsidiaries, set at a level at least equal to the initial monetary amount of each such basket or threshold (which level shall be rounded up to the nearest 1.0% interval). It is understood and agreed that to the extent any representations and warranty relating to the Company and/or any of its subsidiaries is made on, or as of, the Closing Date (or prior thereto) and is qualified by or subject to “Material Adverse Effect”, the definition thereof will be “Material Adverse Effect” as defined in the Acquisition Agreement as it applies to such representation and warranty.

 

The “Sponsor Model” means the Sponsor’s model previously provided to the ABL Lead Arranger on October 15, 2018.

 

Consolidated EBITDA” shall be defined in a manner consistent with the Documentation Principles and shall include, without limitation and duplication, the following addbacks (which in certain agreed instances may be added as adjustments to consolidated net income instead of Consolidated EBITDA):

 

a)  pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic and cost

 

B-4


  

saving initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings and other initiatives and actions, in each case, related to the Transactions and reasonably expected by the Borrower and its Restricted Subsidiaries to be realized based upon actions that have been taken, or are expected to be taken (limited solely in the case of any calculation of Fixed Charge Coverage Ratio to those expected to be taken within 24 months), as of the date of such calculation, which cost savings, operating expense reductions, restructuring charges and synergies are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a financial officer of the Borrower or Holdings;

 

b)  pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic initiatives and cost saving initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings, and other initiatives and actions, in each case, reasonably expected by the Borrower and its Restricted Subsidiaries to be realized based upon actions that have been taken, or are expected to be taken (limited solely in the case of any calculation of Fixed Charge Coverage Ratio to those expected to be taken within 24 months), as of the date of such calculation, which cost savings, operating expense reductions, restructuring charges and synergies are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a financial officer of the Borrower or Holdings;

 

c)  any loss, charge, expense, cost, accrual or reserve of any kind (a) attributable to the planning, undertaking and/or implementation of cost savings or strategic initiatives, business optimization, cost rationalization programs, operating expense reductions and/or other initiatives, actions or synergies (including, without limitation, in connection with any integration, restructuring or transition), (b)

 

B-5


  

relating to the closure or consolidation of any facility and/or discontinued operations (including but not limited to severance, rent termination costs, moving costs and legal costs), any systems implementation, any expansion and /or relocation or any entry into a new market, or (c) relating to any severance, any signing, retention or completion bonus, or any modification to any pension and post-retirement employee benefit plan; and

 

d)  adjustments and add-backs (which add-backs and adjustments shall not, for the avoidance of doubt, be limited to the time periods in respect of which such add-backs and adjustments were reflected therein) reflected in the Sponsor Model.

 

Notwithstanding the above, Consolidated EBITDA for each of the four fiscal quarters most recently ended prior to the date hereof shall be deemed to be, in each case, $49.0 million, subject to pro forma adjustments for transactions occurring after the Closing Date (or, if not disclosed prior to the date hereof, transactions occurring after the date hereof and on or prior to the Closing Date (other than the Transactions)).

Availability:    Loans under the ABL Facility will be made available on the Closing Date in the amount of (a) $25.0 million plus (b) such amount required for working capital related purposes and for any working capital or purchase price adjustments (including repayment of loans or floorplan advances under the Existing ABL Agreement) plus (c) such amounts necessary to cash collateralize letters of credit issued for the account of the Company or any of its subsidiaries or their respective businesses to the extent not backstopped with a Letter of Credit issued under the ABL Facility plus (d) such amounts necessary to fund “OID”, upfront fees or similar amounts in respect of the Facilities in connection with the Flex Provisions (as defined in the Term Fee Letter) plus (e) such amounts necessary to fund currency fluctuations between the date hereof and the Closing Date, provided, that, the aggregate of all amounts under clauses (a) through (e) shall in no event be more than $95.0 million (or $105.0 million if the Specified Acquisition is consummated on or prior to the Closing Date) (the amounts in clauses (a) through (e), the Closing Date ABL

 

B-6


  

Borrowing”). In addition, Letters of Credit may be issued on the Closing Date to backstop or replace letters of credit outstanding on the Closing Date (including by “grandfathering” such existing letters of credit into the ABL Facility) to the extent not cash collateralized as provided above under clause (c), and, up to an amount to be agreed, for other general corporate purposes.

 

The ABL Facility will be available, as set forth below under the heading “Borrowing Base” on a revolving basis until the date that is five years after the Closing Date (the “Revolving Termination Date”). The Revolving Commitments and the Revolving Loans will mature on the Revolving Termination Date; provided that the ABL Facility Documentation will permit individual Lenders to agree to extend the maturity date of their Revolving Commitments upon the request of the Borrower and without the consent of any other Lender (subject to terms and conditions no more restrictive than those set forth in the ABL Sponsor Precedent, including pro rata extension offers open to all Lenders but in any event not to be subject to “most favored nation” pricing or minimum extension condition).

Borrowing Base:    If the initial field examination and initial inventory appraisal are not completed prior to the Closing Date, the Borrowing Base for purposes of drawings and Letters of Credit under the ABL Facility on the Closing Date (the “Closing Borrowing Base”) will be equal to the greater of (x) $95.0 million (or $105.0 million if the Specified Acquisition is consummated prior to the Closing Date) and (y) 100% of the “Borrowing Base” as determined under the Existing ABL Agreement and reflected in the most recently delivered “Borrowing Base Certificate” delivered under the Existing ABL Agreement as of the Closing Date; provided, that, clause (y) of the Closing Borrowing Base shall not apply unless, after giving effect to the Revolving Loan to be made on the Closing Date, Excess Availability (calculated based on clause (y) above and excluding for this purpose Qualified Cash) would be at least 25% of the Borrowing Base calculated based on clause (y) above. Thereafter, the Borrowing Base will be calculated in accordance with the Existing ABL Agreement and in any event not less than $95.0 million (or $105.0 million if the Specified Acquisition is consummated prior to the Closing Date) until the earlier of (i) the 45th day after the Closing Date and (ii) receipt by the ABL Administrative Agent of an initial field examination and inventory appraisal, in

 

B-7


  

each case, consistent with the Documentation Principles and is no less favorable to the Borrower than the “Borrowing Base” as determined under the Existing ABL Agreement. At all other times, availability under the ABL Facility, including the issuance or renewal of Letters of Credit and Swingline Loans, will be subject to a borrowing base formula (the “Borrowing Base”), equal to the sum of:

(i)90% of the Borrower’s Eligible Accounts at such time (net of Accounts Reserves); plus

 

(ii)subject to a cap of 30% of the Borrowing Base, 70% of the Borrower’s Eligible Unbilled Accounts (net of Unbilled Accounts Reserves); plus

 

(iii) 100% of Floorplan Financed Inventory that is Eligible Inventory; plus

 

(iv) 90% of Eligible Cisco VIP Rebates; plus

 

(v) (i) upon the Closing Date, subject to a cap to be agreed (but not less than 10% of the Borrowing Base), 45% of Eligible Inventory (net of Inventory Reserves) that is not Floorplan Financed Inventory and (ii) after the Closing Date, (x) subject to a cap to be agreed (but not less than 10% of the Borrowing Base), 45% of Eligible Inventory (net of Inventory Reserves) that is not Floorplan Financed Inventory, or (y) subject to a cap of 10% to be agreed (but not less than the Borrowing Base), at the Borrower’s option, which, once made, shall be irrevocable, the lesser of (i) 75% of Borrower’s Eligible Inventory (net of Inventory Reserves) that is not Floorplan Financed Inventory (valued at the lower of cost or market) and (ii) the product of 90% multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal ordered by the ABL Administrative Agent multiplied by the Borrower’s Eligible Inventory (net of Inventory Reserves) that is not Floorplan Financed Inventory (valued at cost); plus

 

(vii) Reserves (other than Accounts Reserves, Inventory Reserves and Unbilled Accounts Reserves) established by the collateral agent in its Reasonable Credit Judgement.

 

B-8


  

Eligible Accounts”, “Eligible Unbilled Accounts”, “Unbilled Accounts Reserves”, “Floorplan Financed Inventory”, “Eligible Inventory”, “Eligible Cisco VIP Rebates”, “Net Orderly Liquidation Value”, “Inventory Reserves” and “Reserves” will be defined in a manner consistent with the Documentation Principles.

 

The establishment or increase of any reserve will be limited to the exercise by the ABL Administrative Agent of Reasonable Credit Judgment, upon at least three (3) business days’ prior written notice to the Borrower (which notice will include a reasonably detailed description of the reserve being established). During such three (3) business day period, the ABL Administrative Agent will, if requested, discuss any such reserve or change with the Borrower, and the Borrower may take such action as may be required so that the event, condition or matter that is the basis for such reserve or change no longer exists or exists in a manner that would result in the establishment of a lower reserve or result in a lesser change, in each case, in a manner and to the extent reasonably satisfactory to the ABL Administrative Agent. Notwithstanding anything to the contrary herein, (a) the amount of any such reserve or a change in such reserves will have a reasonable relationship to the event, condition or other matter that is the basis for such reserve or such change and (b) no reserves or changes will be duplicative of reserves or changes already accounted for through eligibility criteria (including collection/advance rates).

 

Reasonable Credit Judgment” means the ABL Administrative Agent’s reasonable credit judgment (from the perspective of a secured asset-based lender) made in good faith in accordance with customary business practices for comparable asset based lending transactions, and as it relates to the establishment or adjustment of reserves or establishment or adjustment of any ineligibility shall require that (a) such establishment, adjustment or modification of any ineligibility or reserves be based on the analysis of facts or events first occurring or first discovered by the ABL Administrative Agent after the Closing Date that are materially different from the facts or events occurring or known to the ABL Administrative Agent on the Closing Date, unless the Borrower and the ABL Administrative Agent agree in writing, (b) the contributing factors to such establishment, adjustment or modification shall not duplicate (i) any other exclusionary criteria set forth in the definitions

 

B-9


  

of Eligible Accounts, Eligible Inventory and other “eligible” definitions as applicable (and vice versa), (ii) any reserves deducted in computing book value, (iii) any criteria or considerations taken into account in determining the Net Orderly Liquidation Value of inventory or (iv) any items taken into consideration in any appraisal, and (c) the amount of any such reserve or ineligibility criteria so established or the effect of any adjustment or modification thereto shall be a reasonable quantification (as reasonably determined by the ABL Administrative Agent) of the incremental dilution of the Borrowing Base attributable to such contributing factors.

 

Qualified Cash” means the amount of unrestricted cash and cash equivalents of the Borrower and the domestic Guarantors at such time to the extent held in investment accounts, deposit accounts and other similar accounts, which from and after the 91st day after the Closing Date (or such later date as reasonably agreed by the ABL Administrative Agent) shall be held either (1) with the ABL Administrative Agent or (2) with another depositary, subject to a control agreement in favor of the ABL Administrative Agent and subject to the cash management/cash dominion provisions set forth below.

Incremental Facilities:    The ABL Facility Documentation will permit the Borrower from time to time, on one or more occasions, to increase Revolving Commitments by up to $150.0 million in the aggregate (the “ABL Incremental Facility Capacity”); provided that (a) no existing Lender will be required to increase its respective Revolving Commitments without its consent, (b) subject to the Limited Condition Provision, no Default (to be defined in a manner consistent with the Documentation Principles) or Event of Default under the ABL Facility shall exist immediately prior to giving effect thereto, (c) any incremental facility resulting from such increase will be on terms identical to (and shall form part of) the ABL Facility, except with respect to any arrangement, upfront or similar fees that may be agreed to among the Borrower and the lenders providing such facility, (d) subject to the Limited Condition Provision, all representations and warranties will be true and correct in all material respects immediately prior to, and immediately after giving effect to such increase in Revolving Commitments (except for representations and warranties that are already qualified by materiality, which representations and warranties will be accurate in all respects), and (e) there shall be no more than two (2) such increases.

 

B-10


   The Borrower may seek additional Revolving Commitments from existing Lenders (each of which will be entitled to agree or decline to participate in its sole discretion) and additional banks, financial institutions and other institutional lenders or investors who will become Lenders in connection therewith; provided that the consent of the ABL Administrative Agent and (with respect to providers of additional commitments) the Swing Lender and the Issuing Lender (not to be unreasonably withheld, delayed or conditioned) will be required with respect to any such additional lender if such consent would be required under the caption “Assignments and Participations” for an assignment to such additional lender.
Limited Condition Provision:    In the case of the incurrence of any indebtedness or liens or the making of any investments, restricted payments, prepayments of junior, unsecured or subordinated debt, asset sales or fundamental changes or the designation of any restricted subsidiaries or unrestricted subsidiaries, in each case, in connection with any Limited Condition Transaction, each at the Borrower’s option, any relevant ratios, Excess Availability, Payment Conditions and baskets shall be determined, the accuracy of representations and warranties in all material respects (other than the Specified Representations or, at the option of the Borrower, European “certain funds” representations) shall be determined, or any default or event of default blocker shall be tested, as of the date the definitive acquisition agreement for such acquisition or other investment is entered into (or prior to the effectiveness of any documentation or agreement with a substantially similar effect as a binding acquisition agreement), in each case after giving effect to the relevant transaction, any related debt (including the intended use of proceeds thereof) and all other permitted pro forma adjustments on a pro forma basis; provided, that if the Borrower has made such an election, in connection with the calculation of any ratio or basket on or following the such date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the definitive agreement for such Limited Condition Transaction is terminated or expires or such irrevocable notice is rescinded, as applicable, any such ratio or basket shall be calculated on a pro forma basis assuming such Limited Condition Transaction and other pro

 

B-11


  

forma events in connection therewith (including any incurrence of indebtedness) have been consummated. The provisions of this paragraph are referred to herein as the “Limited Condition Provision”.

 

As used herein, “Limited Condition Transaction” means any acquisition or other investment by the Borrower or one or more of its restricted subsidiaries permitted pursuant to the ABL Facility Documentation whose consummation is not conditioned on the availability of, or on obtaining, third party financing.

Interest Rate and Fees:    As set forth in Annex I to this Exhibit B.
Default Rate:   

Upon the occurrence and during the continuance of a Specified Event of Default (as defined below), all overdue principal amounts will bear interest at the applicable interest rate plus 2.0% per annum, and overdue interest and fees shall bear interest at the interest rate applicable to ABR loans (as defined in Annex I to this Exhibit B) plus 2.0% and in each case, shall be payable on demand and shall begin to accrue from the date of such Specified Event of Default.

 

Specified Event of Default” means (a) any payment Event of Default (with respect to any principal, interest or fees only) and (b) any bankruptcy Event of Default.

Final Maturity and Amortization:    The ABL Facility will mature on the date that is five years after the Closing Date. No amortization or mandatory commitment reduction will be required with respect to the ABL Facility.
Floorplan Facility:    The ABL Facility will be available for floorplan advances by the Floorplan Facility Funding Agent and/or the Lenders to approved vendors in respect of inventory to be acquired by the Borrower or any of its Restricted Subsidiaries from such venders pursuant to a floorplan facility substantially similar to the Floorplan Facility under, and as defined in, the Existing ABL Agreement. Any floorplan advances and other obligations under the Existing ABL Agreement will be grandfathered into the Floorplan Facility in the ABL Facility Documentation.

 

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Letters of Credit:   

A portion of the ABL Facility not in excess of an amount to be agreed (but, in any event, not less than $50.0 million) will be available for the issuance of letters of credit (“Letters of Credit”) by the ABL Administrative Agent, sharing ratably in such Letters of Credit commitment (in such capacity, the “Issuing Lender”). No Letter of Credit will have an expiration date after the earlier of (a) one year after the date of issuance unless consented to by the Issuing Lender and (b) five business days prior to the Revolving Termination Date; provided that any Letter of Credit with a one-year tenor may provide for the renewal thereof for additional one-year periods (which will in no event extend beyond the date referred to in clause (b) above unless other provisions or arrangements reasonably satisfactory to the Issuing Lender thereof shall have been made). The face amount of any outstanding Letter of Credit (and, without duplication, any unpaid drawing in respect thereof) will reduce availability under the ABL Facility on a dollar-for-dollar basis.

 

Drawings under any Letter of Credit will be reimbursed by the Borrower (whether with its own funds or with the proceeds of Revolving Loans) in a manner to be agreed after notice of such drawing is received by the Borrower from the Issuing Lender with relevant cut off times to be agreed. To the extent that the Borrower does not so reimburse the Issuing Lender, or if requested by the Borrower in accordance with the terms of the ABL Facility Documentation, the Lenders under the ABL Facility will be irrevocably and unconditionally obligated to fund participations in the reimbursement obligations on a pro rata basis in accordance with their commitments under the ABL Facility.

 

If any Lender under the ABL Facility becomes a Defaulting Lender, then the Letter of Credit exposure of such Defaulting Lender will automatically be reallocated among the non-Defaulting Lenders pro rata in accordance with their commitments under the ABL Facility up to an amount such that the revolving credit exposure of each such non-Defaulting Lender does not exceed its commitment. In the event that such reallocation does not fully cover the Letter of Credit exposure of the applicable Defaulting Lender, the applicable Issuing Lender may require the Borrower to cash collateralize such “uncovered” exposure in respect of each outstanding Letter of Credit and will have no obligation to issue new Letters of Credit, or to extend, renew or amend existing Letters of Credit to the extent Letter of

 

B-13


  

Credit exposure would exceed the commitments of the non-Defaulting Lenders, unless such “uncovered” exposure is cash collateralized to the Issuing Lender’s reasonable satisfaction.

 

Defaulting Lender” means any Lender whose acts or failure to act, whether directly or indirectly, constitutes a “Lender Default.”

 

Lender Default” means (a) the refusal (which may be given verbally or in writing and has not been retracted) or failure of any Lender to make available its portion of any incurrence of Revolving Loans or reimbursement obligations, which refusal or failure is not cured within two business days after the date of such refusal or failure, unless such Lender notifies the ABL Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, (b) the failure of any Lender to pay over to the ABL Administrative Agent, the Issuing Lender or any other Lender any other amount required to be paid by it hereunder within two business days of the date when due, (c) any Lender has notified the Borrower or the ABL Administrative Agent that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations under the ABL Facility or under other similar agreements in which it commits to extend credit, (d) the failure of any Lender within three business days after request by the ABL Administrative Agent, to confirm that it will comply with its funding obligations under the ABL Facility (provided that such Lender will cease to be a Defaulting Lender pursuant to this clause (d) upon receipt of such written confirmation by the ABL Administrative Agent and the Borrower), (e) any Lender or a direct or indirect parent company of such Lender becoming subject to a Bail-in Action (the definition of which is to be substantially consistent with, and in any event no less favorable to the Borrower than, the current LSTA model credit agreement provisions) or (f) the admission in writing by any Lender that it is insolvent or such Lender becoming subject to a Lender-Related Distress Event (as defined below).

 

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   A “Lender-Related Distress Event” means, with respect to any Lender or any person that directly or indirectly controls a Lender (each, a “Distressed Person”), as the case may be, a voluntary or involuntary case with respect to such Distressed Person under any debt relief law, or a custodian, conservator, receiver or similar official is appointed for such Distressed Person or any substantial part of such Distressed Person’s assets, or such Distressed Person or any person that directly or indirectly controls such Distressed Person is subject to a forced liquidation, or such Distressed Person makes a general assignment for the benefit of creditors or is otherwise adjudicated as, or determined by any governmental authority having regulatory authority over such Distressed Person or its assets to be, insolvent or bankrupt; provided that a Lender-Related Distress Event shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any equity interests in any Lender or any person that directly or indirectly controls such Lender by a governmental authority or an instrumentality thereof.
Swingline Loans:   

A portion of the ABL Facility not in excess of the lesser of $25.0 million or 10% of the Revolving Commitments will be available for swingline loans (the “Swingline Loans”) on same-day notice from the ABL Administrative Agent (in such capacity, the “Swingline Lender”). Any Swingline Loans will reduce availability under the ABL Facility on a dollar-for-dollar basis (other than for purposes of calculating the Commitment Fee). Each Lender under the ABL Facility will be irrevocably and unconditionally required to purchase, under certain circumstances, a participation in each Swingline Loan on a pro rata basis.

 

If any Lender under the ABL Facility becomes a Defaulting Lender, then the swingline exposure of such Defaulting Lender will automatically be reallocated among the non-Defaulting Lenders pro rata in accordance with their commitments under the ABL Facility up to an amount such that the revolving credit exposure of each non-Defaulting Lender does not exceed its respective Revolving Commitment. In the event such reallocation does not fully cover the exposure of such Defaulting Lender, the Borrower will repay such “uncovered” exposure in respect of the Swingline Loans and the Swingline Lender will have no obligation to make new Swingline Loans to the extent such Swingline Loans would exceed the commitments of the non-Defaulting Lenders.

 

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Guarantees:    Subject to the Certain Funds Provisions, all obligations of the Borrower under the ABL Facility and, to the extent not secured under the First Lien Facilities or the Second Lien Facility and designated by the Borrower, any interest rate protection or other swap or hedging agreements (other than any obligation of any Guarantor to pay or perform under any agreement, contract, or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act (a “Swap”), if, and to the extent that, all or a portion of the guarantee by such Guarantor of, or the grant by such Loan Party of a security interest to secure, such Swap (or any guarantee thereof) is or becomes illegal or unlawful under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof)) or cash management arrangements, in case of cash management arrangements, in each case, among Loan Parties or any of their respective subsidiaries and any other person (“Hedging/Cash Management Arrangements”) will be unconditionally guaranteed jointly and severally on a senior secured basis (subject, in each case, to permitted liens to be mutually agreed) (the “Guarantees”) by Holdings, each existing and subsequently acquired, including by division, or organized direct or indirect wholly owned domestic Restricted Subsidiary of the Borrower (collectively, the “Guarantors”) and (at the election of the Borrower, in its sole discretion) any other Restricted Subsidiary of the Borrower; provided that (1) in the case of any Restricted Subsidiary that is a foreign subsidiary not organized in an Approved Guarantor Jurisdiction (to be defined), such foreign subsidiary jurisdiction shall be acceptable to the ABL Administrative Agent and (2) that the Guarantors will not include (unless otherwise agreed by the Borrower) (a) any Immaterial Subsidiary (as defined below) other than, at the option of the Borrower, any Immaterial Subsidiary of the Borrower that is designated as a Guarantor, (b) any subsidiary that is prohibited or restricted, but only so long as such subsidiary is prohibited or restricted, by applicable law, rule or regulation or by any contractual obligation existing on (but not incurred in anticipation of) the Closing Date or on the date such subsidiary is acquired, including by division, or organized (as long as, in the case of an acquisition of a subsidiary, such prohibition did not arise as part of or in anticipation of such acquisition) from guaranteeing the ABL Facilities or that would require

 

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governmental or regulatory consent, approval, license or authorization to provide a Guarantee unless such consent, approval, license or authorization has been received, (c) (i) any controlled foreign corporation within the meaning of Section 957 of the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated thereunder (a “CFC”) and any foreign subsidiary, (ii) any direct or indirect subsidiary of a direct or indirect foreign subsidiary of the Borrower, (iii) any domestic subsidiary if substantially all of its assets consist of equity (or equity and indebtedness) of one or more CFCs and (iv) any subsidiary that is treated as a disregarded entity or partnership for U.S. federal income tax purposes the assets of which consist of equity (or equity and indebtedness) of one or more CFCs (each entity described in this clause (c), an “Excluded Tax Subsidiary”), (d) special purpose entities, if any, in connection with permitted securitization facilities, (e) not-for-profit subsidiaries, if any, (f) captive insurance companies, if any, (g) any subsidiary for which the provision of a Guarantee would result in material adverse tax consequences as reasonably determined by the Borrower in consultation with the ABL Administrative Agent, (h) any acquired Restricted Subsidiary, the purchase of which is financed with indebtedness permitted to be incurred pursuant to the ABL Facility Documentation as assumed indebtedness and any Restricted Subsidiary thereof that guarantees such indebtedness, in each case to the extent such indebtedness prohibits or therein prevents such Restricted Subsidiary from becoming a Guarantor and such prohibition or prevention was not entered into in contemplation of such acquisition or (i) other exceptions consistent with the Documentation Principles or as may otherwise be agreed.

 

Notwithstanding the foregoing, Restricted Subsidiaries may be excluded from the guarantee requirements in circumstances where the Borrower reasonably determines in consultation with the ABL Administrative Agent that any of the cost, difficulty, burden or consequences of providing such a Guarantee is excessive in relation to the value afforded thereby.

 

Immaterial Subsidiary” means any wholly-owned Restricted Subsidiary that (i) did not, as of the last day of the fiscal quarter of the Company most recently ended for which financial statements are available, have an EBITDA (calculated on the same basis as Consolidated

 

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   EBITDA but on an unconsolidated basis) with a value in excess of 5.0% of the Consolidated EBITDA of the Borrower and its Restricted Subsidiaries as of such date, and (ii) taken together with all Immaterial Subsidiaries designated pursuant to the preceding clause (i), as of the last day of the fiscal year of the Company most recently ended for which financial statements are available, did not have EBITDA (calculated on the same basis as Consolidated EBITDA) in excess of 10% of Consolidated EBITDA of the Company and its Restricted Subsidiaries (for purposes of this definition, Consolidated EBITDA of the Borrower shall disregard (x) the EBITDA of any material subsidiary generating negative and (y) the EBITDA of any Excluded Subsidiary).
Security:   

Subject to the limitations set forth below and subject to the Certain Funds Provisions, all obligations of the Borrower and the Guarantors in respect of the ABL Facility and all obligations with respect to the Hedging/Cash Management Arrangements will be secured by a first priority security interest (subject to permitted liens) on accounts receivable, inventory, rights to any price protection payments, rebates, discounts, credits, factory holdbacks, incentive payments and other amounts due from a floorplan approved vendor, deposit accounts, securities accounts, commodities accounts, and cash and cash equivalents, general intangibles (other than intellectual property and equity interests), and related chattel paper, instruments, documents, commercial tort claims, letter of credit rights, supporting obligations and certain other assets related to the foregoing and other assets included in “ABL Priority Collateral” consistent with the Documentation Principles that are owned by the Borrower or the Guarantors, but not including capital stock of the Borrower and its subsidiaries (other than Excluded Assets (as defined below)) (“Current Asset Collateral”).

 

The First Lien Facilities will be secured by a second priority security interest and the Second Lien Facility will be secured by a third priority security interest (in each case subject to permitted liens) in each case in the Current Asset Collateral.

 

Subject to the limitations set forth below and subject to the Certain Funds Provisions, all obligations of the Borrower and the Guarantors in respect of the ABL Facility and all obligations with respect to the Hedging/Cash Management Arrangements will be secured

 

B-18


  

by a third priority security interest (subject to permitted liens, including a first priority security interest securing the First Lien Facilities) in substantially all assets of the Loan Parties other than the Current Asset Collateral (including, without limitation, a pledge of 100% of the capital stock of the Borrower and a pledge of the capital stock of each Loan Party’s direct wholly-owned restricted subsidiaries, but limited, in the case of voting capital stock of any Excluded Tax Subsidiary, to a pledge of 65% of the voting capital stock of any first tier Excluded Tax Subsidiary (other than Immaterial Subsidiaries) (other than Excluded Assets (as defined below)) (the “Fixed Asset Collateral” and, collectively with the Current Asset Collateral, the “Collateral”).

 

The First Lien Facilities will have a first priority security interest (subject to permitted liens) in the Fixed Asset Collateral.

 

Notwithstanding anything to the contrary, the Collateral will exclude the following: (a) all leasehold real property interests, (b) all fee-owned real property interests (i) not subject to a mortgage on the date hereof under the existing first lien credit agreement, (ii) which the Borrower acting in good faith has determined that it intends to dispose of pursuant to a sale and leaseback transaction within 24 months of such determination, (iii) located outside the United States or (iv) with a fair market value, on a per property basis (as determined by the Borrower in good faith) determined on the Closing Date or, if acquired after the Closing Date, at the time of acquisition thereof of less than $10.0 million, (c) interests in non-wholly owned partnerships, non-wholly owned joint ventures and non-wholly owned subsidiaries which cannot be pledged without the consent of one or more unaffiliated third parties or not permitted by the terms of such person’s organizational or joint venture documents (so long as such prohibition did not arise as part of the acquisition or formation thereof or in anticipation of the Facilities) after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable law, (d) the capital stock of Immaterial Subsidiaries (except to the extent the security interest therein can be perfected by the filing of a Form UCC-1 financing statement), captive insurance subsidiaries, not-for-profit subsidiaries, special purpose entities used for securitization facilities and Unrestricted

 

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Subsidiaries, (e) margin stock, (f) security interests to the extent the same would result in materially adverse tax, accounting or regulatory consequences, in each case, as reasonably determined by the Borrower in consultation with the ABL Administrative Agent, (g) any property and assets the pledge of which would require governmental consent, approval, license or authorization which has not been obtained, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable law, (h) any governmental licenses or state or local franchises, charters and authorizations which are not permitted to be pledged under applicable law, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable law, (i) any “intent-to-use” trademark applications or “intent-to-use” service mark applications, to the extent that the grant of a security interest therein would impair the validity or enforceability of, or render void or voidable or result in the cancellation of the applicable grantor’s right, title or interest therein or any trademark or service mark issued as a result of such application under applicable federal law and any other intellectual property in any jurisdiction where such pledge or security interest would cause the invalidation or abandonment of such intellectual property under applicable law, (j) Trust Funds (as defined below) and any accounts or trusts used solely to hold such Trust Funds, (k) any assets owned by a Restricted Subsidiary that is not a Loan Party, (l) any asset of a subsidiary acquired by Holdings or any Restricted Subsidiary that, at the time of the relevant acquisition, is encumbered to secure assumed indebtedness permitted by the Facilities Documentation to the extent (and for so long as) the documentation governing the applicable assumed indebtedness prohibits such asset from being pledged to secure the Facilities and the relevant prohibition was not implemented in contemplation of the applicable acquisition and (m) other exceptions consistent with the Documentation Principles or as may be otherwise agreed (collectively, the “Excluded Assets”).

 

Notwithstanding anything to the contrary contained herein, (a) neither the Borrower nor the Guarantors will be required to grant a security interest in any asset or perfect a security interest in any Collateral to the extent (i) the cost, burden, difficulty or consequence of obtaining or perfecting a security interest therein outweighs the benefit of the security afforded thereby as reasonably determined by the Borrower in its reasonable judgment in

 

B-20


   consultation with the ABL Administrative Agent or (ii) the granting of a security interest in such asset would be prohibited by enforceable anti-assignment provisions of contracts or applicable law or, in the case of assets consisting of licenses, agreements or similar contracts, to the extent the grant of security therein would violate the terms of such license, agreement or similar contract relating to such asset or would trigger termination of any contract pursuant to any “change of control” or similar provision, in each case, after giving effect to any applicable provisions of the Uniform Commercial Code or other applicable law, (b) (i) with respect to any Loan Party, organized in the United States (including its equity interests and assets (other than equity interests of a Loan Party that is a Foreign Subsidiary)) no actions will be required outside of the United States in order to create or perfect any security interest in any assets and no foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches will be required, and (ii) with respect to a foreign subsidiary that is a Guarantor (including its equity interests and assets), security to be provided including foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches will be reasonably agreed by the Borrower and the ABL Administrative Agent, (c) any required mortgages will be permitted to be delivered after the Closing Date in accordance with the Certain Funds Provisions, (d) the Loan Parties will not be required to seek or obtain any landlord lien waiver, estoppel, warehouseman waiver or other collateral access or similar letter or agreement (any such agreement, a “Lien Waiver Agreement”); provided that the Loan Parties will use commercially reasonable efforts to obtain the same for those locations where inventory exceeds an amount to be agreed (a “Material Location”); provided, further, that the failure to obtain the same will not cause a Default or Event of Default or result in any inventory becoming ineligible, except that the ABL Administrative Agent shall be permitted in the exercise of its Reasonable Credit Judgment to implement reserves in respect thereof and (e) any liens on the following Collateral will not be required to be perfected other than by filing of a UCC financing statement in the jurisdiction of organization of the Loan Party owning such Collateral: (i) assets requiring perfection through control agreements or other control arrangements (other than control of pledged capital stock and material promissory

 

B-21


  

notes to the extent otherwise required above and other than as described below under “Cash Dominion” (it being understood and agreed that perfection by control will not be required with respect to cash and cash equivalents, other deposit accounts and securities and commodities accounts (including securities entitlements and related assets) in amounts below thresholds to be agreed between the Borrower and the ABL Administrative Agent)); (ii) vehicles and any other assets subject to certificates of title; (iii) commercial tort claims; and (iv) letter of credit rights to the extent not perfected as supporting obligations by the filing of a UCC financing statement on the primary collateral.

 

Liens on assets that are transferred to a Person that is not (and is not required to be) a Loan Party in a transaction permitted by the ABL Facility Documentation and liens on Excluded Assets shall be automatically released. Subject to a receipt of an officer’s certificate of the Borrower, the ABL Administrative Agent shall execute such acknowledgments and releases as the Borrower may request in connection with any such release, and the ABL Administrative Agent shall be entitled to (and shall) rely exclusively on an officer’s certificate of the Borrower when executing any such acknowledgment or release.

 

In addition, if not otherwise provided for in the then existing intercreditor agreements, the ABL Facility Documentation will authorize and require the ABL Administrative Agent to enter into any Acceptable Intercreditor Agreement (as defined in Exhibit C) upon the request of the Borrower in connection with the incurrence of additional debt that is permitted to be incurred and secured under the ABL Facility Documentation such that it is secured by a lien on the Collateral that is pari passu or junior with the lien on the Collateral securing the ABL Facility or the First Lien Facilities.

 

Trust Funds” means, to the extent segregated from other assets of the Loan Parties in a segregated account that contains amounts comprised solely and exclusively of such Trust Funds, cash, cash equivalents or other assets comprised solely of (a) funds used for payroll and payroll taxes and other employee benefit payments to or for the benefit of such Loan Party’s employees, (b) all taxes required to be collected, remitted or withheld (including, without limitation, federal and state withholding taxes (including the employer’s share

 

B-22


   thereof)) and (c) any other funds which the Borrower or any of its Restricted Subsidiaries holds in trust or as an escrow or fiduciary for another person, which is not a Restricted Subsidiary of the Borrower.
Intercreditor Agreement:    The relative rights and priorities in the Collateral for each of the First Lien, the Second Lien Facility and the ABL Facility will be set forth in a customary intercreditor agreement, consistent with the Documentation Principles (the “ABL/Term Loan Intercreditor Agreement”).
Mandatory Prepayments:   

Limited to when (a) the sum of (i) the then aggregate principal amounts of Revolving Loans outstanding under the ABL Facility (including Swingline Loans and floorplan advances, if applicable), (ii) unreimbursed drawings of Letters of Credit and (iii) the undrawn face amount of outstanding Letters of Credit, exceeds (b) the Line Cap (as defined below). Such excess will be prepaid and/or Letters of Credit cash collateralized, as applicable, on the business day on which such excess first arises.

 

In addition, during any Cash Dominion Period, at the direction of the Required Lenders, the Borrower will prepay Revolving Loans (with no reduction in commitments) or cash collateralize Letters of Credit with 100% of all net cash proceeds from sales of Collateral included in the Borrowing Base.

 

Any amounts prepaid pursuant to this section will be applied first, to ABR loans, second, to Adjusted LIBOR loans, and third, to the cash collateralization of Letters of Credit at 103% of the face amount of such Letters of Credit.

Voluntary Prepayments:    Voluntary reductions of the unutilized portion of the Revolving Commitments and voluntary prepayments of Revolving Loans will be permitted at any time, in minimum principal amounts not greater than those set forth in the ABL Sponsor Precedent, without premium or penalty, subject to reimbursement of the Lenders’ usual and customary breakage costs (excluding loss of profit) in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period. Voluntary prepayments will be applied as directed by the Borrower.

 

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Representations and Warranties:    Limited to the following (to be applicable to Holdings (solely as it relates to its organizational status and good standing, power and authority, execution, delivery and enforceability of its guarantee and its pledge of equity interests of the Borrower, no conflicts, and material compliance with laws), the Borrower and its Restricted Subsidiaries only and subject, in each case, to materiality thresholds, baskets and other exceptions and qualifications consistent with Documentation Principles and the First Lien Facilities Documentation): organizational status and good standing; power and authority, execution, delivery and enforceability of ABL Facility Documentation; with respect to ABL Facility Documentation, no violation of, or conflict with, law, organizational documents or material agreements; compliance with law (including anti-money laundering, anti-terrorism and sanctions laws (including PATRIOT Act and OFAC) applicable to the Borrower and Restricted Subsidiaries (“AML and Sanctions Laws”), and anti-corruption laws (including the Foreign Corrupt Practice Act) applicable to the Borrower and Restricted Subsidiaries (“Anti-Corruption Laws”)); Investment Company Act; no material litigation; margin regulations; material governmental approvals; after the Closing Date, no Material Adverse Effect (as defined below) since the date of the most recent audited financial statements delivered prior to the Closing Date; materially accurate and complete disclosure in all material respects; taxes; ERISA; equity interest and ownership of subsidiaries; intellectual property; environmental laws; use of proceeds; ownership of properties; subject to the Certain Funds Provisions and the restrictions described under the caption “Security,” creation, validity and perfection of liens and other security interests (subject to permitted liens); borrowing base certificates; and consolidated Closing Date solvency of the Borrower and its subsidiaries (which representation shall be satisfied by the delivery of a solvency certificate in the form attached as Annex I to Exhibit E).
   Material Adverse Effect” means a material adverse effect on (a) the business, operations, assets, financial condition or results of operations, in each case, of the Borrower and its Restricted Subsidiaries (taken as a whole) or (b) the rights and remedies of the ABL Administrative Agent and the Lenders (taken as a whole) under the ABL Facility Documentation.

 

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Conditions to Initial Borrowing:    The availability of the initial borrowing under the ABL Facility on the Closing Date will be subject solely to the applicable conditions set forth in Section 6 (including by reference to Exhibit E) of the Commitment Letter.
Conditions to Borrowings after the Closing Date:   

The making of each extension of credit under the ABL Facility after the Closing Date will be conditioned upon (a) delivery of a customary borrowing notice, (b) the accuracy of representations and warranties in all material respects; provided that any representation and warranty that is qualified as to “materiality,” “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein), (c) the absence of Defaults or Events of Default at the time of, or after giving effect to the making of, such extension of credit and (d) after giving effect to such extension of credit (including the issuance, extension or modification of any Letter of Credit), the sum of, without duplication, the then aggregate outstanding principal amount of Revolving Loans (including Swingline Loans and floorplan advances), unreimbursed drawings under Letters of Credit and the face amount of undrawn amount of outstanding Letters of Credit does not exceed the Line Cap.

 

Notwithstanding the foregoing, the ABL Facility will permit the ABL Administrative Agent to make limited protective advances (the definition of which is to be mutually agreed) on terms consistent with the Documentation Principles.

Cash Dominion:    Within 90 days of the Closing Date (or such longer period as may be consented to by the ABL Administrative Agent, such consent not to be unreasonably withheld, delayed or conditioned), the Borrower and the Guarantors will implement cash management procedures customary for similar asset-based revolving facilities for similarly-situated borrowers and guarantors or otherwise consistent with the Documentation Principles (it being agreed procedures should be no more burdensome to the Loan Parties than those existing on the date hereof with respect to the Existing ABL Agreement (the “Existing Cash Management System”)). Such procedures will provide that (i) the Borrower and the Guarantors will cause or direct certain cash receipts (subject to exceptions to be mutually agreed between the Borrower and the ABL Administrative Agent (including, without limitation, those applicable to the Existing Cash Management System and an exception for an amount to be mutually agreed for purposes of continuing operations and making payments (including payroll) in

 

B-25


  

the ordinary course of business)) to be transferred on each business day to, or otherwise maintained in, accounts subject to account control agreements (providing “springing control”) in favor of the ABL Administrative Agent and (ii) account control agreements (providing “springing control”) in favor of the ABL Administrative Agent will be required in respect of material deposit accounts to be mutually agreed (which will include all cash concentration accounts) of the Borrower and the Guarantors (“Required Deposit Accounts”). During a Cash Dominion Period and after delivery of a written notice to the Borrower from the ABL Administrative Agent, amounts in controlled deposit accounts will be swept into the ABL Administrative Agent’s account (over which it shall have “springing control”) to be applied by the ABL Administrative Agent to repay outstanding Revolving Loans, including Swingline Loans and floorplan advances, unreimbursed Letter of Credit drawings and to cash collateralize outstanding Letters of Credit; provided that amounts will be applied first, to ABR loans, second, to Adjusted LIBOR loans, and third, to the cash collateralization of Letters of Credit.

 

Cash Dominion Period” means the occurrence of, and will exist during the continuation of a Liquidity Condition or during the continuance of any Event of Default.

 

Liquidity Condition” means and will exist during the period from (a) the date Excess Availability shall have been less than the greater of (i) $10.0 million and (ii) 10.0% of the Line Cap then in effect, in either case, for five consecutive business days, to (b) the date Excess Availability shall have been at least equal to the greater of (i) $10.0 million and (ii) 10.0% of the Line Cap then in effect, in either case, for 20 consecutive business days.

 

Line Cap” means, at any time, the lesser of (a) the aggregate amount of Revolving Commitments at such time and (b) the Borrowing Base then in effect.

 

Excess Availability” means at any time (a) the Line Cap then in effect, plus (b) 100% of Qualified cash not to exceed for this purpose 25% of the Borrowing Base, minus (c) the sum, without duplication, of (i) the then aggregate outstanding principal amount of Revolving Loans (including Swingline Loans and floorplan advances), (ii) unreimbursed drawings under Letters of Credit and (iii) the undrawn face amount of outstanding Letters of Credit.

 

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   Designated Event of Default” means (a) any payment Event of Default, (b) any bankruptcy Event of Default, (c) any Event of Default arising from the failure to comply with the financial covenant and (d) any Event of Default with respect to delivery or accuracy of borrowing base certificates or failure to comply with the cash management obligations.
Bank Products:    The Loan Parties shall be required to use commercially reasonable efforts to maintain their existing primary depository and treasury management relationships with the ABL Administrative Agent or one of its affiliates for so long as the ABL Administrative Agent and its affiliates hold more than 50% of the commitments under the ABL Facility.
Affirmative Covenants:    Limited to the following (to be applicable to the Borrower and its Restricted Subsidiaries only (and, in the case of Holdings, maintenance of existence, maintenance of books and records, inspection rights, payment of taxes, compliance with laws and further assurances) and subject, in each case, to materiality thresholds, baskets and other exceptions and qualifications consistent with the Documentation Principles and as may otherwise be agreed upon): delivery of (i) within (A) 150 days of fiscal year end for the first fiscal year ended after the Closing Date and (B) 90 days of fiscal year end for each fiscal year thereafter, annual audited consolidated financial statements and (ii) commencing with the fiscal quarter ended after the Closing Date for which financial statements are required to be delivered, within 75 days of fiscal quarter end for the first three fiscal quarters ended after the Closing Date and within 60 days of the end of the first three fiscal quarters of each fiscal year ended thereafter, quarterly unaudited consolidated financial statements, and, in the case of the annual financial statements, an opinion of an independent accounting firm (which opinion shall not be subject to any “going concern” statement, explanatory note or like qualification or exception (other than a “going concern” statement, explanatory note or like qualification or exception resulting solely from (i) an upcoming maturity date of indebtedness occurring within one year from the time such opinion is delivered or (ii) anticipated or actual financial covenant non-compliance); customary compliance certificates with quarterly and annual

 

B-27


  

compliance certificates; borrowing base and collateral reporting, annual budget reports in the form customarily prepared by the Borrower (with delivery time periods to be consistent with the delivery requirements for the audited financial statements); notices of knowledge of Defaults, ERISA events and litigation that could reasonably be expected to result in a Material Adverse Effect; cash management; maintenance of property (subject to casualty, condemnation and normal wear and tear) and customary insurance (but not, for the avoidance of doubt, flood insurance except to the extent required by applicable law); maintenance of existence; visitation rights upon reasonable prior notice; maintenance of books and records; payment of material taxes; compliance with laws and regulations (including ERISA and environmental); compliance with Anti-Corruption Laws and AML and Sanctions Laws; additional Guarantors and Collateral (subject to limitations set forth under the caption “Security”); use of proceeds; and further assurances on collateral matters.

 

Restricted Subsidiary” means, a subsidiary of a Person that is not an “Unrestricted Subsidiary” (as defined below).

Borrowing Base Reporting Requirements:   

The Borrowing Base will be computed on a monthly basis pursuant to a borrowing base certificate (a “Borrowing Base Certificate”) to be delivered by the Borrower to the ABL Administrative Agent within fifteen business days after the end of each month (or, solely in the case of the first three calendar months for which a Borrowing Base Certificate is required to be delivered following the Closing Date, within 20 business days after the end of such month); provided that the Borrowing Base may be required to be computed weekly, with the Borrowing Base Certificate to be delivered by the following Friday after the end of each week (or if such Friday is not a Business Day, the next Business Day) as reasonably determined by the ABL Administrative Agent during the continuance of a Liquidity Condition.

 

The ABL Administrative Agent will be able to conduct, at the sole cost and expense of the Borrower, one field examination and one inventory appraisal per 12-month period; provided that the ABL Administrative Agent will be able to conduct, at the sole cost and expense of the Borrower, up to two field examinations and two inventory appraisals per 12-month period from the date Excess Availability shall have been less than the greater of (x)

 

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   $10 million and (y) 10% of the Line Cap then in effect for five consecutive business days to the date Excess Availability shall have been at least equal to the greater of (x) $10.0 million and (y) 10% of the Line Cap then in effect for 20 consecutive business days; provided, further, that, following the occurrence and during the continuation of a Designated Event of Default, such field examinations and inventory appraisals may be conducted at the Borrower’s expense as many times as the ABL Administrative Agent considers reasonably necessary.
Negative Covenants:   

Limited to the following (capitalized terms used in this section should be defined in a manner consistent with the Document Principles, unless otherwise defined herein) and subject, in each case, to exceptions, qualifications, materiality thresholds and baskets consistent with the Documentation Principles, as set forth below, as set forth in the First Lien Facilities Documentation (including those set forth in the First Lien Facilities Term Sheet other than with respect to usage of the “Available Amount Builder Basket”) and as may otherwise be agreed upon:

 

•  Indebtedness. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, incur, create or assume any Indebtedness (excluding obligations under or in respect of Floorplan Advances and other inventory financing agreements).

 

•  Liens. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, create, incur or assume any Lien securing indebtedness on any of its property or assets.

 

•  Investments. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, directly or indirectly, make or hold any Investment; provided that Investments shall be permitted if both immediately before such Investment is made and immediately after giving effect thereto, the Payment Conditions are satisfied.

 

•  Sale and Leaseback Transactions. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, enter into any Sale and Lease-Back Transactions.

 

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•  Mergers, Consolidations, Sales of Assets and Acquisitions. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, merge into, or consolidate or amalgamate with, any other person, or permit any other person to merge into or consolidate with it, or sell, transfer or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets, or issue, sell, transfer or otherwise dispose of any Equity Interests of any Restricted Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person or any division, unit or business of any other person; provided that (a) any asset disposition shall be permitted if both immediately before such disposition is made and immediately after giving effect thereto, the Payment Conditions are satisfied and (b) any such acquisition shall be permitted subject to conditions to be determined.

 

•  Restricted Payments. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, make any Restricted Payments; provided that (x) Restricted Payments constituting dividends or distributions on account of Borrowers’ or any Restricted Subsidiary’s equity interests shall be permitted if both immediately before such Restricted Payment is made and immediately after giving effect thereto, the Distribution Conditions are satisfied and (y) all other Restricted Payments shall be permitted if both immediately before such Restricted Payment is made and immediately after giving effect thereto, the Payment Conditions are satisfied.

 

The “Distribution Conditions” means (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) Excess Availability on the date of such proposed action would exceed the greater of (x) $15,000,000 and (y) 15.0% of the Line Cap then in effect on a pro forma basis, (c) the Fixed Charge Coverage Ratio (to be defined as mutually agreed in a manner consistent

 

B-30


  

with the Documentation Principles) would be at least 1.0 to 1.0 on a pro forma basis giving effect to the subject action; provided that compliance with the Fixed Charge Coverage Ratio will not be required if after giving effect to the taking of such action, Excess Availability on the date of such proposed action would exceed the greater of (x) $20,000,000 and (y) 20.0% of the Line Cap then in effect on a pro forma basis and (d) receipt by ABL Administrative Agent of an officer’s certificate certifying as to the calculations and satisfaction of the conditions set forth in foregoing clauses (a) through and including (c) above.

 

The “Payment Conditions” means (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) Excess Availability on the date of such proposed action would exceed the greater of (x) $12,500,000 and (y) 12.5% of the Line Cap then in effect on a pro forma basis, (c) the Fixed Charge Coverage Ratio (to be defined as mutually agreed in a manner consistent with the Documentation Principles) would be at least 1.0 to 1.0 on a pro forma basis giving effect to the subject action; provided that compliance with the Fixed Charge Coverage Ratio will not be required if after giving effect to the taking of such action, Excess Availability on the date of such proposed action would exceed the greater of (x) $15,000,000 million and (y) 15.0% of the Line Cap then in effect on a pro forma basis and (d) receipt by ABL Administrative Agent of an officer’s certificate certifying as to the calculations and satisfaction of the conditions set forth in foregoing clauses (a) through and including (c) above.

 

•  Transactions with Affiliates. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates in a transaction involving aggregate consideration in excess of an amount to be agreed, unless such transaction is (a) otherwise permitted (or required) under the ABL Facilities Documentation or (b) upon terms

 

B-31


  

no less favorable to the Borrower or its Restricted Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a person that is not an Affiliate.

 

•  Business of Borrower and its Subsidiaries. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, engage at any time in any business or business activity other than any business or business activity conducted by the Borrower or any of its Restricted Subsidiaries on the Closing Date and any similar, corollary, related, ancillary, incidental or complementary business or business activities or a reasonable extension, development or expansion thereof or ancillary thereto.

 

•  Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By Laws and Certain Other Agreements; etc. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, (a) amend or modify in any manner materially adverse to the Lenders the articles or certificate of incorporation (or similar document), by-laws, limited liability company operating agreement, partnership agreement or other organizational documents of the Borrower or any of its Restricted Subsidiaries, (b) make any cash payment or other distribution in cash or otherwise (rather than regularly scheduled interest, regularly scheduled or mandatory payments of principal and principal payments on maturity) in respect of, or amend or modify, or permit the amendment or modification of, any provision of, any debt under the Second Lien Facility and any subordinated debt (“Junior Financing”) (it being agreed that exchange offers will be permitted on terms to be agreed), or (c) permit any subsidiary that is not an Immaterial Subsidiary (such subsidiary, a “Material Subsidiary”) to enter into any agreement or instrument that by its terms restricts (i) with respect to any such Material Subsidiary that is not a Loan Party, Restricted Payments from such

 

B-32


  

subsidiary to the Borrower or any other Loan Party that is a direct or indirect parent of such Material Subsidiary or (ii) the granting of Liens by such Subsidiary pursuant to the Security Documents, in each case contemplated by clauses (a)-(c); provided that any cash payment or distribution in cash in respect of any Junior Financing shall be permitted when the Payment Conditions are satisfied.

 

•  Holdings. Holdings will not, conduct, transact or otherwise engage in any active trade or business or operations other than through the Borrower; provided that the foregoing will not prohibit Holdings from taking actions related to the following (and activities incidental thereto): (i) its ownership of the Equity Interests of the Borrower, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the ABL Facility, the First Lien Facilities, the Second Lien Facility other Indebtedness of Holdings, the Borrower or any of its subsidiaries, the Acquisition Agreement and the other agreements contemplated by the Acquisition Agreement, (iv) any public offering of its common stock or any other issuance of its Equity Interests (including Qualified Equity Interests), (v) the making of Restricted Payments, (vi) the incurrence of Permitted Holdings Debt, (vii) making contributions to the capital of its Subsidiaries, (viii) guaranteeing the obligations of the Borrower and its Subsidiaries, (ix) participating in tax, accounting and other administrative matters as a member or parent of the consolidated group, (x) holding any cash or certain property (including cash and certain property received in connection with Restricted Payments made by the Borrower), (xi) providing indemnification to officers and directors, (xii) the making of any Investments and (xiii) activities incidental to the businesses or activities described above.

Financial Maintenance Covenant:    Upon the occurrence and during the continuance of a Covenant Trigger Event, the Borrower will maintain a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0 measured as of the

 

B-33


  

last day of the most recent period of four consecutive fiscal quarters for which Required Financial Statements have been furnished to the ABL Administrative Agent (or were required to be furnished) at the time of occurrence of such Covenant Trigger Event and as of the last day of each subsequent four fiscal quarter period ending during the continuance of such Covenant Trigger Event (the “Financial Maintenance Covenant”).

 

A “Covenant Trigger Event” will occur immediately at any time that Excess Availability is less than the greater of (a) $10.0 million and (b) 10.0% of the Line Cap then in effect for 5 consecutive business days. Once commenced, a Covenant Trigger Event will be deemed to be continuing until such time as Excess Availability equals or exceeds the greater of (i) $10.0 million and (ii) 10.0% of the Line Cap then in effect for 20 consecutive business days.

 

For purposes of determining compliance with the Financial Maintenance Covenant, Holdings will have the right until the expiration of the tenth (10th) business day subsequent to the date financial statements are required to be delivered or actually delivered for such fiscal quarter (the “Curative Period”) to issue equity interests (other than in respect of disqualified equity) (or if later, fifteen business days after the commencement of a Covenant Trigger Event)) for cash or otherwise receive cash contributions to the capital of Holdings, and, in each case, to contribute any such cash to the capital of the Borrower (collectively, the “Cure Right”) and, upon the receipt by the Borrower of such cash (the “Cure Amount”) pursuant to the exercise of such Cure Right, the Financial Maintenance Covenant will be recalculated giving effect to a pro forma adjustment by which Consolidated EBITDA will be increased with respect to such applicable fiscal quarter and any four-quarter period that includes such quarter. In each four fiscal quarter period there shall be at least two fiscal quarters in which the Cure Right is not exercised and the Cure Right may not be exercised more than five times during the term of the ABL Facility. The Cure Amount cannot exceed the amount necessary to cure the applicable Default of the Financial Maintenance Covenant and such equity issuances will be disregarded for purposes of determining pricing levels, ratio-based conditions or any covenant baskets. If, after giving effect to the foregoing adjustments, the Borrower is then in compliance with the requirements of the Financial Maintenance Covenant, the Borrower will be deemed to have satisfied

 

B-34


  

the requirements of the Financial Maintenance Covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach of the Financial Maintenance Covenant and any related Default that had occurred will be deemed cured.

 

Notwithstanding the foregoing, during the Curative Period, the ABL Administrative Agent and the Lenders shall have no obligation to make Revolving Loans (including Swingline Loans and floorplan advances).

Unrestricted Subsidiaries:    The ABL Facility Documentation will contain provisions pursuant to which, subject to limitations on loans, advances, guarantees and other investments, the Borrower will be permitted to designate any existing or subsequently acquired or organized subsidiary as an “Unrestricted Subsidiary” and subsequently re-designate any such Unrestricted Subsidiary as a Restricted Subsidiary so long as, subject to the Limited Condition Provision, (a) no Event of Default is continuing and (b) such designation or re-designation would not cause an Event of Default. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall be deemed to be an incurrence at the time of such designation of indebtedness of such subsidiary or liens on the assets of such subsidiary, in each case, outstanding on the date of such designation. The designation of any subsidiary as an Unrestricted Subsidiary shall constitute an investment for purposes of the investments negative covenant described under the caption “Negative Covenants” above. Unrestricted Subsidiaries will not be subject to the mandatory prepayment, representation and warranty, affirmative or negative covenant or Event of Default provisions of the ABL Facility Documentation.
Events of Default:    Consistent with the Documentation Principles.
Assignments and Participations:    Each Lender will be permitted to make assignments of loans and commitments in minimum amounts of $5.0 million. Minimums do not apply to assignments to a Lender, an affiliate of a Lender, or a related fund or to assignments by a Lender of all of its loans and commitments.

 

B-35


  

Consents of the Borrower and the ABL Administrative Agent are required for each assignment, which consents shall not be unreasonably withheld, delayed or conditioned, except that (i) the Borrower’s consent will not be required during a payment or bankruptcy (with respect to the Borrower) Event of Default or in the case of an assignment to a Lender, an affiliate of a Lender, or a related fund and (ii) the Borrower will be deemed to have consented to an assignment if it has not responded within 10 business days after having received written notice thereof from the ABL Administrative Agent. The ABL Administrative Agent’s consent will not be required in the case of an assignment under the ABL Facility to a Lender with an ABL Facility commitment, an affiliate of such Lender, or a related fund with respect to such Lender. Consent of the Issuing Lender and Swingline Lender (such consent not to be unreasonably withheld, delayed or conditioned) will be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit or Swingline Loans, as applicable (whether or not then outstanding). A $3,500 assignment fee will be payable to the ABL Administrative Agent by the assignee or assignor lender for each assignment other than any assignment by a Lender to a related fund.

 

The Lenders will be permitted to sell participations in loans and commitments without restriction in accordance with applicable law. Voting rights of participants shall be limited to matters set forth under “Voting” below with respect to which the unanimous vote of all Lenders (or all directly and adversely affected Lenders, if the participant is directly and adversely affected) would be required.

 

Notwithstanding the foregoing, no assignments or (to the extent that the Lenders shall have been made available a list of the Disqualified Institutions prior to the execution of such participation right) participations may be made to Disqualified Institutions or any other entity or person that is not an eligible assignee (the definition of which is to be mutually agreed upon).

 

Notwithstanding anything in the ABL Facility Documentation to the contrary, the ABL Administrative Agent shall not be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions thereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, the ABL Administrative Agent shall not (x) be obligated to ascertain, monitor or inquire as to

 

B-36


   whether any Lender or participant or prospective Lender or participant is a Disqualified Institution or (y) have any liability with respect to or arising out of any assignment or participation of Loans or commitments, or disclosure of confidential information, to any Disqualified Institution. The list of Disqualified Institutions shall be available to Lenders upon request.
Voting:    Amendments and waivers of the ABL Facility Documentation will require the approval of Required Lenders, except that (i) the consent of each Lender directly and adversely affected thereby will be required with respect to: (A) increases in or extensions of the commitment of such Lender (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment will not constitute an extension or increase of any commitment); (B) reductions of principal (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment will not constitute a reduction in principal), interest (other than a waiver of default interest or a default waiver or change to a financial ratio) or fees; (C) extensions of scheduled amortization payments, the date for payment of any interest or fees or the final maturity (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment will not constitute an extension of the date for payment of any interest or fees or the final maturity date) and (D) changes to the pro rata sharing provisions (with exceptions for certain transactions to be agreed, including amend and extend and refinancing amendment transactions), (ii) the consent of 100% of the Lenders will be required with respect to (A) modifications to any of the voting percentages or change in the definition of “Required Lenders” or “Supermajority Lenders” and (B) releases of all or substantially all Guarantors or releases of all or substantially all of the Collateral (other than in connection with any sale of Collateral or of the relevant Guarantor permitted by the ABL Facility Documentation), and (C) permitting any Borrower to assign its rights under the ABL Facility Documentation (other than as permitted by the fundamental changes provision in the ABL Facility Documentation), (iii) the consent of the ABL Administrative Agent, the Swingline Lender and the Issuing Lender, as applicable, will be required for any amendment that modifies agency, swing line or letter of credit specific

 

B-37


  

provisions, (iv) the consent of 100% of the Lenders will be required with respect to any subordination of the liens of ABL Administrative Agent on a material portion of the Collateral (other than with respect to certain permitted liens) or subordination of the payment of the obligations in respect of the ABL Facility (other than as contemplated under the ABL Facility), in each case other than transactions permitted under the ABL Facility Documentation, (v) the consent of the Supermajority Lenders will be required with respect to any change in advance rates, eligibility criteria, eligible asset classes, reserves or sublimits or other changes, in each case, which have the effect of increasing availability under the Borrowing Base (other than changes in reserves implemented by the ABL Administrative Agent in its Reasonable Credit Judgments) and (vi) any amendment or waiver that by its terms affects the rights or duties of Lenders holding loans or commitments of a particular class (but not the Lenders holding loans or commitments of any other class) will require only the requisite percentage in interest of the affected class of Lenders that would be required to consent thereto if such class of Lenders were the only class of Lenders.

 

Required Lenders means those non-defaulting Lenders who collectively hold more than 50% of the total commitments or exposure under the ABL Facility.

 

Supermajority Lenders” means those non-defaulting Lenders holding more than 66 2/3% of total commitments or exposure under the ABL Facility.

 

Defaulting Lenders will not be included in the calculation of Required Lenders or other requisite Lenders; provided that, subject to the Borrower’s right to replace Defaulting Lenders described below, Defaulting Lenders will be included therein with respect to (x) any amendment that would disproportionately affect the obligation of the Borrower to make payments to Defaulting Lenders as compared to other Lenders holding the same class of loans or commitments and (y) any amendment relating to (a) increases in the commitment of such Defaulting Lender, (b) reductions of principal, interest, fees or premium applicable to the loans or commitments of such Defaulting Lender, (c) extensions of final maturity or the due date of any amortization, interest, fee or premium payment applicable to the loans or commitments of such Defaulting Lender, (d) certain collateral issues requiring the approval of all Lenders and (e) the definition of Required Lenders.

 

B-38


  

The ABL Facility Documentation will contain customary provisions for replacing Defaulting Lenders (the definition of which is to be substantially consistent with, and in any event no less favorable to the Borrower than, the current LSTA model credit agreement provisions), replacing Lenders claiming increased costs, tax gross ups and similar required indemnity payments and replacing non-consenting Lenders in connection with amendments and waivers requiring the consent of 50% of the aggregate amount of the loans and commitments under the ABL Facility or of all Lenders directly affected thereby so long as Lenders holding at least 50% of the aggregate amount of the loans and commitments under the ABL Facility will have consented thereto.

 

The ABL Facility Documentation will contain customary “amend and extend” provisions pursuant to which the Borrower may extend commitments and/or outstandings with only the consent of the respective extending Lenders; provided that it is understood that no existing Lender will have any obligation to commit to any such extension.

Defaulting Lender Provisions:    Provisions substantially consistent with, and in any event no less favorable to the Borrower than, the current LSTA model credit agreement provisions as of the Closing Date addressing the failure of a Lender to fund when required, a Lender becoming the subject of an insolvency event or similar events affecting such Lender’s ability to perform its obligations under the ABL Facility, including forfeiture (or reallocation) of commitment fees and voting rights and ability of the Issuing Lender to request cash collateral.
Cost and Yield Protection:    Customary provisions protecting the Lenders in the event of prepayment or failure to borrow (funding indemnity), unavailability of funding, capital adequacy and liquidity requirements, and increased costs due to changes in law or regulation after the date of the ABL Facility or, if later, the date on which the applicable Lender became a Lender. Payments to be made free and clear of taxes (subject to customary limitations and exceptions, including for withholding under FATCA). Customary protections for increased costs imposed as a result of the Dodd-Frank Act or Basel III will be included.

 

B-39


Expenses:    If the Transactions are consummated and the Closing Date occurs, the Borrower will pay all reasonable, documented and invoiced out-of-pocket costs and expenses of the ABL Administrative Agent and the Commitment Parties associated with the preparation, due diligence (including third party expenses), administration, amendment, modification, waiver, enforcement and syndication of the ABL Facility and ABL Facility Documentation (including without limitation the reasonable, documented and invoiced (x) legal fees of a single counsel to the ABL Administrative Agent (and, solely in the case of an actual or perceived conflict of interest, where the indemnified person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of an additional counsel for each group of affected indemnified persons similarly situated, taken as a whole), and, if necessary, one local counsel in each relevant material jurisdiction and (y) out-of-pocket fees and expenses incurred in connection with field examinations and inventory appraisals (including desktop appraisals). In addition, the Borrower will reimburse all reasonable, documented and invoiced out-of-pocket costs and expenses of the ABL Administrative Agent and the Lenders, including without limitation the reasonable, documented and invoiced legal fees of a single firm of counsel (and, solely in the case of an actual or perceived conflict of interest, one additional counsel to the affected Lender(s)) and, if necessary, one local counsel in each relevant material jurisdiction, in connection with any enforcement of the ABL Facilities Documentation.
Indemnification:    The Borrower will indemnify the Commitment Parties, the ABL Administrative Agent, the Lenders, the Issuing Lender, and their respective affiliates, and the officers, directors, employees, advisors, agents, controlling persons, equityholders, partners, members and other representatives and the respective successors and permitted assigns of each of the foregoing, and hold them harmless from and against, any and all losses, claims, damages, liabilities and reasonable, documented and invoiced out-of-pocket fees and expenses (limited to reasonable and documented legal fees of a single counsel for all indemnified parties, taken as a whole, and, if necessary, one local counsel in each relevant material jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all indemnified parties taken as a whole (and, in the case of an actual or perceived conflict of interest, where the indemnified

 

B-40


   person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of an additional counsel for each group of affected indemnified persons similarly situated, taken as a whole)) of any such indemnified person arising out of or relating to any claim or any litigation or other proceeding (regardless of whether such indemnified person is a party thereto and whether or not such proceedings are brought by the Borrower, its equity holders, its affiliates, creditors or any other third person) that relates to the Transactions, including the financing contemplated hereby; provided that no indemnified person will be indemnified for any loss, claim, damage, liability, cost or expense to the extent it (i) has been determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (A) the willful misconduct, bad faith or gross negligence of such indemnified person or any of such indemnified person’s affiliates or controlling persons or any of the officers, directors, employees, agents, partners, advisors or other representatives, advisors, or members or other equity holders of any of the foregoing or (B) a breach of the obligations of such indemnified person or any of such indemnified person’s affiliates or controlling persons or any of the officers, directors, employees, agents, partners, advisors or other representatives, advisors, or members or other equity holders of any of the foregoing under the ABL Facility Documentation or (ii) relates to any Proceeding between or among indemnified persons other than (A) claims against the Initial Lenders or their respective affiliates, in each case, in their capacity or in fulfilling their role as the agent or arranger or any other similar role under the ABL Facility (excluding their role as a Lender) to the extent such persons are otherwise entitled to indemnification under this paragraph and (B) claims arising out of any act or omission on the part of Holdings, the Borrower or any of their respective subsidiaries.
Governing Law and Forum:    New York.
Counsel to the ABL Administrative Agent:    Otterbourg P.C.

 

B-41


ANNEX I to

EXHIBIT B

 

Interest Rates:

  

Initially, the interest rates under the ABL Facility will be as follows:

 

At the option of the Borrower, Adjusted LIBOR plus the Applicable Margin or ABR plus the Applicable Margin.

 

Applicable Margin” means, initially, 50 basis points in the case of ABR loans and 150 basis points in the case of Adjusted LIBOR loans. Following delivery of financial statements for the first full fiscal quarter after the Closing Date, the Applicable Margin with respect to the Revolving Loans and Swingline Loans will be subject to the pricing grid set forth below.

 

Level

   Excess Availability
(as a % of the Line
Cap)
    Applicable
Margin for
Adjusted
LIBOR
Loans
    Applicable
Margin for
ABR Loans
 

I

     ³ 66.67     1.25     0.25

II

     < 66.7% but ³ 33.3     1.50     0.50

III

     < 33.3     1.75     0.75

 

 

The Borrower may elect interest periods of one, two, three or six months (or, if agreed by all relevant Lenders, 12 months or a shorter period) for Adjusted LIBOR borrowings or such other periods as agreed to by the ABL Administrative Agent to facilitate the alignment of interest payments with other borrowings under the ABL Facility or the end of a fiscal or calendar period.

 

Interest on any Revolving Loan and all fees will be payable in arrears on the basis of a 360-day year (calculated on the basis of the actual number of days elapsed); provided that interest on ABR loans, when based on the prime rate, will be payable in arrears on the basis of a 365-day year (or a 366-day year in a leap year), in each case, calculated on the basis of the actual number of days elapsed. Interest will be payable on Adjusted LIBOR loans on the last day of the applicable interest period (and at the end of each three months, in the case of interest periods longer than three months) and upon prepayment, and on ABR loans quarterly and upon prepayment.

 

B-1


Adjusted LIBOR:  

Adjusted LIBOR” means LIBOR, adjusted for statutory reserve requirements.

 

LIBOR” means, with respect to the interest period requested, the rate per annum for deposits in U.S. Dollars for the relevant interest period as reported on the LIBOR01 Page as of 11:00 a.m. (London, England time) two business days prior to the first day of the interest period; provided, however, if LIBOR is less than zero per the above, then LIBOR shall be zero.

 

Notwithstanding the foregoing, the definitions of “Adjusted LIBOR” and “LIBOR”, and any related definitions, shall reflect the Documentation Principles; provided that there shall be no floor above zero.

ABR:  

ABR” means the Alternate Base Rate, which will be the highest of (i) the prime commercial lending rate published by The Wall Street Journal as the “prime rate,” (ii) the Federal Funds Effective Rate plus 1/2 of 1.0% and (iii) the LIBOR Quoted Rate plus 1.0% per annum.

 

LIBOR Quoted Rate” means, for any day, Adjusted LIBOR for an interest period of one month as reported on the LIBOR01 Page as of 11:00 a.m. (London, England time) on such day; provided, however, if the LIBOR Quoted Rate is less than zero, the LIBOR Quoted Rate shall be zero.

 

Notwithstanding the foregoing, the definitions of “ABR” and “LIBOR Quoted Rate”, and any related definitions, shall reflect the Documentation Principles; provided that there shall be no floor above zero.

ABL Facility Commitment Fee:   The Borrower will pay to the ABL Administrative Agent for the ratable benefit of the Lenders (with exceptions for Defaulting Lenders) a commitment fee (“Commitment Fee”) of (i) 25 basis points if the actual daily utilized portion of the ABL Facility exceeds 50% and (ii) 37.5 basis points if otherwise, in each case, payable quarterly in arrears after the Closing Date and upon termination of the Revolving Commitments, calculated based on the number of days elapsed in a 360-day year. Swingline Loans shall not constitute utilization of the ABL Facility for purposes of the Commitment Fee calculations.

 

B-2


Letter of Credit Fees:   A per annum participation fee equal to the Applicable Margin with respect to Adjusted LIBOR Loans on the face amount of each Letter of Credit is payable quarterly in arrears to the Lenders (including the Issuing Lender in its capacity as a Lender). A fee of 0.125% on the face amount of each Letter of Credit issued or the term of which is extended shall be payable to the Issuing Lender for its own account, together with the Issuing Lender’s standard documentary and processing charges in connection with the issuance, amendment, cancellation, negotiation, drawing under or transfer of any Letter of Credit.

 

B-3


EXHIBIT C

Project Viking

Senior Secured First Lien Term Loan Facility

Senior Secured Delayed Draw Term Loan Facility

Summary of Principal Terms and Conditions2

 

Borrower:   

(i) Initially, Acquisition Sub (the “Initial Borrower”), all of the outstanding equity interests of which are owned by Holdings (as defined below) and (ii) immediately after giving effect to the Transactions, the Company (the “Borrower”).

 

The Borrower and the Guarantors are collectively referred to as “Loan Parties.” As used herein, “Holdings” is a reference to the immediate parent company of the Borrower (after giving effect to the Transactions)

Transactions:    As set forth in Exhibit A to the Commitment Letter.
First Lien Administrative Agent:    DBNY will act as sole and exclusive administrative agent and collateral agent for the First Lien Facilities (in such capacity, the “First Lien Administrative Agent”) for a syndicate of banks, financial institutions and other entities reasonably acceptable to the Borrower and which syndicate will not include any Disqualified Institutions (together with the Initial Lenders, the “Lenders”).
Lead Arrangers and Bookrunners:    DBSI, UBS Securities and each other applicable Additional Arranger, if any, will each act as a lead arranger and a bookrunner for the First Lien Facilities (collectively, the “Lead Arrangers”) and will perform the duties customarily associated with such roles.
Syndication Agent and Documentation Agent:    The Borrower may designate additional financial institutions, reasonably acceptable to the Lead Arrangers, to act as syndication agent and documentation agent as provided in the Commitment Letter.

 

2 

All capitalized terms used but not defined herein have the meanings assigned to them in the Commitment Letter to which this Exhibit C is attached, including the other Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit C will be determined by reference to the context in which it is used. In the event that any such capitalized term used in this Exhibit C is not defined in this Exhibit C or otherwise in the Commitment Letter, such term as used in this Exhibit C shall have meanings no less favorable than the meanings of such term or similar term in the Bank Sponsor Precedent as modified by the Documentation Principles.

 

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First Lien Facilities:   

(A) Senior secured first lien term loan facility (the “Initial First Lien Facility”) in an aggregate principal amount of $925.0 million (the loans thereunder, the “Initial Term Loans”) on the terms and conditions set forth herein (as such amount may, at the option of the Borrower, be increased to fund any “OID,” upfront fees or similar amounts in respect of the First Lien Facilities in connection with the Flex Provisions (as defined in the Term Fee Letter)); provided that (i) if the acquisition identified by you to the Lead Arrangers (party to the Commitment Letter on the date hereof) on or prior to the date of the Commitment Letter which could potentially close before the Closing Date (the “Specified Acquisition”) does not close on or prior to the Closing Date and clause (ii) below does not apply the aggregate amount of commitments under the Initial First Lien Facility shall be reduced by $85.0 million (the “Initial Term Loan Reduction”) and (ii) if the Specified Acquisition does not close on or prior to the Closing Date but on or prior to the Closing Date the Company or any of its Restricted Subsidiaries shall have entered into an acquisition agreement or other binding arrangement in respect of the Specified Acquisition and the Initial Borrower reasonably believes that the Specified Acquisition will close on or prior to the 90th day occurring after the Closing Date, the Initial Borrower may elect on the Closing Date to incur the Initial Term Loans that would otherwise be subject to the Initial Term Loan Reduction provided that if the Specified Acquisition does not close on or prior to the 90th day occurring after the Closing Date, on the business day immediately following the 90th day occurring after the Closing Date the Borrower shall prepay Initial Term Loans (at par, not subject to any premium) in an aggregate principal amount equal to $115.0 million.

 

(B) Senior secured delayed draw term loan facility (the “Delayed Draw Term Loan Facility” and, together with the Initial First Lien Facility, each a “First Lien Facility” and collectively the “First Lien Facilities”) in an aggregate principal amount of $75.0 million (the loans thereunder, the “Delayed Draw Term Loans” and together with the Initial Term Loans, the “Term Loans”) on the terms and conditions set forth herein. The Delayed Draw Term Loans shall be available in U.S. Dollars.

Purpose:    (A) The proceeds of the Initial First Lien Facility will be made available on the Closing Date (i) to fund a portion of the Acquisition Consideration, (ii) to finance a portion of the Refinancing, (iii) to pay the Transaction Costs and (iv) as additional cash on the balance sheet of the Borrower and its Restricted Subsidiaries and for general corporate purposes of the Borrower and its subsidiaries (including, without limitation, for capital expenditures, acquisitions, Restricted Payments, refinancing of indebtedness and any other transactions not prohibited by the First Lien Facilities Documentation).

 

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   (B) The proceeds of the Delayed Draw Term Loan Facility will be made available from the Closing Date until the Delayed Draw Commitment Expiration Date (as defined below) (i) to finance (x) the acquisition identified by you to the Lead Arrangers (party to the Commitment Letter on the date hereof) on or prior to the date of the Commitment Letter (other than the Specified Acquisition) and (y) in the event of an Initial Term Loan Reduction, the Specified Acquisition and, in each case, costs and expenses related thereto and any repayment of debt of the applicable target group in connection therewith and (ii) to pay outstanding Revolving Loans used to fund any items described in clause (i) above.
Documentation Principles:    The Facilities Documentation with respect to the First Lien Facilities (the “First Lien Facilities Documentation”) will be initially prepared by counsel to the Borrower and (a) will be based upon, and at least as favorable to the Borrower as, the posting version of the Credit Agreement, to be entered into by Messer Industries USA, Inc., Messer Industries GmbH and others and related loan documentation (the “Bank Sponsor Precedent”) but will (except with respect to matters expressly set forth in the Commitment Letter) in no event be less favorable to the Borrower than the Credit Agreement dated as of April 10, 2018 (as amended to date) with respect to the existing senior credit facilities of the Company (or its applicable subsidiaries), (b) will otherwise modified by the Documentation Principles and (c) will include such modification as reasonably necessary to give effect to the Delayed Draw Term Loan Facility. The First Lien Facilities Documentation will contain only those payment provisions, conditions to borrowing, mandatory prepayments, representations and warranties, guarantee and collateral provisions, covenants and Events of Default (as defined below) expressly set forth in this Exhibit C, in each case, applicable to the Borrower and its Restricted Subsidiaries (and, where expressly provided in this Exhibit C, to Holdings) and with standards, qualifications, thresholds, exceptions, “baskets” and grace and cure periods consistent with the provisions of this paragraph. Other than set forth herein, the financial definitions and financial ratio definitions in the First Lien Facilities Documentation shall be based on the equivalent definitions of such terms in the Bank Sponsor Precedent, after giving effect to Documentation Principles. All leverage and ratio calculations shall exclude in any

 

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calculation floorplan facility advances or obligations or other inventory financing facility advances or obligations) (other than Revolving Loans) under the ABL Facility. In addition all monetary baskets or thresholds (regardless of whether any such exception, threshold or “basket” specified herein refers to a builder component) will include grower builders based on, at the option of the Borrower as determined prior to the launch of general syndication of the First Lien Facilities, a percentage of consolidated total assets or Consolidated EBITDA (as defined below) of the Borrower and its Restricted Subsidiaries, set at a level at least equal to the initial monetary amount of each such basket or threshold (which level shall be rounded up to the nearest 1.0% interval). It is understood and agreed that to the extent any representations and warranty relating to the Company and/or any of its subsidiaries is made on, or as of, the Closing Date (or prior thereto) and is qualified by or subject to “Material Adverse Effect”, the definition thereof will be “Material Adverse Effect” as defined in the Acquisition Agreement as it applies to such representation and warranty.

 

The “Sponsor Model” means the Sponsor’s model previously provided to the Term Loan Lead Arranger on October 15, 2018.

Availability:   

(A) The Initial Term Loans will be made in a single drawing on the Closing Date. Repayments and prepayments of the Initial Term Loans may not be reborrowed.

 

(B) The Delayed Draw Term Loan Facility will be available on or after the Closing Date until the day following the date that is 6 months after the Closing Date (the “Delayed Draw Commitment Expiration Date”), subject to the Delayed Draw Terms and Conditions (as defined below). Repayments and prepayments of the Delayed Draw Term Loans may not be reborrowed.

 

The “Delayed Draw Terms and Conditions” shall mean:

 

(i)  the Delayed Draw Term Loan Facility may be funded at any time before the applicable Delayed Draw Term Loan Commitment Expiration Date;

 

(iii)   amortization of all of the outstanding loans advanced under the Delayed Draw Term Loan Facility will commence on the last day of the first full calendar quarter after the initial borrowing thereunder and the percentage of the then-outstanding principal

 

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       balance of the Delayed Draw Term Loans that will amortize will be the same percentage as for the Initial Term Loans on the Closing Date (with appropriate adjustments as may be necessary to cause the Delayed Draw Term Loans and to be treated as the same class as loans under the Initial First Lien Facility and to permit “fungibility” with the Initial First Lien Facility);

 

(iv) pricing and maturity for the outstanding principal amount of the Delayed Draw Term Loans shall be the same as for the Initial Term Loans;

 

(v)   subject to the Limited Condition Provision, no Specified Event of Default under the First Lien Facilities shall have occurred and be continuing or would exist immediately after giving effect thereto on the date of such incurrence;

 

(vi) subject to the Limited Condition Provision, the representations and warranties in the First Lien Facilities Documentation shall be true and correct in all material respects on and as of the date of the incurrence of any Delayed Draw Term Loan (although any representations and warranties which expressly relate to a given date or period shall be required only to be true and correct in all material respects as of the respective date or for the respective period, as the case may be);

 

(vii)  the Available Incremental Facility Amount (as defined below, but without aggregating amounts under clauses (b)(ii) or (b)(iii) of such definition) on the date of any incurrence of any Delayed Draw Term Loans (subject to the Limited Condition Provision) is not less than the principal amount of such Delayed Draw Term Loans to be incurred on such date); and

 

(vii)  the minimum amount of any borrowing of Delayed Draw Term Loans and frequency of borrowings under the Delayed Draw Term Loan Facility to be determined in amounts and frequency to be agreed.

 

At any time and from time to time upon notice to the Administrative Agent, the Borrower may elect to reduce or terminate the Lenders’ commitments under the Delayed Draw Term Loan Facility without fees or penalties.

Incremental Facilities:    The First Lien Facilities Documentation will permit the Borrower from time to time, on one or more occasions, to add one or more incremental term loan facilities to the Initial First

 

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   Lien Facility (each, an “Incremental Facility” and, collectively, the “Incremental Facilities”) in a principal amount at the time such amount is incurred equal to (a) the sum of (i) (x) the greater of (A) $200.0 million and (B) 100% of Consolidated EBITDA for the then most recently ended period of four fiscal quarters for which financial statements are internally available, calculated on a pro forma basis after giving effect to any acquisition or other transaction consummated in connection therewith less (y) the aggregate principal amount of any Incremental Second Lien Facility (as defined in Exhibit D) incurred pursuant to clause (a)(i)(x) under the heading “Incremental Facilities” in Exhibit D plus (ii) all voluntary prepayments of the Term Loans and any Incremental Facilities, Incremental Equivalent Debt, Refinancing Term Facilities and, to the extent originally incurred pursuant to clause (a)(i)(x) of the Second Lien Facility Incremental Facility provisions, Incremental Second Lien Facilities, Incremental Equivalent Second Lien Debt, Second Lien Refinancing Facilities, in respect thereof and in each case, that are secured on a senior, pari passu basis with the Frist Lien Facilities or on a junior basis with the First Lien Facilities and a pari passu basis with the Second Lien Facility, so long as such prepayment or commitment reduction is effected on or prior to the date of any such incurrence (including all loan buy-backs (whether or not offered to all Lenders) and yank-a-bank payments, with credit given to the principal amount purchased) (other than any such prepayments, repurchases or reductions to the extent funded with the proceeds of long-term indebtedness (other than revolving indebtedness)) (collectively, the “Fixed Incremental Amount”) provided that the amount under clause (i) or (ii) of such Fixed Incremental Amount, as the case may be, shall be reduced (but not to an amount less than 0) by the outstanding principal amount of any Incremental Facilities, Incremental Equivalent Debt or Delayed Draw Term Loans incurred in reliance on such clause (i) or (ii) as applicable (so long as such amount is not otherwise reallocated after the date of such incurrence) plus (b)(i) in the case of any Incremental Facility to be secured equally and ratably with the First Lien Facilities, the amount that would result in a First Lien Net Leverage Ratio (as defined below), calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, not exceeding the greater of (x) 4.75:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition (as defined below) or other permitted investment, the First Lien Net Leverage Ratio immediately prior to the incurrence of such debt and (ii) in the case of any Incremental Facility or Incremental Equivalent

 

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Debt to be secured on a junior basis to the First Lien Facilities, the amount that would result in the Secured Net Leverage Ratio (as defined below), calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, not exceeding the greater of (x) 6.50:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Secured Net Leverage Ratio immediately prior to the incurrence of such debt and (iii) in the case of any unsecured Incremental Facility or unsecured Incremental Equivalent Debt, either (I) the amount that would result in the Total Net Leverage Ratio (as defined below), calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, not exceeding the greater of (x) 6.50:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Total Net Leverage Ratio immediately prior to the incurrence of such debt, or (II) the amount that would result in the Cash Interest Coverage Ratio (to be defined) calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, being not less than the lesser of (x) 2.00:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Cash Interest Coverage Ratio immediately prior to the incurrence of such debt (clause (b), the “Ratio Incremental Amount”; the sum of the amounts contemplated by clauses (a) and (b), the “Available Incremental Facility Amount”).

 

First Lien Net Leverage Ratio” will be defined as the ratio of (i) Consolidated Total Debt of the Borrower and its Restricted Subsidiaries that are Loan Parties that is (x) secured by the Collateral or (y) constituting purchase money indebtedness or capital lease obligations, secured by the asset or assets subject thereto, in each case, on a first priority basis (including, for the avoidance of doubt, the ABL Facility) to (ii) trailing 4-quarter Consolidated EBITDA of the Borrower as of the last day of the most recently ended test period for which financial statements are internally available.

 

Secured Net Leverage Ratio” will be defined as the ratio of (i) Consolidated Total Debt of the Borrower and its Restricted Subsidiaries that are Loan Parties that is (x) secured by the Collateral or (y) consisting of purchase money indebtedness or capital lease obligations, secured by the asset or assets subject thereto to (ii) trailing 4-quarter Consolidated EBITDA of the Borrower as of the last day of the most recently ended test period for which financial statements are internally available.

 

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Total Net Leverage Ratio” will be defined as the ratio of (i) Consolidated Total Debt to (ii) trailing 4-quarter Consolidated EBITDA of the Borrower as of the last day of the most recently ended test period for which financial statements are internally available.

 

Consolidated Total Debt”, on any date of determination, will be defined as:

 

(i) the amount of consolidated indebtedness for borrowed money, purchase money indebtedness capital lease obligations, drawn letters of credit that have not been reimbursed after two (2) business days of the Borrower and its Restricted Subsidiaries as of the last day of the most recently ended test period, as such amount may be adjusted to reflect the effect (as determined by the Borrower in good faith) of any hedge agreement or other derivative instrument entered into in respect of the currency exchange risk relating to such indebtedness, calculated on a mark-to-market basis; provided, that such amount shall exclude obligations under or in respect of the floorplan facility or other inventory financing agreements; minus

 

(ii) the amount of (x) unrestricted cash and cash equivalents of the Borrower and its Restricted Subsidiaries and (y) cash and cash equivalents of the Borrower and its Restricted Subsidiaries that are restricted in favor of the First Lien Facilities, the ABL Facility and/or the Second Lien Facility (which may also include cash and cash equivalents securing other indebtedness that is secured by a lien on the Collateral along with the First Lien Facilities, the ABL Facility and/or the Second Lien Facility) whether or not held in a pledged account (in each case, such unrestricted cash and restricted cash and cash equivalents to be determined in accordance with GAAP) (the amounts in clauses (x) and (y), collectively, “Unrestricted Cash”).

 

Cash Interest Coverage Ratio” will be defined as the ratio of (i) trailing 4-quarter Consolidated EBITDA of the Borrower as of the last day of the most recently ended test period for which financial statements are internally available to (ii) Consolidated Cash Interest Expense for such period.

 

Cash Consolidated Interest Expense” means the cash interest expense (including that attributable to Capitalized Leases), net of cash interest income, of the Borrower and the Restricted Subsidiaries with respect to all outstanding Indebtedness of the Borrower

 

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and the Restricted Subsidiaries, including all cash commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net cash costs under hedging agreements, but excluding (i) amortization of deferred financing costs, debt issuance costs, commissions, fees and expenses and any other amounts of non-cash interest (including as a result of the effects of acquisition method accounting or pushdown accounting), (ii) non-cash interest expense attributable to the movement of the mark-to-market valuation of obligations under hedging agreements or other derivative instruments pursuant to FASB Accounting Standards Codification No. 815-Derivatives and Hedging, (iii) any one-time cash costs associated with breakage in respect of hedging agreements for interest rates, (iv) commissions, discounts, yield, make whole premium and other fees and charges (including any interest expense) incurred in connection with any Permitted Receivables Financing, (v) any “additional interest” owing pursuant to a registration rights agreement with respect to any securities, (vi) any payments with respect to make-whole premiums or other breakage costs of any indebtedness, including, without limitation, any Indebtedness issued in connection with the Transactions, (vii) penalties and interest relating to taxes, (viii) accretion or accrual of discounted liabilities not constituting indebtedness, (ix) interest expense attributable to a direct or indirect parent entity resulting from push-down accounting, (x) any expense resulting from the discounting of indebtedness in connection with the application of recapitalization or purchase accounting, (xi) pay-in-kind interest expense of the Borrower and the Restricted Subsidiaries payable pursuant to the terms of the agreements governing such debt for borrowed money, (xii) commissions, discounts, yield and other fees and charges (including any interest expense) related to the Floorplan Facility or any other inventory financing agreement and (xiii) any interest expense attributable to the exercise of appraisal rights and the settlement of any claims or actions (whether actual, contingent or potential) with respect thereto and with respect to any Permitted Acquisition or similar Investment permitted under the Facilities Documentation, all as calculated on a consolidated basis in accordance with GAAP.

 

If the Borrower incurs indebtedness under the Fixed Incremental Amount (and any fixed debt basket) on the same date that it incurs indebtedness under the Ratio Incremental Amount (or any other ratio debt incurrence basket), then the First Lien Net Leverage Ratio,

 

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Secured Net Leverage Ratio or the Total Net Leverage Ratio (or other applicable ratio), as applicable, with respect to the amounts incurred under the Ratio Incremental Amount (or other ratio debt incurrence basket) will be calculated without regard to any incurrence under the Fixed Incremental Amount (and any fixed debt basket but giving full pro forma effect the use of proceeds of the entire amount of the loans and commitments that will be incurred in reliance on each applicable provision and the related transactions). Unless the Borrower elects otherwise, each Incremental Facility shall be deemed incurred first as Ratio Incremental Amount to the extent permitted, with the balance incurred under the Fixed Incremental Amount. The Borrower may classify, and may later reclassify, indebtedness incurred under an Incremental Facility (or Incremental Equivalent Debt or Delayed Draw Term Loans) as incurred as a Fixed Incremental Amount, Ratio Incremental Amount, or both, on the date of incurrence and thereafter, to the extent permitted on the date of classification (or the date of any such reclassification).

 

The availability of the Incremental Facilities will be subject solely to the following terms and conditions: (a) no existing Lender will be required to participate in any Incremental Facility without its consent; (b) subject to the Limited Condition Provision, no Specified Event of Default (as defined below) under the First Lien Facilities shall have occurred and be continuing or would exist immediately after giving effect thereto; (c) such Incremental Facility may, at the discretion of the Borrower, (i) rank pari passu in right of payment with the First Lien Facilities, (ii) be subordinated in right of payment to the First Lien Facilities, (iii) be secured on a pari passu basis with the First Lien Facilities, (iv) be secured on a junior basis to the First Lien Facilities or (v) be unsecured; provided that if subordinated or secured on a junior basis, it may not be incurred under the First Lien Facilities Documentation and any intercreditor or lien subordination arrangements must be reasonably satisfactory to the First Lien Administrative Agent; (d) the maturity date and the weighted average maturity of such Incremental Facility may be no earlier than, or shorter, as the case may be, than the maturity date or the weighted average maturity, as applicable, of the First Lien Facilities (subject to exceptions for (i) customary bridge financings, (ii) Incremental Facilities and Incremental Equivalent Debt in an aggregate amount up to $200.0 million having a maturity date and/or weighted average life that is earlier than, or shorter, as the case may be, than the maturity date or the weighted average maturity, as applicable, of the First Lien Facilities and (iii) Incremental Facilities that amortize at a rate of 5.0% or less per annum, the “Inside

 

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   Maturity Exception”) unless the Lenders are also offered by the Borrower the same percentage amortization prepayment per annum for the corresponding year; provided that, for purposes of this clause (d), each individual Lender will be deemed to have rejected such offer unless such Lender notifies the Administrative Agent that it has accepted such offer within a time period to be agreed after the date of such offer) (this clause (d), the “Maturity Provision”); (e) subject to clause (d) above, the amortization schedules applicable to such Incremental Facility will be as determined by the Borrower and the lenders providing such Incremental Facility; (f) any fees payable in connection with such Incremental Facility will be determined by the Borrower and the arrangers and/or lenders providing such Incremental Facility; (g) such Incremental Facility may provide for the ability to participate on a pro rata basis or greater (as against any later maturing Term Loans) or less than pro rata basis in any voluntary or mandatory prepayments of the Term Loans or, in the case of any voluntary prepayments of the Term Loans or any prepayments of Term Loans, participate on a greater than pro rata basis; (h) the interest rate, upfront fees and original issue discount for any Incremental Facility will be as determined by the Borrower and the lenders providing such Incremental Facility; provided that, solely in the case of any broadly syndicated Incremental Facility incurred prior to the date that is 12 months after the Closing Date (other than in respect of (A) any Incremental Facility originally incurred pursuant to the definition of Fixed Incremental Amount, (B) any Incremental Facility that has an outside maturity date at least one year after the maturity date of the First Lien Facilities at the time of incurrence thereof, (C) any Incremental Facility in an aggregate principal amount of $200.0 million or less, (D) any Incremental Facility being incurred in connection with a Permitted Acquisition or other permitted investment or acquisition and (E) any Incremental Facility incurred to refinance indebtedness (including related fees, costs, premiums, accrued interest and expenses) of the Borrower and its Restricted Subsidiaries) if the yield on any broadly syndicated Incremental Facility secured equally and ratably with the Initial First Lien Facility or Delayed Draw Term Loan Facility, as applicable, denominated in the same currency as such Incremental Facility (taking into account interest margins, minimum Adjusted LIBOR, minimum ABR, upfront fees and OID on such term loans, with upfront fees and OID being equated to interest margins based on an assumed four-year life to maturity, but exclusive of any arrangement, syndication, structuring, commitment or other fees payable in connection therewith) (the “Incremental Yield”) (other than, for the

 

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avoidance of doubt, any such Incremental Facility that is unsecured, subordinated or secured on a junior-lien basis) exceeds the yield on the applicable First Lien Facility denominated in the same currency as such Incremental Facility (determined as provided above), by more than 75 basis points, then the interest margins for such Term Loans incurred under such First Lien Facilities denominated in the same currency as such Incremental Facility will automatically be increased to a level such that the yield on such Term Loans will be 75 basis points below the Incremental Yield (it being agreed that any increase in yield to any existing facility required due to the application of an Adjusted LIBOR or ABR “floor” on any Incremental Facility will be effected solely through an increase in such “floor” (or an implementation thereof, as applicable)) (the “MFN Provision”); (j)(i) may not be guaranteed by any Restricted Subsidiary that is not a Loan Party under the First Lien Facilities and (ii) to the extent secured, may not be secured by any assets of a Loan Party that do not constitute Collateral (this clause (j), the “Guarantor and Collateral Provision”), and (k) except as otherwise provided in clauses (a) through (j), all other terms of such Incremental Facility, if not consistent with the terms of the existing First Lien Facilities (as reasonably determined by the Borrower), will be as agreed between the Borrower and the lenders providing such Incremental Facility.

 

The Borrower may seek commitments in respect of the Incremental Facilities from existing Lenders (each of which will be entitled to agree or decline to participate in its sole discretion) and additional banks, financial institutions and other institutional lenders or investors who will become Lenders in connection therewith; provided that the consent of the First Lien Administrative Agent (not to be unreasonably withheld, delayed or conditioned) will be required with respect to any such additional lender if such consent would be required under the caption “Assignments and Participations” for an assignment to such additional lender.

 

The proceeds of Incremental Facilities may be used for general corporate purposes of the Borrower and its Restricted Subsidiaries (including for capital expenditures, acquisitions, Restricted Payments, refinancing of indebtedness and any other transaction not prohibited by the First Lien Facilities Documentation).

 

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The First Lien Facilities Documentation will be amended to give effect to any Incremental Facility by documentation executed by the Lender or Lenders (or such other persons) making the commitments with respect thereto, the First Lien Administrative Agent and the Borrower and without the consent of any other existing Lender, including such amendments as may be necessary or advisable to have such facility fungible with the other applicable Facilities.

 

In addition, the Borrower or any other Loan Party may, in lieu of adding Incremental Facilities, utilize all or any portion of the Available Incremental Facility Amount at any time by issuing or incurring Incremental Equivalent Debt.

 

Incremental Equivalent Debt” means indebtedness in an aggregate principal amount at the time of incurrence thereof not to exceed the then Available Incremental Facility Amount consisting of senior secured first lien loans or notes or junior lien loans or notes, subordinated loans or notes or senior unsecured term loans or notes, or any bridge facility, reflecting terms as determined by the Company and providers of such Incremental Equivalent Debt; provided that (a) other than in the case of broadly syndicated first lien senior secured term loans, such Incremental Equivalent Debt will not be subject to the MFN Provisions, (b) the maturity date of such Incremental Equivalent Debt will be no earlier than the maturity date of the First Lien Facilities on the date of incurrence thereof (subject to exceptions for customary bridge financings); provided that this clause will not apply to the Inside Maturity Exception, (c) the weighted average life to maturity of such Incremental Equivalent Debt may not be shorter than the remaining weighted average life to maturity of the First Lien Facilities on the date of incurrence thereof (subject to exceptions for customary bridge financings and amortization in an aggregate annual amount of up to 5.0% of the original principal amount incurred) unless the Lenders are also offered by the Borrower the same percentage amortization prepayment per annum for the corresponding year; provided that, for purposes of this clause (c), each individual Lender will be deemed to have rejected such offer unless such Lender notifies the First Lien Administrative Agent that it has accepted such offer by 11 a.m. three (3) business days (or such longer period which the Borrower agrees) after the date of such offer; provided that this clause will not apply to the Inside Maturity Exception, (d) no Incremental Equivalent Debt may be guaranteed by any Restricted Subsidiary that is not a Loan Party under the First Lien Facilities; (e) to the extent secured, no Incremental Equivalent Debt may be secured by any assets of a Restricted Subsidiary that do not constitute Collateral and (f) if such Incremental Equivalent Debt is secured equally and ratably with the Initial First Lien Facility and Delayed Draw Term

 

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   Loan Facility or by liens that are junior to the liens securing the First Lien Facilities, such Incremental Equivalent Debt will be subject to the Guarantor and Collateral Provisions and intercreditor arrangements to be set forth in the First Lien Facilities Documentation.
Limited Condition Provision:    In the case of the incurrence of any indebtedness or liens or the making of any investments, restricted payments, prepayments of junior, unsecured or subordinated debt, asset sales or fundamental changes or the designation of any restricted subsidiaries or unrestricted subsidiaries, in each case, in connection with any Limited Condition Transaction, each at the Borrower’s option, any relevant ratios and baskets shall be determined, the accuracy of representations and warranties in all material respects (other than, in the case of clause (a) below, the Specified Representations or, at the option of the Borrower, European “certain funds” representations) shall be determined, or any default or event of default blocker shall be tested, (a) in the case of any acquisition or other investment (including with respect to any debt contemplated or incurred in connection therewith), either, at the option of the Borrower, (i) as of the date the definitive acquisition agreement for such acquisition or other investment is entered into (or prior to the effectiveness of any documentation or agreement with a substantially similar effect as a binding acquisition agreement) and/or (ii) at the time of the consummation of the relevant acquisition or other investment, (b) in the case of any restricted payment (including with respect to any debt contemplated or incurred in connection therewith), either, at the option of the Borrower, (i) at the time of the declaration of such restricted payment and/or (ii) at the time of the making of such restricted payment and/or (c) in the case of any irrevocable debt repurchase or repayment (including with respect to any debt contemplated or incurred in connection therewith), either, at the option of the Borrower, (i) at the time of delivery of notice with respect to such repurchase or repayment and/or (ii) at the time of the making of such repurchase or repayment, in each case after giving effect to the relevant transaction, any related debt (including the intended use of proceeds thereof) and all other permitted pro forma adjustments on a pro forma basis; provided, that if the Borrower has made such an election, in connection with the calculation of any ratio or basket on or following the such date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the definitive agreement for such Limited Condition Transaction is terminated or expires or such irrevocable notice is rescinded, as applicable, any such ratio or basket shall be calculated on a pro forma basis

 

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assuming such Limited Condition Transaction and other pro forma events in connection therewith (including any incurrence of indebtedness) have been consummated. The provisions of this paragraph are referred to herein as the “Limited Condition Provision”.

 

As used herein, “Limited Condition Transaction” means any acquisition or other investment, irrevocable debt repurchase or repayment, or restricted payment (including with respect to any debt contemplated or incurred in connection therewith) by the Borrower or one or more of its restricted subsidiaries permitted pursuant to the First Lien Facilities Documentation whose consummation is not conditioned on the availability of, or on obtaining, third party financing.

Refinancing Facilities:    The First Lien Facilities Documentation will permit the Borrower or any other Loan Party to refinance loans under any First Lien Facilities and any Incremental Facility, in each case, from time to time, in whole or in part, with (a) one or more new term loan credit facilities (each, a “Refinancing Facility”) under the First Lien Facilities Documentation with the consent of the Borrower and the entities providing such Refinancing Facility, (b) one or more series of senior unsecured notes or term loans, (c) one or more series of senior secured notes or term loans that will be secured by the Collateral on an equal and ratable basis with the First Lien Facilities, or (d) one or more series of junior lien notes or term loans that will be secured on a subordinated basis to the First Lien Facilities, which will be subject to the intercreditor arrangements to be set forth in the First Lien Facilities Documentation (any such notes or loans, “Refinancing Notes”), subject, in each case, solely to the following terms and conditions: (i) no such Refinancing Facility or Refinancing Notes may mature prior to the maturity date of, or have a shorter weighted average life to maturity than, the loans under the Initial First Lien Facility, the Delayed Draw Term Loan Facility or Incremental Facility being refinanced (subject to exceptions for customary bridge financings and amortization in an aggregate annual amount of up to 5.0% of the original principal amount incurred) unless the Lenders are also offered by the Borrower the same percentage amortization prepayment per annum for the corresponding year; provided that, each individual Lender will be deemed to have rejected such offer unless such Lender notifies the Administrative Agent that it has accepted such offer within a time period to be determined after the date of such offer; (ii) no Refinancing Facility or Refinancing Notes may be guaranteed by any Restricted Subsidiary that is not a Guarantor of the First Lien

 

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   Facilities; (iii) to the extent secured, no Refinancing Facility or Refinancing Notes may be secured by any assets of a Restricted Subsidiary that do not constitute Collateral; (iv) as reasonably determined by the Borrower, the other terms and conditions of such Refinancing Facility or Refinancing Notes (excluding pricing and optional prepayment or redemption terms) must (x) be substantially identical to, or not materially more favorable (taken as a whole) to the lenders providing such Refinancing Facility or Refinancing Notes, as applicable, than those applicable to the First Lien Facilities or Incremental Facilities being refinanced are to the Lenders or (y) reflect market terms and conditions at the time of incurrence or issuance thereof as determined by the Borrower (in either case, except for covenants and other provisions applicable only to periods after the latest final maturity date of the First Lien Facilities or Incremental Facilities existing at the time of such refinancing); (v) the amount of such Refinancing Facility or Refinancing Notes will be in an amount not in excess of the amount of loans and commitments refinanced plus fees, expenses, accrued interest, costs and premiums payable in connection therewith; and (vi) the proceeds of such Refinancing Facility or Refinancing Notes shall be applied, substantially concurrently with, or within one business day of, the incurrence thereof, to the prepayment of outstanding loans (and, in the case of the Revolving Facility, commitment reductions) under the applicable Facility being so refinanced; and provided further that in no event shall any Refinancing Facility or Refinancing Notes be permitted to be mandatorily prepaid prior to the repayment in full of the First Lien Facilities maturing no later than such Refinancing Facility or Refinancing Notes, unless accompanied by a ratable prepayment of the First Lien Facilities. The Refinancing Facilities and Refinancing Notes will not be subject to any other restrictions, including “most favored nation” pricing provisions.
Interest Rate and Fees:    As set forth in Annex I to this Exhibit C.
Default Rate:    Upon the occurrence and during the continuance of a Specified Event of Default (as defined below), all overdue principal amounts will bear interest at the applicable interest rate plus 2.0% per annum, and overdue interest and fees shall bear interest at the interest rate applicable to ABR loans (as defined in Annex I to this Exhibit C) plus 2.0%, and in each case, shall be payable on demand and shall begin to accrue from the date of such Specified Event of Default.

 

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   Specified Event of Default” means (a) any payment Event of Default (with respect to any principal, interest or fees only) and (b) any bankruptcy Event of Default.
Final Maturity and Amortization:    The Initial Term Loans and the Delayed Draw Term Loans (to the extent utilized) will mature on the date that is seven years after the Closing Date (the “Maturity Date”); provided that the First Lien Facilities Documentation will provide the right for individual Lenders to agree to extend the maturity date of their outstanding Term Loans upon the request of the Borrower and without the consent of any other Lender (subject to terms and conditions no more restrictive than those set forth in the First Lien Facilities Documentation, including pro rata extension offers open to all Lenders under the applicable tranche of Initial Term Loans subject to extension, but in any event not to be subject to “most favored nation” pricing or minimum extension condition). The Initial Term Loans and the Delayed Draw Term Loans will be payable in equal quarterly installments of 0.25%, commencing with the second full quarter ending after the Closing Date of the original principal amount of the Initial First Lien Facility and any Delayed Draw Term Loan Facility, respectively (with appropriate adjustments as may be necessary to cause the Delayed Draw Term Loans and to be treated as the same class as loans under the Initial First Lien Facility and to permit “fungibility” with the Initial First Lien Facility), with the balance payable on the Maturity Date. Notwithstanding the foregoing, the First Lien Administrative Agent shall be permitted to make such modifications in respect of amortization of the First Lien Facilities it deems reasonably necessary as agreed by the Borrower to provide for fungiblity of the Delayed Draw Term Loans with the Initial First Lien Facility and it is intended that the Delayed Draw Term Loans and the Initial First Lien Facility be fungible.
Guarantees:    Subject to the Certain Funds Provisions, all obligations of the Borrower under the First Lien Facilities and, to the extent not secured under the ABL Facility or the Second Lien Facility and designated by the Borrower, any interest rate protection or other swap or hedging agreements (other than any obligation of any Guarantor to pay or perform under any agreement, contract, or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act (a “Swap”), if, and to the extent that, all or a portion of the guarantee by such Guarantor of, or the grant by such Loan Party of a security interest to secure, such Swap (or any guarantee thereof) is or becomes illegal or unlawful under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof))

 

C-17


   or cash management arrangements, in each case, among any Loan Parties or any of their respective restricted subsidiaries and any other person (“Hedging/Cash Management Arrangements”) that are intended to be secured on an equal and ratable basis with the Term Loans will be unconditionally guaranteed jointly and severally on a senior secured basis by the same entities that guarantee the ABL Facility (the “Guarantors”).
Security:   

Subject to the limitations set forth below and subject to the Certain Funds Provisions, all obligations of the Borrower and the Guarantors in respect of the First Lien Facilities and all obligations with respect to the Hedging/Cash Management Arrangements will be secured by a first priority security interest (subject to permitted liens) on the Fixed Asset Collateral (as defined in Exhibit B to the Commitment Letter).

 

The Second Lien Facility will be secured by a second priority security interest (subject to permitted liens) on the Fixed Asset Collateral.

 

The ABL Facility will be secured by a third priority security interest (subject to permitted liens) on the Fixed Asset Collateral.

 

Subject to the limitations set forth below and subject to the Certain Funds Provisions, all obligations of the Borrower and the Guarantors in respect of the First Lien Facilities and all obligations with respect to the Hedging/Cash Management Arrangements will be secured by a second priority security interest (subject to permitted liens) in the Current Asset Collateral (as defined in Exhibit B to the Commitment Letter).

 

The ABL Facility will be secured by a first priority security interest (subject to permitted liens) on the Current Asset Collateral.

 

The Second Lien Facility will be secured by a third priority security interest (subject to permitted liens) on the Current Asset Collateral.

 

Notwithstanding anything to the contrary, the Collateral will exclude the Excluded Assets as referred to in Exhibit B to the Commitment Letter.

 

Notwithstanding anything to the contrary contained herein, (a) neither the Borrower nor the Guarantors will be required to grant a security interest in any asset or perfect a security

 

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   interest in any Collateral to the extent (i) the cost, burden, difficulty or consequence of obtaining or perfecting a security interest therein outweighs the benefit of the security afforded thereby as reasonably determined by the Borrower in its reasonable judgment in consultation with the First Lien Administrative Agent or (ii) the granting of a security interest in such asset would be prohibited by enforceable anti-assignment provisions of contracts or applicable law or, in the case of assets consisting of licenses, agreements or similar contracts, to the extent the grant of security therein would violate the terms of such license, agreement or similar contract relating to such asset or would trigger termination of any contract pursuant to any “change of control” or similar provision, in each case, after giving effect to any applicable provisions of the Uniform Commercial Code or other applicable law, (b) (i) with respect to any Loan Party, organized in the United States (including its equity interests and assets (other than equity interests of a Loan Party that is a Foreign Subsidiary)) no actions will be required outside of the United States in order to create or perfect any security interest in any assets and no foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches will be required and (ii) with respect to a foreign subsidiary that is a Guarantor (including its equity interests and assets), security to be provided including foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches will be reasonably agreed by the Borrower and the First Lien Administrative Agent, (c) any required mortgages will be permitted to be delivered after the Closing Date in accordance with the Certain Funds Provisions, (d) the Loan Parties will not be required to seek or obtain any landlord lien waiver, estoppel, warehouseman waiver or other collateral access or similar letter or agreement and (e) any liens on the following Collateral will not be required to be perfected other than by filing of a UCC financing statement: (i) assets requiring perfection through control agreements or other control arrangements (other than control of pledged capital stock and material promissory notes to the extent otherwise required above (with perfection by control not required with respect to cash and cash equivalents, other deposit accounts and securities and commodities accounts (including securities entitlements and related assets))); (ii) vehicles and any other assets subject to certificates of title; (iii) commercial tort claims; and (iv) letter of credit rights to the extent not perfected as supporting obligations by the filing of a UCC financing statement on the primary collateral.

 

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Liens on assets that are transferred to a Person that is not (and is not required to be) a Loan Party in a transaction permitted by the First Lien Facilities Documentation and liens on Excluded Assets shall be automatically released. Subject to a receipt of an officer’s certificate of the Borrower, the First Lien Administrative Agent shall execute such acknowledgments and releases as the Borrower may request in connection with any such release, and the First Lien Administrative Agent shall be entitled to (and shall) rely exclusively on an officer’s certificate of the Borrower when executing any such acknowledgment or release.

 

In addition, if not otherwise provided for in the existing intercreditor agreement, the First Lien Facilities Documentation will authorize and require the First Lien Administrative Agent to enter into any Acceptable Intercreditor Agreement (as defined below) upon the request of the Borrower in connection with the incurrence of additional debt that is permitted to be incurred and secured under the First Lien Facilities Documentation such that it is secured by a lien on the Collateral that is pari passu or junior with the lien on the Collateral securing the First Lien Facilities.

 

Acceptable Intercreditor Agreement” means, as applicable: (a) in the case of Indebtedness that is secured on a pari passu basis with the First Lien Facilities, customary intercreditor documentation consistent with the Documentation Principles and substantially in the form of an exhibit attached to the First Lien Facilities Documentation (as such form may be modified in a manner (i) reasonably acceptable to the Borrower and the First Lien Administrative Agent or (ii) where such modifications are posted for review by the Lenders and the Required Lenders (as defined below) do not object in writing within three business days after such agreement is posted), (b) in the case of Indebtedness that is secured on a junior lien basis as compared to the First Lien Facilities, customary intercreditor documentation consistent with the Documentation Principles and substantially in the form of an exhibit attached to the First Lien Facilities Documentation (as such form may be modified in a manner (i) reasonably acceptable to the Borrower and the First Lien Administrative Agent or (ii) where such modifications are posted for review by the Lenders and the Required Lenders do not object in writing within three business days after such agreement is posted) or (c) in the case of any Indebtedness, (i) an intercreditor agreement the terms of which are consistent with market terms (as determined by the Borrower and the First Lien Administrative Agent

 

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   in good faith) governing arrangements for the sharing and subordination of liens and/or arrangements relating to the distribution of payments, as applicable, at the time the intercreditor agreement is proposed to be established in light of the type of indebtedness subject thereto or (ii) any other intercreditor agreement which is reasonably acceptable to the Borrower and the First Lien Administrative Agent so long as, in each case, such intercreditor agreement is posted for review by the Lenders and not objected to by the Required Lenders within three business days thereafter.
Intercreditor Agreement:   

The relative rights and priorities in the Collateral for each of the First Lien Facilities and the Second Lien Facility will be set forth in a customary intercreditor agreement, consistent with the Documentation Principles (the “First Lien/Second Lien Intercreditor Agreement”).

 

The relative rights and priorities in the Collateral for each of the First Lien Term Facility, the Second Lien Term Facility and the ABL Facility will be set forth in the ABL/Term Loan Intercreditor Agreement.

Mandatory Prepayments:   

Mandatory prepayments with respect to the Initial First Lien Facility and the Delayed Draw Term Loan Facility shall be limited to:

 

(a)   commencing with the end of the first full fiscal year ending after the Closing Date, 50% of Excess Cash Flow (which shall be set forth in customary detail by the Borrower in a certificate delivered to the First Lien Administrative Agent), with step-downs to (i) 25% upon achievement of a First Lien Net Leverage Ratio equal to or less than 4.50 to 1.00 and (ii) 0% upon achievement of a First Lien Net Leverage Ratio equal to or less than 4.00 to 1.00 provided that (i) the amount of the prepayment otherwise required from Excess Cash Flow shall be reduced on a dollar for dollar basis by certain prepayments of debt in a manner consistent with the Documentation Principles (“Debt Reduction”), (ii) such First Lien Net Leverage Ratio shall be calculated after giving effect to any such contemplated payment under this clause (a) and any prepayments after the end of such applicable fiscal year and prior to such Excess Cash Flow payment and (iii) such payment shall only be required in respect of any fiscal year in an amount in excess of $10.0 million (the “ECF De Minimis Amount”);

 

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(b)   100% of the Net Cash Proceeds of certain non-ordinary course Asset Sales by the Borrower and its Restricted Subsidiaries, subject to thresholds to be mutually agreed and the right of the Borrower to reinvest 100% of such proceeds, if such proceeds are reinvested (or committed to be reinvested) within 180 days and, if so committed to be reinvested, so long as such reinvestment is actually completed within 180 days after the expiration of such initial 365-day period; and

 

(c)   100% of the net cash proceeds of issuances of debt obligations of the Borrower and its Restricted Subsidiaries after the Closing Date (other than debt permitted under the First Lien Facilities Documentation (excluding the proceeds of any Refinancing Facility or Refinancing Notes)).

 

Mandatory prepayments will be applied, without premium or penalty, subject to reimbursement of the Lenders’ usual and customary breakage costs (excluding loss of profit), in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period among the tranches as directed by the Borrower (or, in the case of no direction, pro rata among the tranches) and within a tranche as directed by the Borrower (and absent such direction, in direct order of maturity thereof).

 

Any Lender may elect not to accept its pro rata portion of any mandatory prepayment (each, a “Declining Lender”). Any prepayment amount declined by a Declining Lender may, subject to the terms of the Second Lien Facility, be retained by the Borrower (any amounts retained by the Borrower, the “Declined Amounts”).

 

Prepayments from Restricted Subsidiaries’ Excess Cash Flow and Asset Sale proceeds will be limited under the First Lien Facilities Documentation to the extent the Borrower determines that such prepayments (including the repatriation of cash in connection therewith) would (a) be prohibited or delayed by applicable law or (b) the repatriation of cash in connection therewith would result in material adverse tax consequences. All prepayments referred to in clauses (a) and (b) above are subject to permissibility under (x) local law (e.g. financial assistance, corporate benefit, thin capitalization, capital maintenance, liquidity maintenance and similar legal principles, restrictions on upstreaming

 

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of cash intra-group and the fiduciary and statutory duties of the directors of the relevant subsidiaries) and (y) material organizational document or other contractual restrictions as a result of minority ownership or in any material agreements.

 

Mandatory prepayments required under the First Lien Facilities Documentation may, if required pursuant to the terms of any other indebtedness secured pari passu with the First Lien Facilities, be applied to the Term Loans and such other pari passu indebtedness, in each case on a ratable basis based on the outstanding principal amounts thereof.

 

Excess Cash Flow” shall be defined in a manner consistent with the Documentation Principles, and shall in any event be reduced for, among other things, (x) cash paid during the applicable Excess Cash Flow Period (as defined below) by the Borrower or any Restricted Subsidiary for capital expenditures, permitted investments, Permitted Acquisitions (as defined below) and permitted restricted payments and (y) at the option of the Borrower, cash payments that the Borrower or any Restricted Subsidiary is required, has committed or has budgeted, in each case, to make in respect of taxes, interest, capital expenditures, permitted investments, Permitted Acquisitions and permitted restricted payments within 365 days after the end of such applicable Excess Cash Flow Period; provided that (A) amounts described in clause (y) above will not reduce Excess Cash Flow in subsequent periods and, to the extent not so paid, will increase Excess Cash Flow in the subsequent period and (B) amounts described in clauses (x) and (y) shall reduce Excess Cash Flow only to the extent not financed with the proceeds of incurrences of long-term indebtedness (other than revolving indebtedness).

 

Excess Cash Flow Period” means each fiscal year of the Borrower, beginning with the first full fiscal year after the Closing Date.

Voluntary Prepayments and Commitment Reductions:    Voluntary reductions of the unutilized portion of the Delayed Draw Term Loan Facility and prepayments of loans under the Initial First Lien Facility, any Incremental Facility or the Delayed Draw Term Loan Facility will be permitted at any time, in minimum principal amounts not greater than those set forth in the Bank Sponsor Precedent, without premium or penalty (except, in the case of Initial First Lien Facility and the Delayed Draw Term Loan Facility, as provided below), subject to reimbursement of the Lenders’ usual and customary breakage costs (excluding loss of profit) in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period.

 

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The Borrower shall pay a “prepayment premium” in connection with any Repricing Event (as defined below) with respect to all or any portion of the Initial First Lien Facility and/or the Delayed Draw Term Loan Facility, as applicable, that occurs on or before the date that is six months after the Closing Date, in an amount equal to 1.00% of the principal amount of the Initial First Lien Facility or the Delayed Draw Term Loan Facility subject to such Repricing Event.

 

The term “Repricing Event” means (i) any prepayment of the Initial Term Loans or Delayed Draw Term Loans with the proceeds of, or any conversion of Initial Term Loans or Delayed Draw Term Loans into, any new or replacement tranche of broadly syndicated term loans of any Loan Party bearing interest at an “effective” interest rate less than the “effective” interest rate applicable to the Initial Term Loans or Delayed Draw Term Loans, as applicable, the primary purpose of which is to reduce such “effective” interest rate and (ii) any amendment to the Initial First Lien Facility or the Delayed Draw Term Loan Facility that, directly or indirectly, reduces the “effective” interest rate applicable to the Initial Term Loans or Delayed Draw Term Loans the primary purpose of which is to reduce such “effective” interest rate (in each case, (x) taking into account OID and upfront fees, which will be deemed to constitute like amounts of OID, being equated to interest rate margins based on an assumed four-year life to maturity, (y) excluding the effect of any other arrangement, structuring, syndication, amendment consent or other fees payable in connection therewith that are not shared with all providers of such financing and (z) excluding the effect of any fluctuations in LIBOR or any other applicable base rate); provided that no prepayment premium will apply if any such Repricing Event is in connection with a dividend recapitalization, a change of control, initial public offering or a Transformative Event. “Transformative Event” means any acquisition (including by merger or consolidation), investment, dissolution, liquidation, consolidation or disposition by the Borrower, a restricted subsidiary, Holdings or a parent entity (other than the Investors) that is either (a) not permitted by the terms of the First Lien Facilities Documentation immediately prior to the consummation of such transaction or (b) if permitted by the terms of the First Lien Facilities Documentation immediately prior to the consummation of such transaction, would not provide the Borrower and its Restricted Subsidiaries with adequate flexibility under

 

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the First Lien Facilities Documentation for the continuation and/or expansion of their combined operations following such consummation, as reasonably determined by the Borrower acting in good faith.

 

All voluntary prepayments of Initial Term Loans or Delayed Draw Term Loans under the First Lien Facilities and any Incremental Facilities will be applied among the tranches as directed by the Borrower (or, in the case of no direction, pro rata among the tranches) and within a tranche as directed by the Borrower (and absent such direction, in direct order of maturity thereof).

Representations and Warranties:    Limited to the following (to be applicable to Holdings (solely as it relates to its organizational status and good standing, power and authority, execution, delivery and enforceability of its guarantee and its pledge of equity interests of the Borrower, no conflicts and material compliance with laws), the Borrower and its Restricted Subsidiaries only and subject, in each case, to materiality thresholds, baskets and other exceptions and qualifications consistent with the Documentation Principles and the First Lien Facilities Documentation): organizational status and good standing; power and authority, execution, delivery and enforceability of First Lien Facilities Documentation; with respect to First Lien Facilities Documentation, no violation of, or conflict with, law, organizational documents or material agreements; compliance with law (including ERISA and environmental); compliance with Anti-Corruption Laws and AML and Sanctions Laws; Investment Company Act; no material litigation; margin regulations; material governmental approvals; after the Closing Date, no Material Adverse Effect (as defined below) since the date of the most recent audited financial statements delivered prior to the Closing Date; materially accurate and complete disclosure in all material respects; taxes; ERISA; equity interest and ownership of subsidiaries; intellectual property; environmental laws; use of proceeds; ownership of properties; subject to the Certain Funds Provisions and the restrictions described under the caption “Security,” creation, validity and perfection of liens and other security interests (subject to permitted liens); and consolidated Closing Date solvency of the Borrower and its subsidiaries (which representation shall be satisfied by the delivery of a solvency certificate in the form attached as Annex I to Exhibit E).

 

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   Material Adverse Effect” means a material adverse effect on (a) the business, financial condition or results of operations, in each case, of the Borrower and its Restricted Subsidiaries (taken as a whole) or (b) the material rights and remedies of the Administrative Agent and the Lenders (taken as a whole) under the First Lien Facilities Documentation.
Conditions to Initial Borrowings:    The availability of borrowings under the First Lien Facilities on the Closing Date will be subject solely to the applicable conditions set forth in Section 6 (including by reference to Exhibit E) of the Commitment Letter.
Affirmative Covenants:    Limited to the following (to be applicable to the Borrower and its Restricted Subsidiaries only (and, in the case of Holdings, maintenance of existence, maintenance of books and records, inspection rights, payment of taxes, compliance with laws and further assurances) and subject, in each case, to materiality thresholds, baskets and other exceptions and qualifications consistent with the Documentation Principles and as may otherwise be agreed upon): delivery of (i) within (A) 150 days of fiscal year end for the first fiscal year ended after the Closing Date and (B) 90 days of fiscal year end for each fiscal year thereafter, annual audited consolidated financial statements and (ii) commencing with the fiscal quarter ended after the Closing Date for which financial statements are required to be delivered, within 75 days of fiscal quarter end for the first three fiscal quarters ended after the Closing Date and within 60 days of the end of the first three fiscal quarters of each fiscal year ended thereafter, quarterly unaudited consolidated financial statements, and, in the case of the annual financial statements, an opinion of an independent accounting firm (which opinion shall not be subject to any “going concern” statement, explanatory note or like qualification or exception (other than a “going concern” statement, explanatory note or like qualification or exception resulting solely from (i) an upcoming maturity date of indebtedness occurring within one year from the time such opinion is delivered or (ii) anticipated or actual financial covenant non-compliance); annual budget reports in the form customarily prepared by the Borrower (with delivery time periods to be consistent with the delivery requirements for the audited financial statements); provided that the requirements to provide a budget shall automatically cease to apply upon an initial public offering of the Borrower or any Restricted Subsidiary or any holding company of the Borrower; notices of knowledge of Defaults, ERISA events and litigation that could reasonably be expected to result in a Material Adverse Effect; commercially reasonable efforts to maintain public corporate credit ratings and public credit ratings for the First Lien Facilities; maintenance of property (subject to casualty, condemnation and normal wear and tear) and customary insurance (but not, for

 

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the avoidance of doubt, flood insurance except to the extent required by applicable law); maintenance of existence; visitation rights upon reasonable prior notice; maintenance of books and records; payment of material taxes; compliance with laws and regulations (including ERISA and environmental); compliance with Anti-Corruption Laws and AML and Sanctions Laws; additional Guarantors and Collateral (subject to limitations set forth under the caption “Security”); use of proceeds; and further assurances on collateral matters.

 

Restricted Subsidiary” means, a subsidiary of a Person that is not an “Unrestricted Subsidiary” (as defined below).

Negative Covenants:   

Limited to the following (capitalized terms used in this section shall be defined in a manner consistent with Documentation Principles, unless otherwise defined herein) and subject, in each case, to exceptions, qualifications, materiality thresholds and baskets consistent with the Documentation Principles, as set forth below and as may otherwise be agreed upon:

 

•   Indebtedness. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, incur, create or assume any Indebtedness (excluding obligations under or in respect of any floorplan facility and other inventory financing agreements); provided that, the Borrower and its Restricted Subsidiaries may incur (a) unlimited Indebtedness so long as, immediately after giving effect to the issuance, incurrence or assumption of such Indebtedness, (x) the Total Net Leverage Ratio, calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, is equal to or less than the greater of (i) 6.50:1.00 and (ii) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Total Net Leverage Ratio immediately prior to the incurrence of such debt or (y) the Cash Interest Coverage Ratio, calculated on a pro forma basis, is equal to or greater than the lesser of (i) 2.00 to 1.00 and (ii) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Cash Interest Coverage Ratio immediately prior to the incurrence of such debt (“Ratio Debt”); provided further (A) in the event that any Ratio Debt is incurred in the form of term loans that are secured pari passu with the Liens on the Collateral securing the First Lien Facilities, such Ratio Debt shall be subject to the MFN Provision and (B) such Ratio Debt shall be subject

 

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to a non-guarantor cap to be agreed, (b) any Permitted Refinancing Indebtedness incurred to refinance Ratio Debt; provided further that the aggregate principal amount of Ratio Debt incurred by Restricted Subsidiaries of the Borrower that are not Guarantors may not exceed the greater of (x) $30.0 million and (y) 15% of Consolidated EBITDA, (c) indebtedness in an amount equal to 100% of the amount of any cash capital contribution in respect of permitted equity of the Borrower and/or its Restricted Subsidiaries (other than any Specified Equity Contribution and in each case to the extent the proceeds of such capital contribution are not otherwise applied), (d) indebtedness (x) in an amount not to exceed 100% of the amount of restricted payments that may be made at the time of the incurrence thereof (the “Available RP Capacity Basket”) and (y) in an amount not to exceed 100% of the amount of cash payments or other distributions in cash in respect of any Junior Financing that may be made at the time of the incurrence thereof (the “Available RDP Capacity Basket”) and (e) any indebtedness in connection with a Permitted Sale and Leaseback (as defined below).

 

•   Liens. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, create, incur or assume any Lien securing indebtedness on any of its property or assets; provided, that (a) Liens that rank pari passu with the Liens securing the First Lien Facilities shall be permitted if the First Lien Net Leverage Ratio as of the date on which such Liens are first created, is less than or equal to the greater of (x) 4.75 to 1.00 and (y) if such Lien is securing Indebtedness incurred to finance a Permitted Acquisition or other permitted Investment, the First Lien Net Leverage Ratio immediately prior to the incurrence of such Indebtedness; provided further that in the event any such Liens are secured pari passu with the Liens on the Collateral securing the First Lien Facilities, such debt securing such Liens shall be, subject to the MFN Provision, (b) Liens that rank junior to the Liens securing the First Lien Facilities shall be permitted if the Secured Net Leverage Ratio as of the date on which such Liens are first created, is less than or equal to the greater of (x) 6.50 to 1.00 and (y) if such Lien is securing Indebtedness incurred to finance a Permitted Acquisition or other permitted Investment, the Secured Net Leverage Ratio immediately prior to the incurrence of such Indebtedness, (c) liens securing

 

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indebtedness incurred pursuant to the Available RP Capacity Basket and Available RDP Capacity Basket will be permitted and (d) any lien in connection with a Permitted Sale and Leaseback (as defined below) will be permitted.

 

•   Investments. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, directly or indirectly, make or hold any Investment (to be defined in the First Lien Facilities Documentation); provided, that (a) the Borrower and its Restricted Subsidiaries may make unlimited Investments so long as immediately after giving effect to the making of such Investment, (x) no Specified Event of Default is continuing immediately prior to making such Investment or would result therefrom (or if, earlier, the execution of a binding agreement governing such Investment) and (y) the Total Net Leverage Ratio, calculated on a pro forma basis, is equal to or less than 6.00 to 1.00, (b) any use of the Available Amount Basket (as defined below) shall be permitted, (c) unlimited intercompany Investments among the Borrower and its restricted subsidiaries will be permitted, (d) Permitted Acquisitions and pre-existing investments (not made in contemplation of such acquisition) made in connection therewith will be permitted without restriction and (e) Investments pursuant to the Available RP Capacity Basket and Available RDP Capacity Basket will be permitted.

 

Permitted Acquisition” means any acquisition of all or substantially all the assets of, or a majority of the Equity Interests (or any acquisition of Equity Interests if, following the acquisition of such Equity Interests, a majority of the Equity Interests is owned) in, or merger, consolidation or amalgamation with, a Person or any acquisition of assets constituting a business unit, division or line of business of a Person (or any subsequent investment made in a person, division or line of business previously acquired in a Permitted Acquisition); provided that (i) no Specified Event of Default is continuing immediately prior to execution of the binding agreement governing such Investment or would result therefrom and (ii) Permitted Acquisitions shall be subject to customary further assurances, additional guarantees and additional collateral provisions consistent with Documentation Principles.

 

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•   Sale and Leaseback Transactions. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, enter into any Sale and Lease-Back Transaction (to be defined in a manner to be mutually agreed).

 

•   Mergers, Consolidations, Sales of Assets and Acquisitions. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, merge into, or consolidate or amalgamate with, any other person, or permit any other person to merge into or consolidate with it, or sell, transfer or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets, or issue, sell, transfer or otherwise dispose of any Equity Interests of any Restricted Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person or any division, unit or business of any other person.

 

•   Restricted Payments. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, make any Restricted Payments; provided that Restricted Payments shall be permitted (a) in an amount not to exceed the Available Amount Basket (as defined below) on such date such Restricted Payments are made, provided that any use of the Available Amount Basket for Restricted Payments shall only be permitted if no Specified Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom; (b) on an unlimited basis so long as (i) immediately after giving effect to the making of such Restricted Payment, the Borrower’s Total Net Leverage Ratio, calculated on a pro forma basis, is 5.50 to 1.00 or less and (ii) no Specified Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom; (c) customary tax distributions; (d) in an amount not to exceed the greater of (x) an amount to be agreed and (y) a percentage of to be agreed of Consolidated EBITDA as of the end of the most recent four quarter period for which financial statements are internally available; and (e) in an amount equal to the Available RDP Capacity Basket.

 

Available Amount Basket” shall be defined in accordance with the Documentation Principles, but in any event, shall include (A) a “starter” basket

 

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(the “Available Amount Starter Basket”) equal to the greater of (x) $75.0 million and (y) 35.0% of Consolidated EBITDA as of the end of the most recent four quarter period for which financial statements are internally available, (B) either, at the option of the Borrower to be made on or prior to the commencement of general syndication of the First Lien Facilities, (i) the retained portion of Excess Cash Flow not otherwise applied pursuant to the mandatory prepayments required under the First Lien Facilities Documentation, which retained portion of Excess Cash Flow for any period shall not be less than zero or (ii) 50% of cumulative Consolidated Net Income (commencing with the first day of the fiscal quarter in which the Closing Date occurs) (this clause (B), the “Available Amount Builder Basket”) and (C) the Declined Amounts. For the avoidance of doubt, no component shall be subject to any financial or similar test.

 

•   Transactions with Affiliates. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates in a transaction involving aggregate consideration in excess of an amount to be agreed, unless such transaction is (a) otherwise permitted (or required) under the First Lien Facilities Documentation or (b) upon terms no less favorable to the Borrower or its Restricted Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a person that is not an Affiliate.

 

•   Business of Borrower and its Subsidiaries. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, engage at any time in any business or business activity other than any business or business activity conducted by the Borrower or any of its Restricted Subsidiaries on the Closing Date and any similar, corollary, related, ancillary, incidental or complementary business or business activities or a reasonable extension, development or expansion thereof or ancillary thereto.

 

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•   Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By Laws and Certain Other Agreements; etc. The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, (a) amend or modify in any manner materially adverse to the Lenders the articles or certificate of incorporation (or similar document), by-laws, limited liability company operating agreement, partnership agreement or other organizational documents of the Borrower or any of its Restricted Subsidiaries, (b) make any cash payment or other distribution in cash or otherwise (rather than regularly scheduled interest and principal payments on maturity) in respect of, or amend or modify, or permit the amendment or modification of, any provision of, any Junior Financing (it being agreed that exchange offers will be permitted on terms to be agreed), or (c) permit any subsidiary that is not an Immaterial Subsidiary (such subsidiary, a “Material Subsidiary”) to enter into any agreement or instrument that by its terms restricts (i) with respect to any such Material Subsidiary that is not a Loan Party, Restricted Payments from such subsidiary to the Borrower or any other Loan Party that is a direct or indirect parent of such Material Subsidiary or (ii) the granting of Liens by such Subsidiary pursuant to the Security Documents, in each case contemplated by clauses (a) and (b), except (x) as would be permitted by the Bank Sponsor Precedent and (y) cash payments or other distributions in cash in respect of any Junior Financing (1) with amounts under the Available Amount Basket on such date so long as no Specified Event of Default has occurred and is continuing immediately prior to making such payment or (2) so long as immediately after giving effect to such payment or distribution, (x) the Borrower’s Total Net Leverage Ratio, calculated on a pro forma basis, is 5.75 to 1.00 or less and (y) no Specified Event of Default has occurred and is continuing immediately prior to making such payment or would result therefrom.

 

•   Holdings. Holdings will not, conduct, transact or otherwise engage in any active trade or business or operations other than through the Borrower; provided that the foregoing will not prohibit Holdings from taking actions related to the following (and activities incidental thereto): (i) its ownership of the Equity Interests of the Borrower, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its

 

C-32


   obligations with respect to the ABL Facility, the Initial First Lien Facility, the Delayed Draw Term Loan Facility, the Second Lien Facility, other Indebtedness of Holdings, the Borrower or any of its subsidiaries, the Acquisition Agreement and the other agreements contemplated by the Acquisition Agreement, (iv) any public offering of its common stock or any other issuance of its Equity Interests (including Qualified Equity Interests), (v) the making of Restricted Payments, (vi) the incurrence of Permitted Holdings Debt (to be defined in a manner consistent with the Documentation Principles), (vii) making contributions to the capital of its Subsidiaries, (viii) guaranteeing the obligations of the Borrower and its Subsidiaries, (ix) participating in tax, accounting and other administrative matters as a member or parent of the consolidated group, (x) holding any cash or certain property (including cash and certain property received in connection with Restricted Payments made by the Borrower), (xi) providing indemnification to officers and directors, (xii) the making of any Investments and (xiii) activities incidental to the businesses or activities described above.
Financial Covenant:    None.
Unrestricted Subsidiaries:    The First Lien Facilities Documentation will contain provisions pursuant to which, subject to limitations on loans, advances, guarantees and other investments, the Borrower will be permitted to designate any existing or subsequently acquired or organized subsidiary as an “Unrestricted Subsidiary” and subsequently re-designate any such Unrestricted Subsidiary as a Restricted Subsidiary so long as, subject to the Limited Condition Provision, (a) no Specified Event of Default is continuing and (b) such designation or re-designation would not cause a Specified Event of Default. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall be deemed to be an incurrence at the time of such designation of indebtedness of such subsidiary or liens on the assets of such subsidiary, in each case, outstanding on the date of such designation. The designation of any subsidiary as an Unrestricted Subsidiary shall constitute an investment for purposes of the investments negative covenant described under the caption “Negative Covenants” above. Unrestricted Subsidiaries will not be subject to the mandatory prepayment, representation and warranty, affirmative or negative covenant or Event of Default provisions of the First Lien Facilities Documentation.

 

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Events of Default:    Usual and customary events of default to be set forth in the First Lien Facilities Documentation (collectively, “Events of Default” and each, an “Event of Default”); provided that the incorrectness in any material respect of any representation or warranty that can be cured shall be subject to a 30 day grace period commencing upon notice from the First Lien Administrative Agent. Notwithstanding the foregoing, a breach of the terms of the ABL Facility shall not constitute an event of default for purposes of the First Lien Facilities or any Incremental Facility unless the lenders under the ABL Facility have accelerated the ABL Facility and terminated the commitments in respect thereof as a result of such breach.
Assignments and Participations:   

After the Closing Date, the Lenders will be permitted to assign loans under the First Lien Facilities with the consent of the Borrower and the First Lien Administrative Agent); provided that (i) no consent of the Borrower will be required (A) if such assignment is made to another Lender or an affiliate or approved fund of such Lender or (B) after the occurrence and during the continuance of a Specified Event of Default (with respect to the Borrower), (ii) the Borrower will be deemed to have consented to an assignment if the Borrower has not responded within 10 business days after having received written notice thereof from the First Lien Administrative Agent and (iii) no consent of the First Lien Administrative Agent will be required with respect to, subject to the proviso below, Affiliate Lenders, Debt Fund Affiliates or Holdings and its Subsidiaries and other exceptions to be set forth in the First Lien Facilities Documentation; provided, further, that no assignments will be made to any Disqualified Institutions.

 

The First Lien Administrative Agent shall receive a processing and recordation fee of $3,500 for each assignment (unless waived by the First Lien Administrative Agent).

 

The Lenders will be permitted to sell participations in loans without restriction in accordance with applicable law and consistent with the Documentation Principles (other than, to the extent that a list of the Disqualified Institutions shall have been made available to the Lenders prior to the execution of such participation right, to Disqualified Institutions). Voting rights of participants shall be limited to matters set forth under “Voting” below with respect to which the unanimous vote of all Lenders (or all directly and adversely affected Lenders, if the participant is directly and adversely affected) would be required.

 

C-34


  

Assignments of Term Loans (and loans under any Incremental Facilities) to, and purchases by, Holdings, the Borrower and its subsidiaries will be permitted without any consent, including, without limitation, through open-market purchases so long as (a) no Specified Event of Default has occurred and is continuing, (b) the loans purchased are immediately cancelled and (c) unless otherwise agreed by the parties thereto, all applicable parties to the relevant transaction render customary “big boy” disclaimer letters.

 

Assignments of Term Loans (or loans under any Incremental Facilities) to the Sponsor and its affiliates (other than Holdings, the Borrower and its subsidiaries, each, an “Affiliated Lender”) will be permitted on a non-pro rata basis through open-market purchases and/or Dutch auctions open to all Lenders on a pro rata basis subject to the following limitations:

 

(a) Affiliated Lenders will not be permitted to attend or participate in meetings attended solely by the Lenders and the First Lien Administrative Agent or receive information provided solely to the Lenders by the First Lien Administrative Agent or any Lender under the First Lien Facilities Documentation;

 

(b) for purposes of any amendment, waiver or modification of the First Lien Facilities Documentation that does not require the consent of each Lender or each affected Lender or does not adversely affect such Affiliated Lender in any material respect as compared to other Lenders, Affiliated Lenders will be deemed to have voted in the same proportion as non-affiliated Lenders voting on such matter;

 

(c) the aggregate principal amount of loans under the First Lien Facilities (and loans under any Incremental Facility) assigned to or purchased by Affiliated Lenders may not exceed 30% of the aggregate principal amount of all such loans of all Lenders outstanding at the time of assignment or purchase; and

 

(d) unless otherwise agreed by the parties thereto, all applicable parties to the relevant transaction render customary “big boy” disclaimer letters.

 

Notwithstanding anything to the contrary contained herein, Debt Fund Affiliates will not be subject to the foregoing limitations and will be entitled to vote as if they were Lenders; provided, that all loans held by Debt Fund Affiliates may not account for more than 49.9% of the loans of consenting Lenders included in determining whether Required Lenders

 

C-35


  

have consented to any amendment, modification, waiver or any other action with respect to any of the terms of, or otherwise have acted on any manner with respect to, the First Lien Facilities Documentation.

 

The First Lien Facilities Documentation will permit (but not require) Affiliated Lenders to contribute any Term Loans acquired to Holdings or any of its subsidiaries for purposes of cancelling such debt, which may include contribution (with the consent of the Borrower) to the Borrower (whether through any of its direct or indirect parent entities or otherwise) in exchange for debt or equity securities of such parent entity or the Borrower that are otherwise permitted to be issued by such entity or the Borrower at such time.

  

Debt Fund Affiliate” means (a) any affiliate of the Sponsor that is a bona fide bank, debt fund, distressed asset fund, hedge fund, mutual fund, insurance company, financial institution or an investment vehicle that is engaged in the business of investing in, acquiring or trading commercial loans, bonds and similar extensions of credit in the ordinary course, in each case, that is not organized primarily for the purpose of making equity investments, (b) any affiliate, division or internal group of a Permitted Investor (as defined below) that has the principal purpose of investing in, acquiring or trading commercial loans, bonds or similar extensions of credit in the ordinary course and (c) any investment fund or account of a Permitted Investor managed by third parties (including by way of a managed account, a fund or an index fund in which a Permitted Investor has invested) or a division or internal group within a Permitted Investor that is not organized or used primarily for the purpose of making equity investments, in each case, in the case of clauses (a), (b) and (c) with respect to which the Sponsor does not, directly or indirectly, possess the power to direct or cause the direction of the investment policies of such entity.

 

Permitted Investors” means (a) the Sponsor, (b) its affiliates and investment managers, (c) any fund or account managed by any of the persons described in clause (a) or (b) of this definition, (d) any employee benefit plan of Holdings or any of its subsidiaries and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan and (e) investment vehicles of members of management of Holdings or the Borrower or any parent entity of the foregoing that invest in, acquire or trade commercial loans but excluding natural persons.

 

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Voting:    Amendments and waivers of the First Lien Facilities Documentation will require the approval of Lenders holding more than 50.0% of the aggregate amount of the loans and commitments under the Facilities (the “Required Lenders”), except that (i) the consent of each Lender directly and adversely affected thereby (but not the Required Lenders except in the case of clause (A) below, which changes shall require consent of the Required Lenders in addition to each Lender directly and adversely affected thereby) will be required with respect to: (A) increases in or extensions of the commitment of such Lender (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment will not constitute an extension or increase of any commitment); (B) reductions of principal (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment will not constitute a reduction in principal), interest (other than a waiver of default interest or a default waiver or change to a financial ratio) or fees; (C) extensions of scheduled amortization payments, the date for payment of any interest or fees or the final maturity (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment will not constitute an extension of any scheduled amortization payment, the date for payment of any interest or fees or the final maturity date) and (D) changes to the pro rata sharing provisions (with exceptions for certain transactions to be agreed, including amend and extend and refinancing amendment transactions), (ii) the consent of 100% of the Lenders will be required with respect to (A) modifications to any of the voting percentages and (B) releases of all or substantially all Guarantors or releases of all or substantially all of the Collateral (other than in connection with any sale of Collateral or of the relevant Guarantor permitted by the First Lien Facilities Documentation), (iii) the consent of the First Lien Administrative Agent, the Swingline Lender and the Issuing Lender, as applicable, will be required for any amendment that modifies agency, swing line or letter of credit specific provisions and (iv) any amendment or waiver that by its terms affects the rights or duties of Lenders holding loans or commitments of a particular class (but not the Lenders holding loans or commitments of any other class) will require only the requisite percentage in interest of the affected class of Lenders that would be required to consent thereto if such class of Lenders were the only class of Lenders.

 

C-37


  

Amendments and waivers to the Delayed Draw Terms and Conditions shall require the consent of (i) the Required Lenders and (ii) Lenders holding more than 50.0% of the aggregate amount of loans and commitments under the Delayed Draw Term Loan Facility (the “Required Delayed Draw Lenders”).

 

The First Lien Facilities Documentation will contain customary provisions for replacing Defaulting Lenders (the definition of which is to be substantially consistent with, and in any event no less favorable to the Borrower than, the current LSTA model credit agreement provisions), replacing Lenders claiming increased costs, tax gross ups and similar required indemnity payments and replacing non-consenting Lenders in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby so long as Lenders holding at least 50% of the aggregate amount of the loans and commitments under the First Lien Facilities will have consented thereto.

 

The First Lien Facilities Documentation will contain customary “amend and extend” provisions pursuant to which the Borrower may extend commitments and/or outstandings with only the consent of the respective extending Lenders; provided that it is understood that no existing Lender will have any obligation to commit to any such extension.

Defaulting Lender Provisions:    Provisions substantially consistent with, and in any event no less favorable to the Borrower than, the current LSTA model credit agreement provisions as of the Closing Date addressing the failure of a Lender to fund when required, a Lender becoming the subject of an insolvency event or similar events affecting such Lender’s ability to perform its obligations under the First Lien Facilities, including forfeiture (or reallocation) of commitment fees and voting rights and ability of the Issuing Lender to request cash collateral.
Cost and Yield Protection:    Customary provisions protecting the Lenders in the event of prepayment or failure to borrow (funding indemnity), unavailability of funding, capital adequacy and liquidity requirements, and increased costs due to changes in law or regulation after the date of the First Lien Facilities or, if later, the date on which the applicable Lender became a Lender. Payments to be made free and clear of taxes (subject to customary limitations and exceptions, including for withholding under FATCA). Customary protections for increased costs imposed as a result of the Dodd-Frank Act or Basel III will be included.

 

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Expenses:    If the Transactions are consummated and the Closing Date occurs, the Borrower will pay all reasonable, documented and invoiced out-of-pocket costs and expenses of the First Lien Administrative Agent and the Commitment Parties associated with the preparation, due diligence (including third party expenses), administration, amendment, modification, waiver, enforcement and syndication of the First Lien Facilities and First Lien Facilities Documentation (including without limitation the reasonable, documented and invoiced legal fees of a single counsel to the First Lien Administrative Agent (and, solely in the case of an actual or perceived conflict of interest, where the indemnified person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, an additional counsel for each group of affected indemnified persons similarly situated, taken as a whole)), and, if necessary, one local counsel in each relevant material jurisdiction). In addition, the Borrower will reimburse all reasonable, documented and invoiced out-of-pocket costs and expenses of the First Lien Administrative Agent and the Lenders, including, without limitation, the reasonable, documented and invoiced legal fees of a single firm of counsel (and, solely in the case of an actual or perceived conflict of interest, one additional counsel to the affected Lender(s)) and, if necessary, one local counsel in each relevant material jurisdiction, in connection with any enforcement of the First Lien Facilities Documentation.
Indemnification:    The Borrower will indemnify the Commitment Parties, the First Lien Administrative Agent, the Lenders, the Issuing Lender, and their respective affiliates, and the officers, directors, employees, advisors, agents, controlling persons, equityholders, partners, members and other representatives and the respective successors and permitted assigns of each of the foregoing, and hold them harmless from and against, any and all losses, claims, damages, liabilities and reasonable, documented and invoiced out-of-pocket fees and expenses (limited to reasonable and documented legal fees of a single counsel for all indemnified parties, taken as a whole, and, if necessary, one local counsel in each relevant material jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all indemnified parties taken as a whole (and, in the case of an actual or perceived conflict of interest, where the indemnified person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, an additional counsel for each group of affected indemnified persons similarly situated, taken as a whole)) of any such indemnified person arising out of or relating to any claim or any litigation or other proceeding (regardless of whether such indemnified person is a party thereto and whether or not such proceedings are brought by

 

C-39


   the Borrower, its equity holders, its affiliates, creditors or any other third person) that relates to the Transactions, including the financing contemplated hereby; provided that no indemnified person will be indemnified for any loss, claim, damage, liability, cost or expense to the extent it (i) has been determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (A) the willful misconduct, bad faith or gross negligence of such indemnified person or any of such indemnified person’s affiliates or controlling persons or any of the officers, directors, employees, agents, partners, advisors or other representatives, advisors, or members or other equity holders of any of the foregoing or (B) a material breach of the obligations of such indemnified person or any of such indemnified person’s affiliates or controlling persons or any of the officers, directors, employees, agents, partners, advisors or other representatives, advisors, or members or other equity holders of any of the foregoing under the First Lien Facilities Documentation or (ii) relates to any Proceeding between or among indemnified persons other than (A) claims against the Initial Lenders or their respective affiliates, in each case, in their capacity or in fulfilling their role as the agent or arranger or any other similar role under the First Lien Facilities (excluding their role as a Lender) to the extent such persons are otherwise entitled to indemnification under this paragraph and (B) claims arising out of any act or omission on the part of Holdings, the Borrower or any of their respective subsidiaries.
Governing Law and Forum:    New York.
Counsel to the First Lien Administrative Agent:    Cahill Gordon & Reindel LLP.

 

C-40


ANNEX I to

EXHIBIT C

 

Interest Rates:   

At the option of the Borrower, Adjusted LIBOR plus the Applicable Margin or ABR plus the Applicable Margin.

 

Applicable Margin” means with respect to the Initial First Lien Facility and the Delayed Draw Term Loan Facility, initially, 300 basis points in the case of ABR loans and 400 basis points in the case of Adjusted LIBOR loans.

 

From and after the delivery by the Borrower to the First Lien Administrative Agent of financial statements for the first full fiscal quarter ended after the Closing Date, interest rates under the First Lien Facilities based on the spread over ABR or Adjusted LIBOR, as the case may be, shall be subject to a step down of 25 basis points based upon meeting a First Lien Net Leverage Ratio of 4.25 to 1.00 or less.

 

The Borrower may elect interest periods of one, two, three or six months (or, if agreed by all relevant Lenders, 12 months or a shorter period) for Adjusted LIBOR borrowings or such other periods as agreed to by the First Lien Administrative Agent to facilitate the alignment of interest payments with other borrowings under the First Lien Facilities or the end of a fiscal or calendar period subject to the First Lien Administrative Agent’s reasonable discretion.

 

Interest on any Loans and all fees will be payable in arrears on the basis of a 360-day year (calculated on the basis of the actual number of days elapsed); provided that interest on ABR loans, when based on the prime rate, will be payable in arrears on the basis of a 365-day year (or a 366-day year in a leap year), in each case, calculated on the basis of the actual number of days elapsed. Interest will be payable on Adjusted LIBOR loans on the last day of the applicable interest period (and at the end of each three months, in the case of interest periods longer than three months) and upon prepayment, and on ABR loans quarterly and upon prepayment.

Adjusted LIBOR:   

Adjusted LIBOR” means LIBOR, adjusted for statutory reserve requirements.

 

LIBOR” means, with respect to the interest period requested, the rate per annum for deposits in U.S. Dollars for the relevant interest period as reported on the LIBOR01 Page as of 11:00 a.m. (London, England time) two business days prior to the first day of the interest period; provided, however, if LIBOR is less than zero per the above, then LIBOR shall be zero.

 

Annex-I-C-1


ABR:   

ABR” means the Alternate Base Rate, which will be the highest of (i) the prime commercial lending rate published by The Wall Street Journal as the “prime rate,” (ii) the Federal Funds Effective Rate plus 1/2 of 1.0% and (iii) the LIBOR Quoted Rate plus 1.0% per annum.

 

LIBOR Quoted Rate” means, for any day, Adjusted LIBOR for an interest period of one month as reported on the LIBOR01 Page as of 11:00 a.m. (London, England time) on such day; provided, however, if the LIBOR Quoted Rate is less than zero, the LIBOR Quoted Rate shall be zero.

Delayed Draw Term Loan Facility Commitment Fee:    During the period commencing on the Closing Date and ending on the Delayed Draw Commitment Expiration Date, the Borrower will pay the First Lien Administrative Agent for the ratable benefit of the Lenders a commitment fee (the “Delayed Draw Term Loan Commitment Fee”) of (i) accruing from the day that is the sixty-first day from the Closing Date and through the date that is one hundred and twenty days from the Closing Date, a rate of per annum equal to 50% of the Applicable Margin for Adjusted LIBOR loans multiplied by the aggregate unused commitments outstanding under the Delayed Draw Term Loan Facility during such period, (ii) accruing from the day that is the one hundred and twenty-first day from the Closing Date through the Delayed Draw Commitment Expiration Date, a rate of per annum equal to 100% of the Applicable Margin for Adjusted LIBOR loans multiplied by the aggregate unused commitments outstanding under the Delayed Draw Term Loan Facility during such period, which Delayed Draw Term Loan Commitment Fee, in each case, shall cease to accrue on and after Delayed Draw Commitment Expiration Date and shall be due and payable on the Delayed Draw Commitment Expiration Date.


EXHIBIT D

Project Viking

Senior Secured Second Lien Facility

Summary of Principal Terms and Conditions8

 

Borrower:    Same as the First Lien Facilities.
Transactions:    As set forth in Exhibit A to the Commitment Letter.
Second Lien Administrative Agent:    UBS will act as sole and exclusive administrative agent and collateral agent for the Second Lien Facility (in such capacity, the “Second Lien Administrative Agent”) for a syndicate of banks, financial institutions and other entities reasonably acceptable to the Borrower and which syndicate will not include any Disqualified Institutions (together with the Initial Lenders, the “Lenders”).
Lead Arrangers and Bookrunners:    UBS Securities, DBSI and each other applicable Additional Arranger, if any, will each act as a lead arranger and a bookrunner for the Second Lien Facility (collectively, the “Lead Arrangers”) and will perform the duties customarily associated with such roles.
Syndication Agent and Documentation Agent:    The Borrower may designate additional financial institutions, reasonably acceptable to the Lead Arrangers, to act as syndication agent and documentation agent as provided in the Commitment Letter.
Second Lien Facility:    A senior secured second lien term loan facility (the “Second Lien Facility”) in an aggregate principal amount of $350.0 million (the loans thereunder, the “Second Lien Loans”) on the terms and conditions set forth herein (as such amount may, at the option of the Borrower, be increased to fund any “OID,” upfront fees or similar amounts in respect of the Second Lien Facility in connection with the Flex Provisions (as defined in the Term Fee Letter)); provided that (i) if the Specified Acquisition does not close on or prior to the Closing Date and clause (ii) below does not apply the aggregate amount of commitments under the Second Lien Facility shall be reduced by $30.0 million (the “Second Lien Reduction”) (ii) if the

 

8 

All capitalized terms used but not defined herein have the meanings assigned to them in the Commitment Letter to which this Exhibit D is attached, including the other Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit D will be determined by reference to the context in which it is used. In the event that any such capitalized term used in this Exhibit D is not defined in this Exhibit D or otherwise in the Commitment Letter, such term as used in this Exhibit D shall have meanings no less favorable than the meanings of such term or similar term in the Bank Sponsor Precedent as modified by the Documentation Principles.

 

D-1


   Specified Acquisition does not close on or prior to the Closing Date but on or prior to the Closing Date the Company or any of its Restricted Subsidiaries shall have entered into an acquisition agreement or other binding arrangement in respect of the Specified Acquisition and the Initial Borrower reasonably believes that the Specified Acquisition will close on or prior to the 90th day occurring after the Closing Date, the Initial Borrower may elect on the Closing Date to incur the Second Lien Loans that would otherwise be subject to the Second Lien Reduction.
Purpose:    The proceeds of the Second Lien Facility will be made available on the Closing Date (i) to fund a portion of the Acquisition Consideration, (ii) to finance a portion of the Refinancing, (iii) to pay the Transaction Costs and (iv) as additional cash on the balance sheet of the Borrower and its Restricted Subsidiaries and for general corporate purposes of the Borrower and its subsidiaries (including, without limitation, for capital expenditures, acquisitions, Restricted Payments, refinancing of indebtedness and any other transactions not prohibited by the Second Lien Facilities Documentation).
Documentation Principles:    The Facilities Documentation with respect to the Second Lien Facility (the “Second Lien Facility Documentation” and together with the ABL Facility Documentation and the First Lien Facilities Documentation, the “Facilities Documentation”) will be initially prepared by counsel to the Borrower and (a) will be based upon, and in form and substance be substantially the same as, the First Lien Facilities Documentation, except to the extent set forth herein with changes, modifications and cushions that reflect the second lien nature of the Second Lien Facility, (b) will be based on and consistent with the Documentation Principles. The Second Lien Facility Documentation will contain, subject to the First Lien Facilities Documentation and the Intercreditor Agreement, only those payment provisions, conditions to borrowing, mandatory prepayments, representations and warranties, guarantee and collateral provisions, covenants and Events of Default expressly set forth in this Exhibit D, in each case, applicable to the Borrower and its Restricted Subsidiaries (and, where expressly provided in this Exhibit D, to Holdings) and with standards, qualifications, thresholds, exceptions, “baskets” and grace and cure periods consistent with the provisions of this paragraph. Other than set forth herein, the financial definitions and financial ratio definitions in the First Lien Facilities Documentation shall be based on the equivalent definitions of such terms in the Bank Sponsor Precedent, after giving effect to

 

D-2


   Documentation Principles. All leverage and ratio calculations shall exclude in any calculation floorplan facility advances or obligations or other inventory financing facility advances or obligations) (other than Revolving Loans) under the ABL Facility. In addition all monetary baskets or thresholds (regardless of whether any such exception, threshold or “basket” specified herein refers to a builder component) will include grower builders based on, at the option of the Borrower as determined prior to the launch of general syndication of the Second Lien Facility, a percentage of consolidated total assets or Consolidated EBITDA of the Borrower and its Restricted Subsidiaries, set at a level at least equal to the initial monetary amount of each such basket or threshold (which level shall be rounded up to the nearest 1.0% interval). It is understood and agreed that to the extent any representations and warranty relating to the Company and/or any of its subsidiaries is made on, or as of, the Closing Date (or prior thereto) and is qualified by or subject to “Material Adverse Effect”, the definition thereof will be “Material Adverse Effect” as defined in the Acquisition Agreement as it applies to such representation and warranty.
Availability:    The Second Lien Loans will be made in a single drawing on the Closing Date. Repayments and prepayments of the Second Lien Loans may not be reborrowed.
Incremental Facilities:    The Second Lien Facility Documentation will permit the Borrower from time to time, on one or more occasions, to add one or more incremental term loan facilities to the Second Lien Facility (each, an “Incremental Second Lien Facility” and, collectively, the “Incremental Second Lien Facilities”) in a principal amount at the time such amount is incurred equal to (a) the sum of (i)(x) the greater of (A) $200.0 million and (B) 100% of Consolidated EBITDA for the then most recently ended period of four fiscal quarters for which financial statements are internally available, calculated on a pro forma basis after giving effect to any acquisition or other transaction consummated in connection therewith less (y) the aggregate principal amount of any Incremental Facility (as defined in Exhibit C) incurred pursuant to clause (a)(i)(x) under the heading “Incremental Facilities” in Exhibit C plus (ii) all voluntary prepayments of the Initial Term Loans, Delayed Draw Term Loans, Second Lien Loans and any Incremental Facilities, Incremental Second Lien Facilities, Incremental Equivalent Debt, Incremental Equivalent Second Lien Debt, Refinancing Term Facilities or Second Lien Refinancing Facilities, in respect thereof and in each case, that are secured on a senior or pari passu basis with the Second Lien Facility and in each case, so long as such prepayment

 

D-3


  

or commitment reduction is effected on or prior to the date of any such incurrence (including all loan buy-backs (whether or not offered to all Lenders) and yank-a-bank payments, with credit given to the principal amount purchased) (other than any such prepayments, repurchases or reductions to the extent funded with the proceeds of long-term indebtedness (other than revolving indebtedness)) (collectively, the “Fixed Incremental Amount”) provided that the amount under clause (i) or (ii) of such Fixed Incremental Amount, as the case may be, shall be reduced (but not to an amount less than 0) by the principal amount of any Incremental Second Lien Facilities or Incremental Equivalent Second Lien Debt incurred in reliance on such clause (i) or (ii) as applicable (so long as such amount is not otherwise reallocated after the date of such incurrence) plus (b)(i) in the case of any Incremental Second Lien Facility to be secured equally and ratably with the Second Lien Facility, the amount that would result in a Secured Leverage Ratio, calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, not exceeding the greater of (x) 6.50:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Secured Net Leverage Ratio immediately prior to the incurrence of such debt and (ii) in the case of any unsecured Incremental Second Lien Facility or unsecured Incremental Equivalent Second Lien Debt, either (I) the amount that would result in the Total Net Leverage Ratio, calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, not exceeding the greater of (x) 6.50:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Total Net Leverage Ratio immediately prior to the incurrence of such debt or (II) the amount that would result in the Cash Interest Coverage Ratio (to be defined) calculated on a pro forma basis, after giving effect to any acquisition or other transaction consummated in connection therewith, being not less than the lesser of (x) 2.00:1.00 and (y) if such debt is incurred to finance a Permitted Acquisition or other permitted investment, the Cash Interest Coverage Ratio immediately prior to the incurrence of such debt (clause (b), the “Ratio Incremental Amount”; the sum of the amounts contemplated by clauses (a) and (b), the “Available Incremental Second Lien Facility Amount”).

 

If the Borrower incurs indebtedness under the Fixed Incremental Amount (and any fixed debt basket) on the same date that it incurs indebtedness under the Ratio Incremental

 

D-4


  

Amount (or any other ratio debt incurrence basket), then the Secured Net Leverage Ratio or the Total Net Leverage Ratio (or other applicable ratio), as applicable, with respect to the amounts incurred under the Ratio Incremental Amount (or other ratio debt incurrence basket) will be calculated without regard to any incurrence under the Fixed Incremental Amount (and any fixed debt basket but giving full pro forma effect the use of proceeds of the entire amount of the loans and commitments that will be incurred in reliance on each applicable provision and the related transactions). Unless the Borrower elects otherwise, each Incremental Second Lien Facility shall be deemed incurred first as Ratio Incremental Amount to the extent permitted, with the balance incurred under the Fixed Incremental Amount. The Borrower may classify, and may later reclassify, indebtedness incurred under an Incremental Second Lien Facility (or Incremental Equivalent Second Lien Debt) as incurred as a Fixed Incremental Amount, Ratio Incremental Amount, or both, on the date of incurrence and thereafter, to the extent permitted on the date of classification (or the date of any such reclassification).

 

The availability of the Incremental Second Lien Facilities will be subject solely to the following terms and conditions: (a) no existing Lender will be required to participate in any Incremental Second Lien Facility without its consent; (b) subject to the Limited Condition Provision, no Specified Event of Default under the Second Lien Facility shall have occurred and be continuing or would exist immediately after giving effect thereto; (c) such Incremental Second Lien Facility may, at the discretion of the Borrower, (i) rank pari passu in right of payment with the Second Lien Facility, (ii) be subordinated in right of payment to the Second Lien Facility, (iii) be secured on a pari passu basis with the Second Lien Facility. (iv) be secured on a junior basis to the Second Lien Facility or (v) be unsecured; provided that if subordinated or secured on a junior basis, it may not be incurred under the Second Lien Facility Documentation and any intercreditor or lien subordination arrangements must be reasonably satisfactory to the Second Lien Administrative Agent; (d) the maturity date and the weighted average maturity of such Incremental Second Lien Facility may be no earlier, or shorter, as the case may be, than the maturity date or the weighted average maturity, as applicable, of the Second Lien Facility (subject to exceptions for (i) customary bridge financings, (ii) Incremental Second Lien Facilities and Incremental Equivalent Second Lien Debt in an aggregate amount up to $200.0 million having a maturity date and/or

 

D-5


   weighted average life that is earlier than, or shorter, as the case may be, than the maturity date or the weighted average maturity, as applicable, of the First Lien Facilities and (iii) Incremental Second Lien Facilities that amortize at a rate of 5.0% or less per annum, the “Inside Maturity Exception”) unless the Lenders are also offered by the Borrower the same percentage amortization prepayment per annum for the corresponding year; provided that, for purposes of this clause (d), each individual Lender will be deemed to have rejected such offer unless such Lender notifies the Administrative Agent that it has accepted such offer within a time period to be agreed after the date of such offer) (this clause (d), the “Maturity Provision”); (e) subject to clause (d) above, the amortization schedules applicable to such Incremental Second Lien Facility will be as determined by the Borrower and the lenders providing such Incremental Second Lien Facility; (f) any fees payable in connection with such Incremental Second Lien Facility will be determined by the Borrower and the arrangers and/or lenders providing such Incremental Second Lien Facility; (g) such Incremental Second Lien Facility may provide for the ability to participate on a pro rata basis or greater or less than pro rata basis in any voluntary or mandatory prepayments of the Second Lien Loans or, in the case of any voluntary prepayments of the Second Lien Loans or any prepayments of Second Lien Loans, participate on a greater than pro rata basis; (h) the interest rate, upfront fees and original issue discount for any term loans under such Incremental Second Lien Facility will be as determined by the Borrower and the lenders providing such Incremental Second Lien Facility; provided that, solely in the case of any broadly syndicated Incremental Second Lien Facility incurred prior to the date that is 12 months after the Closing Date (other than in respect of (A) any Incremental Second Lien Facility originally incurred pursuant to the definition of Fixed Incremental Amount, (B) any Incremental Second Lien Facility that has an outside maturity date at least one year after the maturity date of the Second Lien Facility at the time of incurrence thereof and (C) any Incremental Second Lien Facility in an aggregate principal amount of $200.0 million or less, (D) any Incremental Second Lien Facility being incurred in connection with a Permitted Acquisition or other permitted investment or acquisition and (E) any Incremental Second Lien Facility incurred to refinance indebtedness (including related fees, costs, premiums, accrued interest and expenses) of the Borrower and its Restricted Subsidiaries) if the yield on any such broadly syndicated Incremental Second Lien Facility that is to be secured equally and ratably with the Second Lien Facility denominated in the same currency as such

 

D-6


  

Incremental Second Lien Facility (taking into account interest margins, minimum Adjusted LIBOR, minimum ABR, upfront fees and OID on such term loans, with upfront fees and OID being equated to interest margins based on an assumed four-year life to maturity, but exclusive of any arrangement, syndication, structuring, commitment or other fees payable in connection therewith) (the “Incremental Second Lien Yield”) (other than, for the avoidance of doubt, any such Incremental Second Lien Facility that is unsecured, subordinated or secured on a junior-lien basis) exceeds the yield on the Second Lien Facility denominated in the same currency as such Incremental Second Lien Facility (determined as provided above), by more than 75 basis points, then the interest margins for such Second Lien Loans incurred under such Second Lien Facility denominated in the same currency as such Incremental Second Lien Facility will automatically be increased to a level such that the yield on such Second Lien Loans will be 75 basis points below the Incremental Second Lien Yield (it being agreed that any increase in yield to any existing facility required due to the application of an Adjusted LIBOR or ABR “floor” on any Incremental Second Lien Facility will be effected solely through an increase in such “floor” (or an implementation thereof, as applicable)) (the “MFN Provision”); (j)(i) may not be guaranteed by any Restricted Subsidiary that is not a Loan Party under the Second Lien Facilities and (ii) to the extent secured, may not be secured by any assets of a Loan Party that do not constitute Collateral (this clause (j), the “Guarantor and Collateral Provision”), and (k) except as otherwise provided in clauses (a) through (j), all other terms of such Incremental Second Lien Facility, if not consistent with the terms of the existing Second Lien Facility (as reasonably determined by the Borrower), will be as agreed between the Borrower and the lenders providing such Incremental Second Lien Facility.

 

The Borrower may seek commitments in respect of the Incremental Second Lien Facilities from existing Lenders (each of which will be entitled to agree or decline to participate in its sole discretion) and additional banks, financial institutions and other institutional lenders or investors who will become Lenders in connection therewith; provided that the consent of the Second Lien Administrative Agent (not to be unreasonably withheld, delayed or conditioned) will be required with respect to any such additional lender if such consent would be required under the caption “Assignments and Participations” for an assignment to such additional lender.

 

D-7


  

The proceeds of Incremental Second Lien Facilities will be used for general corporate purposes of the Borrower and its Restricted Subsidiaries (including for capital expenditures, acquisitions, Restricted Payments, refinancing of indebtedness and any other transaction not prohibited by the Second Lien Facility Documentation).

 

The Second Lien Loan Facility Documentation will be amended to give effect to any Incremental Second Lien Facility by documentation executed by the Lender or Lenders (or such other persons) making the commitments with respect thereto, the Second Lien Administrative Agent and the Borrower and without the consent of any other existing Lender, including such amendments as may be necessary or advisable to have such facility fungible with the other applicable Second Lien Facility.

 

In addition, the Borrower may, in lieu of adding Incremental Second Lien Facilities, utilize all or any portion of the Available Incremental Second Lien Facility Amount at any time by issuing or incurring Incremental Equivalent Second Lien Debt.

 

Incremental Equivalent Second Lien Debt” means indebtedness in an aggregate principal amount at the time of incurrence thereof not to exceed the then Available Incremental Second Lien Facility Amount consisting of senior secured first lien loans or notes or junior lien loans or notes, subordinated loans or notes or senior unsecured term loans or notes, or any bridge facility, reflecting terms as determined by the Company and providers of such Incremental Equivalent Second Lien Debt; provided that (a) other than in the case of broadly syndicated second lien term loans secured pari passu with the Second Lien Facility, such Incremental Equivalent Second Lien Debt will not be subject to the MFN Provisions, (b) the maturity date of such Incremental Equivalent Second Lien Debt will be no earlier than the maturity date of the Second Lien Facility on the date of incurrence thereof (subject to exceptions for customary bridge financings); provided that this clause will not apply to the Inside Maturity Exception, (c) the weighted average life to maturity of such Incremental Equivalent Second Lien Debt may not be shorter than the remaining weighted average life to maturity of the Second Lien Facility on the date of incurrence thereof (subject to exceptions for customary bridge financings and amortization in an aggregate annual amount of up to 5.0% of the original principal amount incurred) unless the Lenders are also offered by the Borrower the same percentage amortization prepayment per annum for the corresponding

 

D-8


   year; provided that, for purposes of this clause (c), each individual Lender will be deemed to have rejected such offer unless such Lender notifies the Second Lien Administrative Agent that it has accepted such offer by 11 a.m. three (3) business days (or such longer period which the Borrower agrees) after the date of such offer; provided that this clause will not apply to the Inside Maturity Exception, (d) no Incremental Equivalent Second Lien Debt may be guaranteed by any Restricted Subsidiary that is not a Loan Party under the Second Lien Facility; (e) to the extent secured, no Incremental Equivalent Second Lien Debt may be secured by any assets of a Restricted Subsidiary that do not constitute Collateral and (f) if such Incremental Equivalent Second Lien Debt is secured equally and ratably with the Second Lien Facility or by liens that are junior to the liens securing the Second Lien Facility, such Incremental Equivalent Second Lien Debt will be subject to the Guarantor and Collateral Provisions and intercreditor arrangements to be set forth in the Second Lien Facility Documentation.
Limited Condition Provision:    Substantially the same as the corresponding provisions set forth in Exhibit C to the Commitment Letter.
Refinancing Facilities:    The Second Lien Loan Facility Documentation will permit the Borrower to refinance loans under the Second Lien Facility on substantially the same terms as the First Lien Facilities Documentation (such refinanced loans, a “Second Lien Refinancing Facility”).
Interest Rate and Fees:    As set forth in Annex I to this Exhibit D.
Default Rate:    Upon the occurrence and during the continuance of a Specified Event of Default (as defined in Exhibit B), all overdue principal amounts will bear interest at the applicable interest rate plus 2.0% per annum, and overdue interest and fees shall bear interest at the interest rate applicable to ABR loans (as defined in Annex I to Exhibit B) plus 2.0%, and in each case, shall be payable on demand and shall begin to accrue from the date of such Specified Event of Default.
Final Maturity and Amortization:    The Second Lien Loans will mature on the date that is eight years after the Closing Date (the “Second Lien Maturity Date”); provided that the Second Lien Facility Documentation will provide the right for individual Lenders to agree to extend the maturity date of their outstanding Second Lien Loans upon the request of the Borrower and without the consent of any other Lender (subject to terms and conditions no more restrictive than those set forth in

 

D-9


   the First Lien Facilities Documentation, including pro rata extension offers open to all Lenders under the applicable tranche of Second Lien Loans subject to extension, but in any event not to be subject to “most favored nation” pricing or minimum extension condition). The Second Lien Loans will not amortize and shall be payable in full on the Second Lien Maturity Date.
Guarantees:    Subject to the Certain Funds Provisions, all obligations of the Borrower under the Second Lien Facility and, to the extent not secured under the ABL Facility or the First Lien Facilities and designated by the Borrower, any obligations with respect to the Hedging/Cash Management Agreements (as defined in Exhibit B) will be unconditionally guaranteed jointly and severally on a senior second lien secured basis by the Guarantors of the First Lien Facilities. Any such guarantees shall rank pari passu in right of payment with the obligations under the guarantees of the First Lien Facilities and all other senior indebtedness of the Guarantors.
Security:   

Subject to the limitations set forth below and subject to the Certain Funds Provisions, all obligations of the Borrower and the Guarantors in respect of the Second Lien Facility and all pari passu obligations with respect to the Hedging/Cash Management Arrangements will be secured by a second priority security interest (subject to permitted liens) on the Fixed Asset Collateral (as defined in Exhibit B) securing the First Lien Facilities.

 

The First Lien Facilities will be secured by a first priority security interest (subject to permitted liens) on the Fixed Asset Collateral.

 

The ABL Facility will be secured by a third priority security interest (subject to permitted liens) on the Fixed Asset Collateral.

 

Subject to the limitations set forth below and subject to the Certain Funds Provisions, all obligations of the Borrower and the Guarantors in respect of the Second Lien Facility and all obligations with respect to the Hedging/Cash Management Arrangements will be secured by a third priority security interest (subject to permitted liens) in the Current Asset Collateral (as defined in Exhibit B to the Commitment Letter).

 

The ABL Facility will be secured by a first priority security interest (subject to permitted liens) on the Current Asset Collateral.

 

D-10


  

The First Lien Facilities will be secured by a second priority security interest (subject to permitted liens) on the Current Asset Collateral.

 

Notwithstanding anything to the contrary, the Collateral will exclude the Excluded Assets as referred to in Exhibit B to the Commitment Letter and the security interests securing the Second Lien Facility shall otherwise be subject to the same requirements set forth in the last four paragraphs in the section entitled “Security” in Exhibit B to the Commitment Letter.

Intercreditor Agreement:   

The relative rights and priorities in the Collateral for each of the First Lien Facilities and the Second Lien Facility will be set forth in the First Lien/Second Lien Intercreditor Agreement or another intercreditor agreement not materially less favorable to the lenders than the First Lien/Second Lien Intercreditor Agreement.

 

The relative rights and priorities in the Collateral for each of the First Lien Term Facility, the Second Lien Term Facility and the ABL Facility will be set forth in the ABL/Term Loan Intercreditor Agreement or another intercreditor agreement not materially less favorable to the lenders than the ABL/Term Loan Intercreditor Agreement.

Mandatory Prepayments:   

Subject to the First Lien/Second Lien Intercreditor Agreement and the First Lien Facilities Documentation, substantially the same as the First Lien Facilities (but limited to those mandatory prepayments) provided that no mandatory prepayments under the Second Lien Facility (other than from First Lien Declined Amounts (as defined below)) shall be required until after the First Lien Facilities and the debt secured on a pari passu basis with the First Lien Facilities have been paid in full.

 

Any prepayment amount declined (such amount, a “First Lien Declined Amount”) by a Declining Lender under the First Lien Facilities must be offered to prepay the Second Lien Loans. Any prepayment amount declined by both the Lenders under the First Lien Facilities and the Lenders under the Second Lien Facility may be retained by the Borrower.

Voluntary Prepayments:    Voluntary prepayments of loans under the Second Lien Facility and any Incremental Second Lien Facilities will be permitted at any time, in minimum principal amounts not greater than those set forth in the Bank Sponsor Precedent, without premium or penalty (except, in the case of the Second Lien Facility, as provided below), subject to reimbursement of the Lenders’ usual and customary breakage costs (excluding loss of profit) in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period.    

 

D-11


  

Voluntary prepayments, mandatory prepayments from the incurrence of non-permitted indebtedness or from any Second Lien Refinancing Facility or any repricing events of Second Lien Loans (which shall be defined consistently with the First Lien Facilities Documentation) (excluding any transaction that would, if consummated, constitute a change of control, initial public offering, or Transformative Event) will be subject to the following premiums:

 

(a) If such prepayment or repricing event is made or occurs after the Closing Date, but prior to the first anniversary of the Closing Date, an amount equal to 2.00% of the principal amount of such prepayment or repricing.

 

(b) If such prepayment or repricing event is made or occurs on or after the first anniversary of the Closing Date, but prior to the second anniversary of the Closing Date, an amount equal to 1.00% of the principal amount of such prepayment or repricing.

 

(c) If such prepayment or repricing event is made or occurs on or after the second anniversary of the Closing Date, there shall be no premium.

 

All voluntary prepayments of loans under the Second Lien Facility and any Incremental Second Lien Facilities will be applied among the tranches as directed by the Borrower (or, in the case of no direction, pro rata among the tranches) and within a tranche as directed by the Borrower (and absent such direction, in direct order of maturity thereof).

Representations and Warranties:    Limited to those set forth in Exhibit C with respect to the First Lien Facilities with appropriate modifications to reflect the second lien status of the Second Lien Facility.
Conditions to Borrowings:    The availability of borrowings under the Second Lien Facility will be subject solely to the applicable conditions set forth in Section 6 (including by reference to Exhibit E) of the Commitment Letter.
Affirmative Covenants:    Limited to those set forth in Exhibit C with respect to the First Lien Facilities, with appropriate modifications to reflect the second lien status of the Second Lien Facility.

 

D-12


Negative Covenants:    Limited to those set forth in Exhibit C with respect to the First Lien Facilities, with (i) appropriate modifications to reflect the second lien status of the Second Lien Facility, (ii) cushions on the monetary and percentage of Consolidated EBITDA or consolidated total asset grower baskets and other thresholds in the Second Lien Documentation of 25% to the monetary and percentage of Consolidated EBITDA or consolidated total asset grower baskets, ratios and other thresholds in the First Lien Documentation and (iii) cushions on any ratios in Second Lien Documentation of 0.25x to the ratios in the First Lien Documentation.
Financial Covenant:    None.
Unrestricted Subsidiaries:    Substantially the same as the corresponding provisions set forth in Exhibit C with respect to the First Lien Facilities.
Events of Default:    Limited to those set forth in Exhibit C with respect to the First Lien Facilities, with (a) appropriate modifications to reflect the second lien status of the Second Lien Facility, (b) cushions on the thresholds in the Second Lien Documentation of 25% to the thresholds in the First Lien Documentation and (c) cross acceleration (not cross default) to the First Lien Facilities and ABL Facility and other debt secured on a pari passu basis with the First Lien Facilities and ABL Facility.
Assignments and Participations:    Substantially the same as the corresponding provisions set forth in Exhibit C with respect to the First Lien Facilities.
Voting:    Subject to the provisions of the Intercreditor Agreement, substantially the same as the corresponding provisions set forth in Exhibit C with respect to the First Lien Facilities.
Cost and Yield Protection:    Substantially the same as the corresponding provisions set forth in Exhibit C with respect to the First Lien Facilities.
Expenses:    Substantially the same as the corresponding provisions set forth in Exhibit C with respect to the First Lien Facilities.
Indemnification:    Substantially the same as the corresponding provisions set forth in Exhibit C with respect to the First Lien Facilities.
Governing Law and Forum:    New York
Counsel to the Second Lien Administrative Agent:    Cahill Gordon & Reindel LLP.

 

D-13


ANNEX I to

EXHIBIT D

 

Interest Rates:   

At the option of the Borrower, Adjusted LIBOR plus the Applicable Margin or ABR plus the Applicable Margin.

 

Applicable Margin” means 675 basis points in the case of ABR loans and 775 basis points in the case of Adjusted LIBOR loans.

 

The Borrower may elect interest periods of one, two, three or six months (or, if agreed by all relevant Lenders, 12 months or a shorter period) for Adjusted LIBOR borrowings or such other periods as agreed to by the Second Lien Administrative Agent to facilitate the alignment of interest payments with other borrowings under the Second Lien Facility or the end of a fiscal or calendar period subject to the Second Lien Administrative Agent’s reasonable discretion.

 

Interest on any Second Lien Loans and all fees will be payable in arrears on the basis of a 360-day year (calculated on the basis of the actual number of days elapsed); provided that interest on ABR loans, when based on the prime rate, will be payable in arrears on the basis of a 365-day year (or a 366-day year in a leap year), in each case, calculated on the basis of the actual number of days elapsed. Interest will be payable on Adjusted LIBOR loans on the last day of the applicable interest period (and at the end of each three months, in the case of interest periods longer than three months) and upon prepayment, and on ABR loans quarterly and upon prepayment.

 

Annex-I-D-1


EXHIBIT E

Project Viking

Summary of Additional Conditions9

The initial borrowings under the Facilities will be subject only to the satisfaction (or waiver by the Lead Arrangers) of the conditions set forth in Section 6 of the Commitment Letter and the following additional conditions:

1. Confirmation by Acquisition Sub that the Acquisition (including, for the avoidance of doubt, the Tender Offer and the Merger) has been consummated, or will be consummated substantially concurrently with the initial borrowing under one or more Facilities, in each case, in all material respects in accordance with the terms of the Acquisition Agreement, after giving effect to any modifications, amendments or waivers permitted by this paragraph. The Acquisition Agreement shall not have been amended or waived or modified by you in a manner materially adverse to the Lenders, in their capacity as such, without the consent of the Lead Arrangers (such consent not to be unreasonably withheld, delayed or conditioned); provided that (a) any reduction in the purchase price under the Acquisition Agreement (or amendment, waiver or modification to the Acquisition Agreement related thereto) will be deemed not to be materially adverse to the Lenders so long as such reduction is allocated (i) first, to reduce the amount of the Equity Contribution to the extent it exceeds the minimum amount set forth in paragraph (b) of Exhibit A and (ii) second, unless the Lead Arrangers otherwise consent, to reduce (A) the amount of funded debt on the Closing Date under the Initial First Lien Facility and Second Lien Facility and (B) the Equity Contribution on a pro rata basis, (b) any increase in the purchase price will be deemed to be not materially adverse to the Lenders so long as such increase is funded by an increase in the Equity Contribution, (c) the granting of any consent under the Acquisition Agreement that is not materially adverse to the interests of the Commitment Parties will not otherwise constitute an amendment, modification or waiver and (d) any amendment, modification or waiver to (i) the definitions of “Material Adverse Effect” and “Minimum Condition” that reduces the Minimum Condition or (ii) the Acquisition Agreement with respect to compliance in all material respects with the rules and regulations promulgated under the Exchange Act governing tender offers or Section 251(h) of the DGCL, in each case, in the Acquisition Agreement will be deemed materially adverse to the interests of the Lenders.

2. Confirmation from you that the Equity Contribution shall have been consummated or will be consummated substantially simultaneously with, or prior to, the initial borrowings under one or more Facilities in at least the amount set forth in Exhibit A to the Commitment Letter (as reduced by paragraph 1 above). Confirmation from you that the Refinancing shall have been consummated, or will be consummated substantially simultaneously with, or prior to, the initial borrowing under one or more Facilities.

 

 

9 

All capitalized terms used but not defined herein shall have the meanings given to them in the Commitment Letter to which this Term Sheet is attached, including the other Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit E shall be determined by reference to the context in which it is used.

 

E-1


3. The Lead Arrangers shall have received (a) to the extent received by you pursuant to the Acquisition Agreement (i) unaudited consolidated balance sheets and related statements of income and cash flows of the Company for each fiscal quarter, if any, ended after December 31, 2017 (other than the fourth fiscal quarter of the Company) and at least 45 days prior to the date of consummation of the Acquisition (the “Acquisition Date”) (and the Lead Arrangers hereby acknowledge receipt of the foregoing for the fiscal quarters ended March 31, 2018, June 30, 2018, and September 30, 2018 as of the date hereof) and (ii) audited consolidated balance sheets and related statements of income and cash flows of the Company, in each case, for the two fiscal years most recently ended at least 90 days before the Acquisition Date (and the Lead Arrangers hereby acknowledge receipt of the foregoing for the fiscal years ended December 31, 2016 and December 31, 2017 as of the date hereof), and (b) a pro forma consolidated balance sheet of the Company as of the last day of the most recent fiscal quarter of the Company for which financial statements have been delivered to satisfy the conditions set forth in the preceding clause (a)(i) or (a)(ii), as applicable, and income statement for the four-quarter period then ended, in each case, giving effect to the Transactions as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of the statement of income); provided, that no financial statement or pro forma financial statement will be required to (i) be prepared in compliance with Regulation S-X of the Securities Act of 1933 or (ii) include adjustments for purchase accounting (including adjustments of the type contemplated by Financial Accounting Standards Board accounting Standards Certification 805, Business Combinations (formerly SFAS 141R)).

4. All documentation and other information about the Loan Parties required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations (including without limitation PATRIOT Act and Beneficial Ownership Certificates), as has been reasonably requested in writing by the Administrative Agents and the Lead Arrangers at least ten business days prior to the Acquisition Date will be provided not later than the date that is three business days prior to the Acquisition Date.

5. Payment of all fees required to be paid to the Lenders, Lead Arrangers or the Administrative Agents pursuant to the Fee Letters, as applicable, and reasonable (and reasonably documented) out-of-pocket expenses required to be paid on the Closing Date pursuant to the Commitment Letter, to the extent invoiced in reasonable detail at least five business days prior to the Closing Date.

6. The Lead Arrangers shall have received the following (collectively, the “Closing Deliverables”), in each case, subject to the Certain Funds Provisions: (i) execution and delivery by the Borrower, Holdings and the other Guarantors of guarantee agreements and security agreements (pursuant to which security agreement a lien is granted on the Collateral in favor of the applicable Administrative Agent for the benefit of the Lenders and other secured parties under the ABL Facility, the First Lien Facilities and the Second Lien Facility, as applicable, and each such applicable Administrative

 

E-2


Agent is authorized to file customary UCC-1 financing statements with respect thereto) relating to the ABL Facility, the First Lien Facilities and the Second Lien Facility, in each case, initially prepared by your counsel in accordance with the Term Sheets, (ii) in the case of any pledge of stock of any Loan Party (other than Holdings) whose equity interests constitute Collateral, to the extent received by Holdings or the Initial Borrower prior to the Closing Date, delivery to the First Lien Administrative Agent of any applicable stock certificates with customary stock powers executed in blank (with delivery of any such certificates on or prior to the Closing Date to be required in accordance with the Certain Funds Provisions) and (iii) with respect to the ABL Facility, you will have used commercially reasonable efforts to deliver (x) customary inventory appraisals and field exams with respect to Collateral included in the Borrowing Base not later than the Closing Date (it being understood that you will not be required to deliver a field exam or any such inventory appraisal until 90 days (or such longer period of time as the ABL Administrative Agent may agree in its sole discretion) after the Closing Date) and (y) a borrowing base certificate prepared as of the last day of the last month ended at least 20 business days prior to the Acquisition Date; provided that if a field exam and/or inventory appraisal has not been completed prior to the Acquisition Date, such borrowing base certificate will be based upon the most recently delivered borrowing base certificate under the Existing ABL Agreement and delivery of the borrowing base certificate most recently delivered pursuant to the Existing ABL Agreement will be deemed to satisfy the condition in this clause (y). In addition, the Lead Arrangers shall have received customary legal opinions from your counsel, customary evidence of authorization with respect to any of your officers executing the Facilities Documentation, organizational documents and good standing certificates (to the extent applicable) from you in your jurisdiction of organization, a customary secretary’s and officer’s certificate from Acquisition Sub, a customary borrowing notice (which may be delivered on or prior to the Closing Date), and a solvency certificate delivered by Holdings or the Initial Borrower substantially in the form set forth in Annex I to this Exhibit E.

7. Since the date of the Acquisition Agreement, there shall not have occurred and be continuing any event, occurrence, change, development, violation, inaccuracy, fact, circumstance or other matter that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (as defined in the Acquisition Agreement) that would result in the failure of a condition precedent to your obligations under the Acquisition Agreement.

 

E-3


ANNEX I to

EXHIBIT E

Form of Solvency Certificate

SOLVENCY CERTIFICATE

of

THE BORROWER

AND ITS SUBSIDIARIES

Pursuant to [each of the Credit Agreements]11, the undersigned hereby certifies, solely in such undersigned’s capacity as [applicable officer title] of [●] (the “Borrower”), and not in the undersigned’s individual or personal capacity and without personal liability, that, to his or her knowledge:

As of the date hereof, after giving effect to the consummation of the Transactions, including the making of the Loans under each Credit Agreement on the date hereof, and after giving effect to the application of the proceeds of such indebtedness:

 

  a.

The fair value of the assets of the Borrower and its subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise;

 

  b.

The present fair saleable value of the property of the Borrower and its subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured;

 

  c.

The Borrower and its subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and

 

  d.

The Borrower and its subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.

For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreements, as applicable.

 

 

11 

Credit Agreements to be defined and to include each of the Facilities.

 

Annex I-E-1


IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate in such undersigned’s capacity as [applicable officer title] of the Borrower, on behalf of the Borrower, and not in the undersigned’s individual or personal capacity and without personal liability, as of the date first stated above.

 

[●]
By:  

 

Name:
Title:

Exhibit (b)(2)

PVKG Merger Sub, Inc.

c/o CVC Advisors (U.S.), Inc.

712 Fifth Avenue, 43rd Floor

New York, New York 10019

Attention: Adil Seetal and Emma Barrier

CONFIDENTIAL

November 20, 2018

DEUTSCHE BANK SECURITIES INC.

DEUTSCHE BANK AG NEW YORK BRANCH

60 Wall Street

New York, New York 10005

UBS AG, STAMFORD BRANCH

600 Washington Boulevard

Stamford, Connecticut 06901

UBS SECURITIES LLC

1285 Avenue of the Americas

New York, New York 10019

WELLS FARGO BANK, N.A.

100 Park Avenue

Suite 1400

New York, New York 10017

CITIGROUP GLOBAL MARKETS INC.

388 Greenwich Street

New York, New York 10013

MACQUARIE CAPITAL (USA) INC.

MACQUARIE CAPITAL FUNDING LLC

125 West 55th Street

New York, NY 10019

SG AMERICAS SECURITIES, LLC

SOCIETÉ GENERALE

245 Park Avenue

New York, NY 10167


Project Viking

Joinder to Commitment Letter and Fee Letter

Ladies and Gentlemen:

Reference is made to (a) the commitment letter dated November 6, 2018 (including the exhibits and other attachments thereto, the “Commitment Letter”) among Wells Fargo Bank, National Association (“Wells Fargo”), Deutsche Bank Securities Inc. (“DBSI”), Deutsche Bank AG New York Branch (“DBNY”), UBS AG, Stamford Branch (“UBS”) and UBS Securities LLC (“UBS Securities” together with DBSI, DBNY and UBS, each an “Initial Term Loan Commitment Party” and collectively the “Initial Term Loan Commitment Parties” and collectively with Wells Fargo, the “Initial Commitment Parties”) and PVKG Merger Sub, Inc., an entity organized under the laws of the State of Delaware (the “Buyer”), and (b) the term fee letter dated November 6, 2018 (the “Fee Letter”) among the Initial Term Commitment Parties and the Buyer. Terms used but not defined in this joinder letter (this “Joinder Letter”) shall have the meanings assigned to them in the Commitment Letter and, if not defined therein, the meanings assigned to them in the Fee Letter.

For purposes of this Joinder Letter, the Commitment Letter and the Fee Letter, “Citi” shall mean Citigroup Global Markets Inc., Citibank, N.A., Citicorp USA, Inc., Citicorp North America, Inc. and/or any of their affiliates as any of them shall determine to be appropriate to provide the services contemplated herein and therein (subject to the confidentiality, assignment and other provisions hereof and thereof). It is understood and agreed that Citigroup Global Markets Inc. is entering into this Joinder Letter for and on behalf of Citi.

 

1.

Additional Commitment Parties.

As contemplated by Section 2 of the Commitment Letter, the Initial Commitment Parties and the Buyer hereby agree to the joinder of (i) Citi, (ii) Macquarie Capital (USA) Inc. (“Macquarie Capital”), (iii) Macquarie Capital Funding LLC (“Macquarie Lender”, together with Macquarie Capital, “Macquarie”), (iv) SG Americas Securities, LLC (“SG”) and (v) Société Générale (“SocGen” and, together with SG, Citi and Macquarie, “you” or the “Additional Commitment Parties”, and each, an “Additional Commitment Party”) to the Commitment Letter and the Fee Letter and (a) each Additional Commitment Party hereby agrees to become a “Commitment Party” under the Commitment Letter and the Fee Letter, (b) each of Citi, Macquarie Lender and SocGen hereby agrees to become an “Initial Term Lender” and an “Initial Lender” under the Commitment Letter and the Fee Letter, (c) each of Citi, Macquarie Capital and SG hereby agrees to become a “Term Loan Lead Arranger” and, in its capacity as a Term Loan Lead Arranger, a “Lead Arranger” under the Commitment Letter and the Fee Letter and (d) each reference in the Commitment Letter and the Fee Letter to “we,” “us,” “our,” “parties hereto,” “Commitment Party,” “Initial Term Lender,” “Initial Lender,” “Term Loan Lead Arranger” and/or, in its capacity as a Term Loan Lead Arranger,“Lead Arranger” shall also refer to each Additional Commitment Party in such respective capacity, as applicable.

In furtherance of the foregoing, each of the parties hereto acknowledges and agrees that (i) each Additional Commitment Party shall be subject to all of the obligations, bound by all of the terms and conditions and entitled to all of the rights and benefits applicable to a Commitment

 

2


Party in respect of each of the Term Facilities under the Commitment Letter and the Fee Letter with the same force and effect as if originally named therein as a Commitment Party in respect of each of the Term Facilities, (ii) each of Citi, Macquarie Lender and SocGen shall be subject to all of the obligations, bound by all of the terms and conditions and entitled to all of the rights and benefits applicable to an Initial Term Lender in respect of each of the Term Facilities under the Commitment Letter and the Fee Letter with the same force and effect as if originally named therein as an Initial Term Lender and (iii) each of Citi, Macquarie Capital and SG shall be subject to all of the obligations, bound by all of the terms and conditions and entitled to all of the rights and benefits applicable to a Term Loan Lead Arranger in respect of each of the Term Facilities under the Commitment Letter and the Fee Letter with the same force and effect as if originally named therein as a Term Loan Lead Arranger.

 

2.

Commitments.

Upon the terms set forth in this Joinder Letter and subject to the terms and conditions set forth in the Commitment Letter, (a) the Initial Term Loan Commitment Parties hereby assign on a pro rata basis to Citi and Citi hereby assumes from the Initial Term Loan Commitment Parties, and commits to provide 12.5% of the commitments to provide each of the Term Facilities (including, without limitation, any increase required as a result of OID or upfront fees required to be funded in connection with the “market flex” provisions of the Fee Letter in respect of the Term Facilities) pro rata across the Term Facilities,(b) the Initial Term Loan Commitment Parties hereby assign on a pro rata basis to Macquarie Lender, and Macquarie Lender hereby assumes from the Initial Term Loan Commitment Parties on, and commits to provide, 12.5% of the commitments to provide each of the Term Facilities (including, without limitation, any increase required as a result of OID or upfront fees required to be funded in connection with the “market flex” provisions of the Fee Letter in respect of the Term Facilities) pro rata across the Term Facilities and (c) the Initial Term Loan Commitment Parties hereby assign on a pro rata basis to SocGen, and SocGen hereby assumes from the Initial Term Loan Commitment Parties, and commits to provide, 10.0% of the commitments to provide each of the Term Facilities (including, without limitation, any increase required as a result of OID or upfront fees required to be funded in connection with the “market flex” provisions of the Fee Letter in respect of the Term Facilities) pro rata across the Term Facilities. It is understood and agreed that the aggregate principal amount of the Term Facilities shall not be increased as a result of such assignments and assumptions, and that the commitment amounts of the Initial Term Loan Commitment Parties with respect to the Term Facilities as set forth in the Commitment Letter shall be reduced in accordance with the Commitment Letter, and permanently on a dollar-for-dollar pro rata basis, as a result of such assignments, with commitments under the Term Facilities after giving effect to the assignments and assumptions set forth on Annex A to this Joinder Letter.

 

3.

Fees Payable.

As consideration for its commitment hereunder and under the Commitment Letter, each Additional Commitment Party shall be entitled to its pro rata share of the fees set forth in the Fee Letter for the benefit of each Initial Lender in proportion to its allocated commitments under the Commitment Letter (after giving effect to this Joinder Letter), in each case, if and when any such fees become payable pursuant to the terms and conditions of the Fee Letter.

 

3


4.

Titles and Roles.

Notwithstanding anything contained herein to the contrary, in accordance with the Commitment Letter, it is hereby agreed that (a) DBSI will have “lead left” placement on the cover page of any marketing materials for the First Lien Facilities and UBS Securities will be immediately to the right of DBSI, and, in each case will hold the respective roles and responsibilities conventionally understood to be associated with each such name placement, (b) UBS Securities will have “lead left” placement on the cover page of any marketing materials for the Second Lien Facility and DBSI will be immediately to the right of UBS Securities, and, in each case will hold the respective roles and responsibilities conventionally understood to be associated with each such name placement, (c) each of Citi, Macquarie Capital and SG will have “right side” designation and placement in the order set forth herein to the right of DBSI and UBS Securities on any marketing materials for the Term Facilities and, in each case, each of Citi, Macquarie Capital and SG will hold the roles and responsibilities conventionally understood to be associated with such name placements and (d) the Buyer hereby appoints (i) each of Citi, Macquarie Lender and SocGen, and each of Citi, Macquarie Lender and SocGen hereby agrees to act, as an Initial Term Lender and (ii) each of Citi, Macquarie Capital and SG, and each of Citi, Macquarie Capital and SG hereby agrees to act, as Term Loan Lead Arranger for each of the Term Facilities, in each case of clauses (i) and (ii), upon the terms and subject to the conditions set forth in this Joinder Letter and the Commitment Letter.

 

5.

Amendments.

Each of the parties hereto agree that, with effect from and on the date hereof, the Commitment Letter and the Fee Letter shall be amended by replacing all references therein to “Term Lead Arranger” and “Term Lead Arrangers” with “Term Loan Lead Arranger” and “Term Loan Lead Arrangers”, respectively.

 

6.

Counterparts; Conflict; Governing Law.

This Joinder Letter is intended solely for the benefit of the parties hereto and their successors and assigns permitted under the Commitment Letter (and, to the extent expressly provided in Section 7 of the Commitment Letter, the Indemnified Persons) and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto and their successors and assigns permitted under the Commitment Letter (and, to the extent expressly provided in Section 7 of the Commitment Letter, the Indemnified Persons). This Joinder Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by the parties hereto. This Joinder Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Joinder Letter by facsimile transmission or by “.pdf” or similar electronic transmission shall be effective as delivery of a manually executed counterpart hereof. Section headings used herein are for convenience of reference only, are not part of this Joinder Letter and are not to affect the construction of, or to be taken into consideration in interpreting, this Joinder Letter. This Joinder Letter constitutes an amendment to the Commitment Letter and the Fee Letter, each of which shall remain in full force and effect as amended hereby. Except as expressly set forth herein, nothing contained in this Joinder Letter shall constitute a modification or waiver of any other

 

4


provision of the Commitment Letter or the Fee Letter. From and after the date hereof, any reference to the Commitment Letter or the Fee Letter in any agreement, document, undertaking or course of dealing (verbal or otherwise) shall be deemed to be a reference to the Commitment Letter or the Fee Letter, as applicable, each as amended hereby. This Joinder Letter, the Commitment Letter and the Fee Letter contain the entire agreement of the parties hereto relating to the subject matter hereof and thereof and supersede any prior negotiations or agreements, whether oral or written, among the parties hereto relative to such subject matter. The governing law provisions contained in Section 10 of the Commitment Letter are incorporated herein by reference, mutatis mutandis; provided, that all references therein to “this Commitment Letter” shall be deemed to refer to this Joinder Letter.

 

7.

Waiver of Jury Trial.

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THE ACQUISITION, THIS JOINDER LETTER, THE COMMITMENT LETTER, THE FEE LETTER OR THE PERFORMANCE BY YOU OR ANY OF YOUR AFFILIATES OF THE SERVICES HEREUNDER OR THEREUNDER.

 

8.

Jurisdiction.

The jurisdiction provisions contained in Section 10 of the Commitment Letter are incorporated herein by reference, mutatis mutandis; provided, that all references therein to “this Commitment Letter” shall be deemed to refer to this Joinder Letter.

 

9.

Indemnity

The indemnity provisions contained in Section 7 of the Commitment Letter are incorporated herein by reference, mutatis mutandis; as if all references therein to “this Commitment Letter” shall be deemed to also include this Joinder Letter.

 

10.

Confidentiality.

The confidentiality provisions contained in Section 9 of the Commitment Letter are incorporated herein by reference, mutatis mutandis; provided, that all references therein to “this Commitment Letter” shall be deemed to refer to this Joinder Letter; provided further that the proviso in clause (e) of the second paragraph of Section 9 of the Commitment Letter shall not apply to Macquarie and its respective affiliates, in each case solely to the extent that any such information that is published, disclosed or otherwise divulged to such affiliate or representative is done so on a “need to know” basis solely in connection with the transactions contemplated by the Commitment Letter and any such affiliate or representative is informed of the confidential nature of such information and is or has been advised of their obligation to keep information of this type confidential).

 

11.

Termination.

 

5


This Joinder Letter and the commitments and agreements of each Additional Commitment Party hereunder shall automatically terminate as set forth in the last paragraph of Section 10 of the Commitment Letter; provided, that the termination of any commitment pursuant to this sentence does not prejudice our or your rights and remedies in respect of any breach of this Joinder Letter or the Commitment Letter; provided, further, that termination of this Joinder Letter shall be subject to Section 9 of the Commitment Letter.

[Remainder of page intentionally left blank]

 

6


Very truly yours,
PVKG MERGER SUB, INC.
By:   /s/ James Christopoulos      
Name: James Christopoulos
Title: Secretary

 

[Signature Page to Joinder Letter]


Accepted and agreed to as of

the date first above written:

 

DEUTSCHE BANK SECURITIES INC.
By:  

/s/ Frank Fazio

  Name: Frank Fazio
  Title: Managing Director
By:  

/s/ Alvin Varughese

  Name: Alvin Varughese
  Title: Director
DEUTSCHE BANK AG NEW YORK BRANCH
By:  

/s/ Frank Fazio

  Name: Frank Fazio
  Title: Managing Director
By:  

/s/ Alvin Varughese

  Name: Alvin Varughese
  Title: Director

 

[Signature Page to Joinder Letter]


UBS AG, STAMFORD BRANCH
By:  

/s/ Luke Bartolone

  Name: Luke Bartolone
  Title: Executive Director
By:  

/s/ Michael Lawton

  Name: Michael Lawton
  Title: Managing Director
UBS SECURITIES LLC
By:  

/s/ Luke Bartolone

  Name: Luke Bartolone
  Title: Executive Director
By:  

/s/ Michael Lawton

  Name: Michael Lawton
  Title: Managing Director

 

[Signature Page to Joinder Letter]


WELLS FARGO BANK, NATIONAL

ASSOCIATION

By:  

/s/ John Hanley

  Name: John Hanley
  Title: Senior Vice President

 

[Signature Page to Joinder Letter]


CITIGROUP GLOBAL MARKETS INC.
By:  

/s/ Scott Sartorius

  Name: Scott Sartorius
  Title: Managing Director

 

[Signature Page to Joinder Letter]


MACQUARIE CAPITAL (USA) INC.
By:  

/s/ Ayesha Farooqi

  Name: Ayesha Farooqi
  Title: Managing Director
By:  

/s/ Michael Barrish

  Name: Michael Barrish
  Title: Managing Director
MACQUARIE CAPITAL FUNDING LLC
By:  

/s/ Ayesha Farooqi

  Name: Ayesha Farooqi
  Title: Authorized Signatory
By:  

/s/ Michael Barrish

  Name: Michael Barrish
  Title: Authorized Signatory

 

[Signature Page to Joinder Letter]


SG AMERICAS SECURITIES, LLC
By:  

/s/ Eugene Kabakov

  Name: Eugene Kabakov
  Title: Director
SOCIETÉ GENERALE
By:  

/s/ Eugene Kabakov

  Name: Eugene Kabakov
  Title: Director

 

[Signature Page to Joinder Letter]


Annex A

First Lien, Delayed Draw and Second Lien Term Loan Commitments

 

Commitment Party

  

Current Committed Percentage

  

Revised Committed Percentage

    

(in each case, pro rata across the

Term Facilities)

  

(in each case, pro rata across the

Term Facilities)

DBNY    50.0% of each of the Term Facilities    32.5% of each of the Term Facilities
UBS    50.0% of each of the Term Facilities    32.5% of each of the Term Facilities
Citi    0.0% of each of the Term Facilities    12.5% of each of the Term Facilities
Macquarie Lender    0.0% of each of the Term Facilities    12.5% of each of the Term Facilities
SocGen    0.0% of each of the Term Facilities    10.0% of each of the Term Facilities

Exhibit (d)(2)

CONFIDENTIALITY AGREEMENT

THIS CONFIDENTIALITY AGREEMENT (“Agreement”) is being entered into as of August 31, 2018 between ConvergeOne Holdings Corp (the “Company”) and CVC Advisers (U.S.) Inc. (“Interested Party”).

In order to facilitate the consideration and negotiation of a possible negotiated transaction involving a newly incorporated company (“New co”) to be invested in by funds or vehicles (“ CVC Funds”) advised by Interested Party and/or its Affiliates and the Company (any such possible negotiated transaction, a “Transaction” and each of Interested Party and the Company being sometimes referred to collectively as the “Parties” and individually as a “Party”), each Party has requested access to certain non-public information regarding the other Party and the other Party’s subsidiaries (each Party, in its capacity as a provider of information, is referred to in this Agreement as the “Provider”; and each Party, in its capacity as a recipient of information, is referred to in this Agreement as the “Recipient”). This Agreement sets forth the Parties’ obligations regarding the use and disclosure of such information and regarding various related matters.

The Parties, intending to be legally bound, acknowledge and agree as follows:

1. Limitations on Use and Disclosure of Confidential Information. Other than as specifically provided in Sections 2 and 4 below, Recipient will not, and will direct the Recipient’s Representatives (as defined in Section 15 below) not to, at any time, directly or indirectly:

(a) make use of any of the Provider’s Confidential Information (as defined in Section 12 below), except for the specific purpose of considering, evaluating, negotiating and/or consummating a Transaction; or

(b) disclose any of the Provider’s Confidential Information to any Person (as defined in Section 15 below), including, for the avoidance of doubt and without limitation, any Representative of the Recipient unless in compliance with Section 4 below).

The Recipient will be liable and responsible for any breach of this Agreement by any of its Representatives, except that Recipient shall not be responsible for any breach of this Agreement by those of its Representatives who have otherwise entered into a confidentiality agreement directly with the Company consistent with the confidentiality provisions of this Agreement.

2. Party Contact. Each of Recipient’s Representatives shall have been directed to abide by the provisions of this Agreement expressly applicable to Representatives.

3. No Representations by Provider. The Provider will have the exclusive authority to decide what Confidential Information (if any) of the Provider is to be made available to the Recipient and its Representatives. Neither the Provider nor any of the Provider’s Representatives will be under any obligation to make any particular Confidential Information of the Provider available to the Recipient or any of the Recipient’s Representatives or to supplement or update any Confidential Information of the Provider previously furnished. Neither the Provider nor any of its Representatives has made or is making any representation or warranty hereunder, nor will be making, solely by virtue of providing Confidential Information to Recipient, any such


representation or warranty, express or implied, as to the accuracy or completeness of any of the Provider’s Confidential Information, and neither the Provider nor any of its Representatives will have any liability hereunder to the Recipient or to any of the Recipient’s Representatives relating to or resulting from the use of any of the Provider’s Confidential Information or any inaccuracies or errors therein or omissions therefrom. Only those representations and warranties (if any) that are included in any final definitive written agreement that provides for the consummation of a Transaction between the Parties and is validly executed on behalf of the Parties (a “Definitive Agreement”) will have legal effect. Notwithstanding the foregoing, nothing contained in this Agreement shall be construed as a waiver of a Party’s right to assert, and each Party hereby expressly reserves all rights with respect to, any claim based on fraud or the bad faith of the other Party.

4. Permitted Disclosures.

(a) Notwithstanding the limitations set forth in Section 1 above:

the Recipient (and, if applicable, its Representatives) may disclose Confidential Information of the Provider if and to the extent that the Provider consents in writing to the Recipient’s (or, if applicable, any of its Representative’s) disclosure thereof;

subject to Section 2 and Section 4(b), the Recipient (and, if applicable, its Representatives) may disclose Confidential Information of the Provider to any Representative of the Recipient, but only to the extent such Representative (A) reasonably needs to know such Confidential Information for the purpose of helping the Recipient consider, evaluate, negotiate and/or consummate a Transaction, and (B) has been directed to, and has agreed to, abide by the provisions of this Agreement expressly applicable to Representatives; and

subject to Section 4(c) below, the Recipient (and, if applicable, its Representatives) may disclose Confidential Information of the Provider to the extent required by any law, rule, or regulation, including in connection with any legal, regulatory, judicial, or administrative process (including any deposition, interrogatory, oral questioning, information or document request, subpoena, court order, regulatory filing, civil investigative demand or other similar process) or any audit or inquiry by a regulator, bank examiner or auditor, self-regulating organization or pursuant to mandatory professional ethics rules (collectively, “Law”).

(b) If prior to the disclosure of certain Confidential Information, the Provider delivers to the Recipient a written notice stating that such Confidential Information of the Provider may be disclosed only to specified Representatives of the Recipient (e.g. outside counsel only), then, notwithstanding anything to the contrary contained in Section 4(a)(ii) above, the Recipient (and, if applicable, such specified Representatives) will not thereafter disclose or permit the disclosure of any of such designated Confidential Information to any other Representative of the Recipient.

(c) Notwithstanding the provisions of Section 4(a)(iii), if the Recipient or any of the Recipient’s Representatives is requested or required by Law to disclose any of the Provider’s Confidential Information to any Person, then the Recipient will, and will direct its Representatives to, as soon as reasonably practicable, provide the Provider with written notice (email being sufficient) of the applicable request or requirement so that the Provider


may seek, at its sole expense, a protective order or other appropriate remedy to prevent, limit or delay such disclosure or the nature and scope thereof; provided, that notice to the Provider is not required if an information request is made by a bank, securities, tax or other regulatory, governmental or supervisory authority in the course of a routine, ordinary course examination of Recipient’s or its Representatives’ books and records by such authority, or in response to any request by such authority that is not targeted at the Confidential Information, Provider or the Transaction. The Recipient will, and will direct its Representatives to, reasonably cooperate with the Provider and the Provider’s Representatives, at the Provider’s sole expense, in any reasonable attempt by the Provider to obtain any such protective order or other remedy, except to the extent that such efforts involve litigation against the Recipient or any of its Representatives. In the absence of such protective order or other remedy in connection with any request or requirement that the Recipient or any of its Representatives, as applicable and as required by Law, disclose Confidential Information of the Provider, the Recipient or such Representative receives advice from legal counsel confirming that the disclosure of such Confidential Information is required by Law, then the Recipient or any such Representatives, as applicable and as required by Law, may disclose such Confidential Information solely to the extent required by Law; provided, however, that the Recipient and its Representatives will reasonably cooperate with the Provider’s reasonable efforts, at the Provider’s sole expense, to ensure that such Confidential Information is treated confidentially by each Person to whom it is disclosed.

5. Return of Confidential Information. Upon receipt of the Provider’s written request, the Recipient will, and will direct the Recipient’s Representatives to, reasonably promptly deliver to the Provider or destroy, at the Recipient’s option, any of the Provider’s Confidential Information (and all copies thereof) obtained or possessed by the Recipient or any of the Recipient’s Representatives. Notwithstanding the delivery to the Provider (or the destruction by the Recipient) of Confidential Information of the Provider pursuant to this Section 5, the Recipient and its Representatives will continue to be bound by their confidentiality obligations and other obligations under this Agreement for the term of this Agreement. In addition, notwithstanding this Section 5, (i) Recipient and its Representatives may retain secured copies of the Provider’s Confidential Information solely to the extent required to comply with Law, legal or regulatory requirements, established document retention policies or demonstrate compliance with this Agreement, (ii) Recipient and its Representatives shall not be required to destroy any computer files stored securely by them that are created during automatic system back-up and shall be entitled to retain such Confidential Information as they are required to retain by Law or any professional standard applicable to them (any such retained Confidential Information pursuant to clauses (i) through (ii), “Retained Confidential Information”).

6. Limitation on Soliciting Employees and Distributors. During the twelve (12) month period commencing on the date of this Agreement, Interested Party will not, directly or indirectly solicit, induce, encourage or attempt to solicit, induce or encourage any Covered Person (as defined herein) to terminate such Covered Person’s relationship with the other Party in order to become an employee, consultant, distributor or independent contractor, to or for Interested Party; provided, however, that the foregoing provision will not be deemed to prevent (a) Interested Party or its Representatives from conducting bona fide general solicitations of employment published in a journal, newspaper or other publication of general circulation or in trade publications or other similar media or through the use of search firms or the internet and which, in any case, are not directed


specifically toward the Company or its employees or (b) the employment of any such Person (i) if such Person first approaches Interested Party on an unsolicited basis or (ii) following cessation of such Person’s employment with the Company without any prior solicitation or encouragement by Interested Party in violation of this Agreement. For purposes of this Agreement, “Covered Person” shall mean any Person who is a manager or executive employee of the Company or any subsidiary of the Company as of the date of this Agreement or who becomes a manager or executive employee of the Company or of any subsidiary of the Company before the termination of discussions regarding a Transaction, and either (i) with whom Interested Party has direct interaction during discussions and negotiations regarding a possible Transaction or (ii) about whom the Company has provided Confidential Information to Interested Party in advance of any solicitation by Interested Party (other than basic employee census data or other generalized information).

7. Limitation on Soliciting Customers, Vendors and Suppliers. During the twelve (12) month period commencing on the date of this Agreement, Interested Party will not (a) directly or indirectly solicit, induce, encourage or attempt to solicit, induce or encourage any known customer of, vendor or supplier to the Company to cease or materially alter its relationship with the Company, nor (b) contact any known customer of, vendor or supplier to the Company regarding any of the Company’s Confidential Information or a Transaction; provided, however, the covenants contained in this Agreement shall not limit any contacts made by Interested Party or its Representatives (i) in respect of such Persons in the ordinary course of business consistent with past practice (ii) in the course of conducting commercial or market due diligence in connection with a Transaction on a no-names basis with the prior consent of Provider (such consent not to be unreasonably withheld, conditioned or delayed) or (iii) with Representatives (acting in their capacity as such).

8. No Obligation to Pursue Transaction. Unless the Parties enter into a Definitive Agreement, no agreement providing for a transaction involving either of the Parties will be deemed to exist between the Parties, and neither Party will be under any obligation to negotiate or enter into any such agreement or transaction with the other Party. Each Party reserves the right, in its sole discretion: (a) to conduct any process it deems appropriate with respect to any transaction or proposed transaction involving such Party, and to modify any procedures relating to any such process without giving notice to the other Party or any other Person; (b) to reject any proposal made by the other Party or any of the other Party’s Representatives with respect to a transaction involving such Party; and (c) to terminate discussions and negotiations with the other Party at any time. Each Party recognizes that, except as expressly provided in any Definitive Agreement between the Parties: (i) the other Party and its Representatives will be free to negotiate with, and to enter into any agreement or transaction with, any other interested party; and (ii) such Party will not have any rights or claims against the other Party or any of the other Party’s Representatives arising out of or relating to any transaction or proposed transaction involving the other Party.

9. No Waiver. No failure or delay by either Party or any of its Representatives in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, and no single or partial exercise of any such right, power or privilege will preclude any other or future exercise thereof or the exercise of any other right, power or privilege under this Agreement. No provision of this Agreement can be waived or amended except by means of a written instrument that is validly executed on behalf of both of the Parties and that refers specifically to the particular provision or provisions being waived or amended.


10. Remedies. Each Party acknowledges that money damages may not be a sufficient remedy for any breach of this Agreement by such Party or by any of such Party’s Representatives and that the other Party may suffer irreparable harm as a result of any such breach. Accordingly, each Party will also be entitled to equitable relief, including injunction and specific performance, as a remedy for any breach or threatened breach of this Agreement by the other Party or any of the other Party’s Representatives. The equitable remedies referred to above will not be deemed to be the exclusive remedies for a breach of this Agreement, but rather will be in addition to all other remedies available at law or in equity to the Parties.

11. Successors and Assigns; Applicable Law; Jurisdiction and Venue. Neither Party may assign its rights or obligations hereunder without the prior written consent of the other Party; provided, however, that a Provider may assign its rights hereunder to any acquiror of or other successor in interest to the Provider. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to principles of conflicts of laws). Each Party and its Representatives: (a) irrevocably and unconditionally consent and submit to the jurisdiction of the state and federal courts located in the County of Newcastle in the State of Delaware for purposes of any action, suit or proceeding arising out of or relating to this Agreement; (b) agree that service of any process, summons, notice or document by U.S. registered mail to the address and email addresses set forth at the end of this Agreement shall be effective service of process for any action, suit or proceeding brought against such Party or any of such Party’s Representatives; (c) irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement in any state or federal court located in the County of Newcastle in the State of Delaware; and (d) irrevocably and unconditionally waive the right to plead or claim, and irrevocably and unconditionally agree not to plead or claim, that any action, suit or proceeding arising out of or relating to this Agreement that is brought in any state or federal court located in the County of Newcastle in the State of Delaware has been brought in an inconvenient forum.

12. Confidential Information. For purposes of this Agreement, the Provider’s “Confidential Information” will be deemed to include:

(a) any information (including, without limitation, any technology, know-how, patent application, test result, research study, business plan, budget, forecast or projection) relating directly or indirectly to the business of the Provider, any predecessor entity or any subsidiary or other Affiliate of the Provider (whether prepared by the Provider or by any other Person and whether or not in written form) that is or has been made available to the Recipient or any Representative of the Recipient by or on behalf of the Provider or any Representative of the Provider on or after the date hereof in connection with the consideration, evaluation or negotiation of a Transaction;

(b) such portion of any memorandum, analysis, compilation, summary, interpretation, study, report or other document, record or material that is or has been prepared by or for the Recipient or any Representative of the Recipient and that contains, or reflects in any reasonably apparent manner any information of the type referred to in clause ]”(a)” of this Section 12;


(c) the existence and terms of this Agreement, and the fact that information of the type referred to in clause “(a)” of this Section 12 has been made available to the Recipient or any of its Representatives; and

(d) the fact that discussions or negotiations are or may be taking place with respect to a Transaction involving the Parties, and the proposed terms of any such Transaction.

However, the Provider’s “Confidential Information” will not be deemed to include:

any information that is or becomes generally available to the public or generally known in the industry in which the Company operates other than as a direct or indirect result of the disclosure of any of such information by the Recipient or by any of the Recipient’s Representatives in breach of this Agreement;

any information that was in the Recipient’s or any of its Representatives’ possession prior to the time it was first made available to the Recipient or any of the Recipient’s Representatives by or on behalf of the Provider or any of the Provider’s Representatives, provided that the source of such information was not and is not known by the Recipient to be bound by any contractual or other obligation of confidentiality, directly or indirectly, to the Provider with respect to any of such information;

any information that is or becomes available to the Recipient or any of its Representatives’ on a non-confidential basis from a source other than the Provider or any of the Provider’s Representatives, provided that such source is not known by the Recipient to be bound by any contractual or other obligation of confidentiality, directly or indirectly, to the Provider with respect to any of such information; or

is or was independently developed by the Recipient or its Representatives with no use of Confidential Information.

13. Trading in Securities. Interested Party acknowledges and agrees that it is aware (and that the its Representatives are aware or will be advised by Interested Party) that Confidential Information being furnished by the Company contains material, non-public information regarding the Company and that the United States securities laws prohibit any Person who has such material, non-public information from purchasing or selling securities of the Company on the basis of such information or from communicating such information to any Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities on the basis of such information.

14. Standstill. As of the date hereof, Interested Party hereby represents and warrants to the Company that neither Interested Party nor any of its subsidiaries, nor any Person with whom Interested Party or any of Interested Party’s subsidiaries may be deemed to be acting in concert, owns any securities of the Company. Interested Party agrees that, for a period of twelve (12) months from the date of this Agreement, unless specifically invited in writing by the board of directors of the Company, neither Interested Party nor any of its subsidiaries, nor any Person with whom Interested Party or any


of Interested Party’s subsidiaries may be deemed to be acting in concert, will in any manner, directly or indirectly: (a) effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or cause or participate in or in any way assist, facilitate or encourage any other Person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (i) any acquisition of any securities (or beneficial ownership thereof), or rights or options to acquire any securities (or beneficial ownership thereof), or any assets, indebtedness or businesses of the Company or any of its subsidiaries, (ii) any tender or exchange offer, merger or other business combination involving the Company or, any of the subsidiaries or assets of the Company constituting a significant portion of the consolidated assets of the Company and its subsidiaries, (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its subsidiaries, or (iv) any “solicitation” of “proxies” (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of the Company; (b) form, join or in any way participate in a “group” (as defined under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) with respect to the Company or otherwise act in concert with any Person in respect of any such securities; (c) otherwise act, alone or in concert with others, to seek representation on or to control or influence the management, board of directors or policies of the Company or to obtain representation on the board of directors of the Company; (d) take any action which would or would reasonably be expected to force the Company to make a public announcement regarding any of the types of matters set forth in (a) above; or (e) enter into any discussions or arrangements with any third party with respect to any of the foregoing. Interested Party also agrees during such period not to request (in any manner that would reasonably be likely to cause the Company to disclose publicly) that the Company or any of its Representatives, directly or indirectly, amend or waive any provision of this paragraph (including this sentence); provided, that in the event that the Company or any of its subsidiaries issues any securities after the date hereof, the Company shall, as soon as reasonably practicable, provide Interested Party notice of such issuance so that Interested Party may seek to comply with the terms of this Section 14 that are applicable to such newly issued securities. The term “securities”, as used in this Agreement, shall include, without limitation, any securities of the Company and any derivative, swap or other transaction the purpose or effect of which is to give Interested Party or any of its subsidiaries, or any Person with whom Interested Party or any of its subsidiaries may be deemed to be acting in concert, economic risk similar to ownership of shares of any class or series of the Company, including due to the fact that the value of such derivative, swap or other transaction is determined by reference to the price, value or volatility of any shares of any class or series of the Company, or which derivative, swap or other transaction provides, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Company. The Parties acknowledge and agree that the foregoing shall not limit Interested Party in any way from acquiring or offering to acquire, directly or indirectly, any company or business unit thereof that, prior to entering into the definitive agreement with respect to such acquisition, beneficially owns securities of the Company so long as (A) such entity’s prior acquisition of such securities was not made directly or indirectly on Interested Party’s behalf or in connection with or anticipation of Interested Party’s acquisition of such company or business, and (B) such entity’s ownership was not a primary factor in the decision to consummate such transaction. The Company confirms that, at the time this Agreement is entered into, each Person that has executed a confidentiality agreement in relation to a Transaction has agreed, in such confidentiality agreement, to comply with obligations which are at least as onerous as those placed upon Interested Party by this Section 14.


15. Miscellaneous.

(a) For purposes of this Agreement, a Party’s “Representatives” will be deemed to include each Person that is or during the term of this Agreement becomes (i) a subsidiary or other Affiliate of such Party, or (ii) an officer, director, member, manager, executive partner, employee, partner, advisor (including without limitation accountants, attorneys, financial advisors and consultants), agent or other representative, of such Party or of any of such Party’s subsidiaries or other Affiliates, or (iii) only upon prior written approval of other Party, any debt financing source to be used in connection with a potential Transaction; provided, that the term “Representatives” shall only include those who actually receive Confidential Information from Recipient or one of Recipient’s other Representatives or otherwise in connection with Recipient’s consideration of a Transaction.

(b) Interested Party agrees not to discourage financial institutions or financial advisors from being retained by other bidders or potential bidders as advisors for a Possible Transaction; provided, that, notwithstanding the foregoing, any debt financing sources may establish an industry standard “tree” system whereby separate groups or “trees” will be formed and dedicated to Interested Party and any other party, respectively, involved in any similar transaction, solely to the extent that Interested Party has engaged such debt financing sources in good faith. For the avoidance of doubt, such system will not violate this Agreement.

(c) The term “Person,” as used in this Agreement, will be broadly interpreted to include any individual and any corporation, partnership, entity, group, tribunal or governmental authority.

(d) The term “Affiliate” has the meaning given to it under the 1934 Act; provided, that with respect to Interested Party, the term “Affiliate” means a person that directly, or indirectly, controls or is controlled by, or is under common control with Interested Party, and also includes Newco and CVC Funds, in each case to the extent they receive Confidential Information in connection with a Transaction; but excludes (i) CVC Credit Partners Group Holding Foundation and each of its subsidiaries from time to time and (ii) portfolio companies in which any CVC Fund holds an interest or investment (the entities in (i) and (ii) being the “Excluded Entities”), although if Interested Party discloses any Confidential Information to an Excluded Entity or the Excluded Entity receives Confidential Information on Interested Party’s behalf, that Excluded Entity shall, from such time, be deemed to be an Affiliate of Interested Party for all purposes hereunder.

(e) The bold-faced captions appearing in this Agreement have been included only for convenience and shall not affect or be taken into account in the interpretation of this Agreement.

(f) Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.


(g) By making Confidential Information or other information available to the Recipient or the Recipient’s Representatives, the Provider is not, and shall not be deemed to be, granting (expressly or by implication) any license or other right under or with respect to any patent, trade secret, copyright, trademark or other proprietary or intellectual property right.

(h) To the extent that any Confidential Information includes materials or other information that may be subject to the attorney-client privilege, work product doctrine or any other applicable privilege or doctrine concerning any pending, threatened or prospective action, suit, proceeding, investigation, arbitration or dispute, it is acknowledged and agreed that the Parties have a commonality of interest with respect to such action, suit, proceeding, investigation, arbitration or dispute and that it is their mutual desire, intention and understanding that the sharing of such materials and other information is not intended to, and shall not, affect the confidentiality of any of such materials or other information or waive or diminish the continued protection of any of such materials or other information under the attorney-client privilege, work product doctrine or other applicable privilege or doctrine. Accordingly, all Confidential Information that is entitled to protection under the attorney-client privilege, work product doctrine or other applicable privilege or doctrine shall remain entitled to protection thereunder and shall be entitled to protection under the joint defense doctrine, and the Parties agree to take reasonable measures necessary to preserve, to the fullest extent possible, the applicability of all such privileges or doctrines.

(i) This Agreement constitutes the entire agreement between the Recipient and the Provider regarding the subject matter hereof and supersedes any prior agreement between the Recipient and the Provider regarding the subject matter hereof. This Agreement also applies to Confidential Information accessed through any electronic data room made available in connection with a Transaction and supersedes any “click through” acknowledgement or agreement associated with any such electronic data room.

(j) This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement. The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.

(k) This Agreement shall expire and cease to have any force or effect on the earlier of (i) the eighteen (18) month anniversary of the date hereof and (ii) the date the Parties enter and deliver an executed Definitive Agreement providing for the consummation of the Transaction; provided, however, that (A)with respect to any Retained Confidential Information retained pursuant to Section 5 of this Agreement, each Party will and will direct its Representatives to continue to undertake reasonable precautions (consistent with the precautions such Party or such Representative ordinarily takes to safeguard its own confidential information) to keep such Retained Confidential Information confidential for the term of this Agreement; and (B) the termination of this Agreement shall not relieve any Party from any liability with respect to any violation or breach of any provision contained in this Agreement.

Signature page follows


The parties have caused this Agreement to be executed as of the date first set forth above.

 

CVC Advisors (U.S.) Inc.
By:  

/s/ Chris Colpitts

Name:   Chris Colpitts
Title:   Senior Managing Director

 

Address:   One Maritime Plaza, Suite 1610
  San Francisco, CA 94111
  United States of America

 

ConvergeOne Holdings Corp
By:  

/s/ John McKenna

Title:   Chief Executive Officer

 

Address:   3344 Highway 149
  Eagan, MN 55121

Exhibit (d)(3)

November 3, 2018

Confidential

CVC Advisors (U.S.) Inc.

One Maritime Plaza

Suite 1610

San Francisco CA, 94111

Attention: Chris Colpitts,

Dear Chris:

 

  Re:

Possible Transaction

ConvergeOne Holdings, Inc. (the “Company”) and CVC Advisors (U.S.) Inc. (“Buyer”) are currently in negotiations related to a possible transaction between the Company and Buyer involving the acquisition (a “Possible Transaction”) of the Company by a newly incorporated company (“Newco”) to be controlled by funds (“CVC Funds”) advised by Affiliates of Buyer. In recognition of the time and effort that Buyer and the Company have expended and in consideration of Buyer’s offer on November 2, 2018 for Newco to acquire 100% of the Company by paying $12.50 in cash per share of the Company on terms not materially less beneficial to the Company stockholders than those set forth in the draft merger agreement submitted to the Company by Buyer on November 2, 2018, each of the Company and Buyer, intending to be legally bound, agrees as set forth below in this letter (this “Exclusivity Letter”).

1. The Company acknowledges and agrees that, from the date hereof, until the expiration of the No-Shop Period (as defined in paragraph 10 below), it shall not, and shall not authorize or instruct any of its officers, directors or employees or any investment banker, attorney or other advisor or representative retained by it (together, the Company’s “Representatives”) to:

 

  (a)

continue any solicitation, knowing encouragement, knowing facilitation, discussions or negotiations with any Persons that may be ongoing with respect to an Acquisition Proposal;

 

  (b)

directly or indirectly, (A) solicit, initiate or knowingly facilitate or knowingly encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (B) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other Person any non-public information in connection with or for the purpose of knowingly encouraging or facilitating, an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal, or (C) enter into any letter of intent, acquisition agreement, agreement in principle or similar agreement with respect to an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal.


The Company will be liable and responsible for any breach of this Exclusivity Letter by any of its Representatives. Immediately upon execution of this Exclusivity Letter until the expiration of the No-Shop Period, the Company shall not, and shall not permit any of its Representatives to, continue any ongoing discussions or negotiations (other than any ongoing discussions with Buyer or its Affiliates) relating to a possible Acquisition Proposal.

2. The Company acknowledges and agrees that neither this Exclusivity Letter nor any action taken in connection with this Exclusivity Letter will give rise to any obligation on the part of either party or its Affiliates to (a) continue any discussions or negotiations with the other party or such party’s Affiliates or (b) pursue or enter into any transaction or relationship of any nature with the other party or such Party’s Affiliates.

3. The parties acknowledge and agree that, in accordance with the terms of the Confidentiality Agreement between the Company and Buyer, dated August 31, 2018 (as it may be amended from time to time, the “NDA”), which shall remain in full force and effect, none of Buyer, its subsidiaries or their respective representatives, on the one hand, or the Company, its subsidiaries or their respective representatives, on the other hand, are authorized to disclose (a) the existence or terms of this Exclusivity Letter, (b) the existence of discussions or negotiations between the Company and Buyer, or (c) the existence or terms of any proposal regarding a Possible Transaction, except as may be provided in the NDA.

4. The Company acknowledges and agrees that, in addition to all other remedies available (at law or otherwise) to Buyer, Buyer shall be entitled to equitable relief (including injunction and specific performance) as a remedy for any breach or threatened breach of any provision of this Exclusivity Letter. The Company further acknowledges and agrees that Buyer shall not be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this paragraph 4, and the Company waives any right it may have to require that Buyer obtain, furnish or post any such bond or similar instrument.

5. The Company represents and warrants that the execution and delivery of this Exclusivity Letter and the performance by the Company of its obligations contemplated hereunder have been duly authorized on the part of the Company and will not conflict with, or result in any violation of, any agreement, contract, obligation, promise, commitment, undertaking or understanding (whether oral, written, express or implied) to which the Company or any of its direct and indirect subsidiaries is a party or by which the Company or any of its direct and indirect subsidiaries or any of their respective assets or properties may be bound or affected.

6. This Exclusivity Letter and the matters set forth herein will be governed by and construed in accordance with the laws of the State of Delaware without regard to the conflict of law rules thereof. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of the Delaware Court of Chancery and any state appellate court therefrom within Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware) in connection with any matter based upon or arising out of this Exclusivity Letter and agrees that process may be served upon them in any manner authorized by the laws of Delaware for such Persons.

7. EACH THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS EXCLUSIVITY LETTER OR ANY OTHER AGREEMENT ENTERED INTO IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,


THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS EXCLUSIVITY LETTER BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS PARAGRAPH 7.

8. This Exclusivity Letter may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

9. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or an e-mail with a .pdf attachment) and shall be deemed given upon (a) personal delivery, (b) recipient’s confirmation of receipt of an e-mail with a .pdf attachment, or (c) confirmed delivery by standard overnight carrier or when mailed in the United States by certified or registered mail, postage prepaid, addressed to the receiving party at the following addresses:

if to Buyer to:

CVC Advisors (U.S.) Inc.

One Maritime Plaza

Suite 1610

San Francisco CA, 94111

Attention: Chris Colpitts

E-mail: [email protected]

with a copy (which shall not constitute notice) to:

White & Case LLP

1221 Avenue of the Americas

New York, New York 10020-1095

Attention: Oliver Brahmst; Chang-Do Gong

Email: [email protected]; [email protected]

if to the Company, to:

Cooley LLP

Attn: Mehdi Khodadad

3175 Hanover Street

Palo Alto, CA 94304

Email: [email protected]

or to such other address, or e-mail address as such party may hereafter specify for the purpose by notice to each other party hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.


10. For purposes of this Exclusivity Letter:

 

  (a)

Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise and when used in relation to Buyer, shall also include (i) Newco, (ii) CVC Funds and (iii) CVC Capital Partners SICAV-FIS SA and its subsidiaries.

 

  (b)

Acquired Corporations” shall mean the Company and each of its subsidiaries.

 

  (c)

Acquisition Proposal” shall mean any bona fide proposal or offer from any Person (other than Buyer and its Affiliates) or “group”, within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transaction or series of related transactions, any direct or indirect (A) acquisition, sale or license of assets or properties of the Acquired Corporations equal to 15% or more of the Company’s consolidated assets or to which 15% or more of the Company’s revenues or earnings are attributable (other than non-exclusive out-bound licenses in the ordinary course of business), in each case, including through the acquisition of securities or assets of one or more Acquired Corporations, (B) issuance, acquisition or other disposition of 15% or more of the outstanding Shares or voting power of the Company, (C) recapitalization, tender offer or exchange offer that if consummated would result in any Person or group beneficially owning 15% or more of the outstanding Shares or other voting securities of the Company, (D) merger, consolidation, amalgamation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any other Acquired Corporation that would constitute a “significant subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Exchange Act) of the Company that if consummated would result in any Person or group beneficially owning 15% or more of the outstanding Shares or voting power of the Company, in each case other than the Transactions or (E) any combination of the foregoing types of transactions if the sum of the percentage of consolidated assets, net revenues, net income or Shares or voting power of the Company involved is 15% or more.

 

  (d)

Governmental Body” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, domestic, national, provincial or other government; or (c) governmental or quasi-governmental authority of any nature including any governmental division, department, agency, commission, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity, any regulatory, self-regulatory, administrative body or Entity and any court, arbitrator or other tribunal, in each case whether federal, state, local, municipal, foreign, domestic, national, provincial or otherwise.

 

  (e)

No-Shop Period” shall mean the period commencing on the date hereof and ending at 5:00 p.m. PT, on the earlier of (i) November 5, 2018 and (ii) the date on which Buyer advises the Company that Buyer is abandoning a Possible Transaction and terminating all discussions with respect thereto.

 

  (f)

Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity.


  (g)

Person” shall mean any individual, Entity or Governmental Body.

11. This Exclusivity Letter supersedes all prior agreements, written or oral, between the Company and Buyer relating to the subject matter hereof. This Exclusivity Letter may not be modified, changed, discharged or waived, in whole or in part, except by a writing signed by an authorized representative of the party against whom enforcement of such modification, change, discharge or waiver is sought. Any assignment of this Exclusivity Letter by either party without the other party’s prior written consent shall be void. The parties hereto have participated jointly in the negotiation and drafting of this Exclusivity Letter. In the event an ambiguity or question of intent or interpretation arises, this Exclusivity Letter shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Exclusivity Letter.

[Signature page follows.]


Please confirm your agreement to the terms set forth in this Exclusivity Letter by executing the duplicate original of this Exclusivity Letter that is enclosed and return the same to the undersigned. The obligations set forth in this Exclusivity Letter shall immediately be binding upon your acceptance of this letter.

 

Very truly yours,
CONVERGEONE HOLDINGS, INC.
By:  

/s/ John A. McKenna, Jr.

Name: John A. McKenna, Jr.
Title: Chief Executive Officer


ACKNOWLEDGED AND AGREED:
CVC ADVISORS (U.S.) INC.
By:  

/s/ Christopher J. Stadler

Name: Christopher J. Stadler
Title: Managing Partner

Exhibit (d)(4)

ROLLOVER AGREEMENT

This Rollover Agreement (this “Agreement”) dated as of November 6, 2018, is made by and among PVKG Investment Holdings, Inc., a Delaware corporation (“Holdings”), and the undersigned person (collectively, the “Investors” and, each individually, an “Investor”), each a stockholder of ConvergeOne Holdings, Inc., a Delaware corporation (the “Company”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).

WHEREAS, soon after the execution of this Agreement, PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), shall cause PVKG Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Purchaser”), to commence (within the meaning of Rule 14d-2 of the Securities Exchange Act, as amended) a tender offer to acquire all of the Shares at an offer price of $12.50 per share, in cash, without interest (the “Offer Price”), pursuant to the terms and conditions set forth in an Offer to Purchase under cover of the Schedule TO and in a related letter of transmittal to be filed with the Securities and Exchange Commission (which, together with any amendments or supplements thereto, collectively constitute the “Offer”);

WHEREAS, the Offer is being made in connection with a proposed merger (the “Merger”) pursuant to that certain Agreement and Plan of Merger to be entered into by and among Parent, Purchaser and the Company (the “Merger Agreement”), which contemplates that upon the terms and subject to the conditions in the Merger Agreement, Purchaser will merge with and into the Company, with the Company remaining as the surviving corporation;

WHEREAS, prior to and without giving effect to the transactions contemplated by the Merger Agreement (the “Contemplated Transactions”), each Investor owns the number of Shares set across from his, her or its name on Annex A attached hereto;

WHEREAS, in connection with the consummation of the Contemplated Transactions, each Investor hereby commits to contribute that number of Shares set forth across from such Investors name on Annex A, owned, beneficially and of record, by such Investor at the Contribution Closing (the “Rollover Shares”) in exchange for the issuance of shares of common stock of Holdings (the “Holdings Shares”) as determined in accordance with this Agreement, and the Rollover Shares shall be cancelled pursuant to Section 2.5(a)(2) of the Merger Agreement;

WHEREAS, CVC Capital Partners VII (A) L.P., CVC Capital Partners Investment Europe VII L.P. and CVC Capital Partners VII Associates L.P. shall, or shall cause one or more of its Affiliates to, immediately prior to the Merger, contribute to Holdings an amount of cash (the “Contributed Cash”) equal to the Merger Consideration (as defined in the Merger Agreement) in exchange for shares of Holdings in a transaction described in Section 351(a) of the Code that is intended to be integrated with the rollover contemplated by this Agreement such that, after consummation of such transaction and the rollover contemplated by this Agreement, the party or parties contributing the Contributed Cash in exchange for shares of Holdings together with the Investors own stock representing “control” of Holdings within the meaning of Section 368(c) of the Code; and

WHEREAS, the parties hereto desire to make certain agreements, representations, warranties and covenants in connection with the contributions contemplated by this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and conditions as hereinafter set forth, the parties hereto do hereby agree as follows:

ARTICLE 1

CONTRIBUTION

Section 1.1 Contributed Common Stock. Upon the terms and subject to the conditions of this Agreement, each Investor hereby agrees to transfer, contribute and deliver to Holdings as of the Contribution Closing (as defined below) all of such Investor’s Rollover Shares set across from his, her or its name on Annex A attached hereto. In consideration for the Rollover Shares, Holdings hereby agrees to issue to each Investor, as of the Contribution Closing, the number of shares of Holdings Shares equal to the Rollover Shares Value divided by the value of a Holdings Share, which the parties hereby agree shall be the same price per share paid by CVC Capital Partners VII (A) L.P. for its indirect purchase of identical Holdings Shares in connection with the transactions contemplated by the Merger Agreement (the “Share Purchase Price”). For purposes of this section, the “Rollover Shares Value” shall equal the Offer Price multiplied by the number of such Investor’s Rollover Shares.


Section 1.2 Delivery of Contribution and Stock Certificates. Subject to the satisfaction (or waiver by the parties entitled to the benefit hereof) of the conditions set forth in Section 1.3 below, the closing of the transactions contemplated by this Agreement (the “Contribution Closing”) shall be deemed to have occurred immediately prior to the Effective Time. At the Contribution Closing, Holdings will issue to each Investor the Holdings Shares, against (i) the transfer and contribution to Holdings of the Rollover Shares (including the delivery of certificates evidencing the applicable number of Shares owned, beneficially and of record, by such Investor, duly endorsed to Holdings), free and clear of any Encumbrances, by such Investor and (ii) a duly executed joinder to the stockholders agreement of Holdings by such Investor. At the Effective Time, the Holdings Shares shall have the rights, preferences, allocations, privileges and restrictions set forth in the stockholders agreement of Holdings, which stockholders agreement shall contain customary provisions relating to, among other provisions, transfer restrictions, tag-along and drag-along provisions, repurchase rights in favor of Holdings and such other customary terms, in each case as mutually acceptable to the parties.

Section 1.3 Closing Condition; Failure of the Merger to Occur. The obligations of the parties to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver by Parent, Purchaser and/or the Company, as applicable, of all of the conditions to the consummation of the Merger, as set forth in the Merger Agreement. If for any reason the Merger contemplated by the Merger Agreement fails to occur but the Contribution Closing has already taken place, then Holdings shall return to each Investor, such Investor’s Rollover Shares.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Section 2.1 Representations and Warranties of Purchaser. Holdings represents and warrants to each Investor as follows:

(a) Holdings is a corporation, validly existing and in good standing under the laws of the state of Delaware and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Holdings of this Agreement, the performance by Holdings of its obligations hereunder, and the consummation by Holdings of the transactions contemplated hereby have been duly authorized. This Agreement has been duly executed and delivered by Holdings and, assuming the due execution and delivery thereof by each Investor, constitutes a legal, valid and binding obligation of Holdings, enforceable against Holdings in accordance with its terms, except as enforceability may be limited by laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief and other equitable remedies.

(b) The execution, delivery and performance by Holdings of this Agreement and the consummation by Holdings of the transactions contemplated hereby do not and will not, with or without the giving of notice or the passage of time or both, (i) violate the provisions of any Legal Requirement or Order applicable to Holdings or its properties or assets, (ii) require authorization, approval, consent or other action by any Person under, result in a breach of any of the terms of, or constitute a default under, or give rise to any right of termination, cancellation or acceleration or to a loss of any benefit to which Holdings is entitled under any provision of any agreement or other instrument to which Holdings is a party or by which Holdings is bound, or (ii) violate the provisions of the governing documents of Holdings.

Section 2.2 Representations and Warranties of the Investor. Each Investor represents and warrants to Holdings that:

(a) Such Investor has full legal capacity, right and authority to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement has been duly executed and delivered by such Investor, and assuming the due execution and delivery thereof by Holdings, constitutes a legal, valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except as enforceability may be limited by laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief and other equitable remedies.

(b) The execution, delivery and performance of this Agreement by such Investor and the consummation by such Investor of the transactions contemplated hereby do not and will not, with or without the giving of notice or the passage of time or both, (i) violate the provisions of any Legal Requirement or Order applicable to such Investor, (ii) require authorization, approval, consent or other action by any Person under, result in a breach of any of the terms of, or constitute a default under, or give rise to any right of termination, cancellation or acceleration or to a loss of any benefit to which such Investor is entitled under any provision of any agreement or other instrument to which such Investor is a party or by which such Investor is bound, or (iv) result in the imposition of any Encumbrance on any of the Rollover Shares.


(c) As of the date hereof, such Investor is the beneficial owner of the Rollover Shares, free and clear of any Encumbrances and any other limitation or restriction (including any restriction on the right to vote or otherwise dispose of any such Rollover Shares) other than those created by this Agreement.

(d) The spouse of such Investor has executed and delivered or shall execute and deliver to Holdings the requisite spousal consent in a form satisfactory to Holdings.

ARTICLE III

COVENANTS

Section 3.1 No Proxies or Encumbrances. Except pursuant to the terms of this Agreement, the Support Agreement or the Merger Agreement, no Investor will, directly or indirectly, (a) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any of such Investor’s Rollover Shares, (b) tender any of such Investor’s Rollover Shares pursuant to the Offer or (c) otherwise sell, assign, transfer, encumber or dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer, encumbrance or other disposition of, any of such Investor’s Rollover Shares unless such action is effective upon a Company Adverse Change Recommendation resulting from a Superior Offer in compliance with Section 6.1(b)(i) of the Merger Agreement.

Section 3.2 Further Assurances. Each party hereto shall use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to satisfy its obligations hereunder.

Section 3.3 Tax Matters. The parties hereto agree to (a) treat the rollover contemplated by this Agreement for U.S. federal income tax purposes as a contribution of the Rollover Shares to Holdings under Section 351(a) of the Code of 1986, as amended (the “Code”) and (ii) not take any action or position (including but not limited to preparation and filing of any tax return) that is inconsistent with, or is otherwise harmful to, such treatment, except as may be required by a final determination within the meaning of Section 1313(a) of the Code.

ARTICLE IV

MISCELLANEOUS

Section 4.1 Notices. All notices, consents and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by hand delivery, by prepaid overnight courier (providing written proof of delivery), by confirmed facsimile transmission or by certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows:

(a) if to Holdings to:

c/o CVC Advisors (U.S.) Inc.

One Maritime Plaza, Suite 1610

San Francisco, CA 94111

United States of America

Attention Chris Colpitts

Email: [email protected]

with copies (which shall not constitute notice) to:

White & Case LLP

1221 Avenue of the Americas

New York, New York 10020-1095

Attention: Oliver Brahmst; Chang-Do Gong; Robert N. Chung

Email: [email protected]; [email protected]; [email protected] Esq.

(b) if to the Investors to: addresses set forth across from such Investors name on Annex A


Section 4.2 Termination. This Agreement shall automatically terminate if, at any time prior to the Contribution Closing, the Merger Agreement shall have been terminated in accordance with its terms. In the event of any termination of this Agreement as provided in this Section 4.2, this Agreement shall immediately become void and there shall be no liability or obligations on the part of Holdings or the Investor under this Agreement.

Section 4.3 Successors and Assigns. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided, that notwithstanding the foregoing, after consummation of the transactions contemplated as of the Contribution Closing, Holdings may assign all but not less than all of its rights and obligations hereunder to any Affiliate without the prior written consent of the other parties hereto. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns.

Section 4.4 Counterparts. This Agreement may be executed in two or more counterparts, by different parties on separate counterparts or by confirmation by electronic mail from a party, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 4.5 Survival. The representations, warranties, and other agreements contained herein will survive the Contribution Closing.

Section 4.6 Amendments and Waivers. No amendment, modification or supplement to the Agreement shall be enforced against any party unless such amendment, modification or supplement is in writing and signed by Purchaser and the Investor. Any waiver by any party of any term of this Agreement shall not operate as or be construed to be a waiver of any other term of this Agreement.

Section 4.7 Integration. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof. There are no agreements, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to this subject matter. There are no third party beneficiaries having rights under or with respect to this Agreement.

Section 4.8 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof.

Section 4.9 Specific Performance. The parties hereto agree that irreparable harm would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they are entitled at law or in equity.

Section 4.10 No Ownership Interest. All rights, ownership and economic benefits of and relating to the Rollover Shares shall remain vested in and belong to each Investor, and Holdings shall have no authority to exercise any power or authority to direct the Investors, except as specifically provided herein and subject to all of the conditions precedent herein, (a) in the voting or disposition of any of the Rollover Shares or (b) in the performance of such Investor’s duties or responsibilities as a stockholder of the Company.

Section 4.11 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed and interpreted in accordance with, the Laws of the State of Delaware, without giving effect to any Law that would cause the Laws of any jurisdiction other than the State of Delaware to be applied. The parties hereto hereby (a) submit to the exclusive jurisdiction of any state or federal court in Delaware for the purpose of any action arising out of or relating to this letter agreement brought by any party hereto and (b) irrevocably waive, in any such action, any claim of improper venue or any claim that such courts are an inconvenient forum.

Section 4.12 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[Signature Pages Follow]


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

PVKG Investment Holdings, Inc.
By:  

/s/ James Christopoulos

  Name: James Christopoulos
  Title: Secretary

[Signature Page to Rollover Agreement]


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

/s/ John McKenna, Jr.

John McKenna, Jr.

/s/ Jeff Nachbor

Jeff Nachbor

/s/ Paul Maier

Paul Maier

/s/ John Lyons

John Lyons

/s/ Craig Chumley

Craig Chumley

/s/ Klaus Hillman

Klaus Hillman

/s/ Gerald Pearce

Gerald Pearce

/s/ Seth Frank

Seth Frank

/s/ Bill Benson

Bill Benson

/s/ Neil Wada

Neil Wada

/s/ Joe Fabrizio

Joe Fabrizio

/s/ Colleen Haberman

Colleen Haberman

/s/ Mark Langanki

Mark Langanki

/s/ Brooks Martin

Brooks Martin

/s/ Scott Ford

Scott Ford

[Signature Page to Rollover Agreement]


ANNEX A

 

Names

   Rollover Shares     

Addresses

John Mckenna

     1,405,641     

Jeff Nachbor

     320,000     

Paul Maier

     185,435     

John Lyons

     150,000     

Crig Chumley

     50,000     

Klaus Hillman

     42,164     

Gerry Pearce

     57,668     

Seth Frank

     47,114     

Bill Benson

     1,710     

Neil Wada

     9,330     

Joe Fabizio

     33,354     

Colleen Haberman

     20,000     

Mark Langanki

     6,889     

Brooks Martin

     28,000     

Scott Ford

     100,000     

Total

     2,457,305     

Exhibit (d)(5)

November 6, 2018

Re: Equity Commitment Letter

Ladies and Gentlemen:

Reference is hereby made to that certain Agreement and Plan of Merger, dated as of November 6, 2018 (as may be amended from time to time, the “Merger Agreement”), by and among PVKG Intermediate Holdings Inc., a Delaware (“Parent”), PVKG Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Purchaser”), and ConvergeOne Holdings, Inc., a Delaware corporation (the “Company”), pursuant to which, upon the terms and conditions set forth therein, Purchaser will be merged with and into the Company, with the Company continuing as the surviving corporation as a wholly owned Subsidiary of Parent (the “Merger”). Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Merger Agreement. The parties listed on Schedule A hereto are each an “Investor” and collectively, the “Investors.”

1. Commitment. This letter agreement confirms the several, and not joint, commitment of each Investor, upon the terms and subject to the conditions and limitations set forth herein, to contribute or cause to be contributed (directly or indirectly) to Parent its percentage (as set forth opposite such Investor’s name on Schedule A hereto) of an aggregate amount of up to $750,000,000 of cash equity financing (the “Commitment”) at the Closing, solely for the purpose of funding and only to the extent necessary, together with the substantially concurrent receipt of the proceeds of the Debt Financing, (a) the payment for any and all Shares tendered pursuant to the Offer at the Offer Acceptance Time and (b) the payment required to be made pursuant to Section 2.6(a) and Section 2.9 of the Merger Agreement, in each case, pursuant to, and in accordance with, the Merger Agreement and the payment of Indebtedness and related fees and expenses in connection with the Offer and the Merger; provided, that no Investor or any of their permitted assignees shall, under any circumstances, be obligated to make available, or cause to be made available, any amounts in excess of their respective percentage of the Commitment as set out in Schedule A hereto. The several obligation of each Investor (or any of its permitted assignees) to fund its respective portion of the Commitment is subject to (a) the terms of this letter agreement, (b) the written waiver by Parent or Purchaser or satisfaction of all conditions precedent set forth in the Merger Agreement (including the Offer Condition) to Parent’s and Purchaser’s obligations to effect the Closing, (c) the prior or substantially simultaneous receipt of the net cash proceeds of the Debt Financing (or any alternative financing) and (d) the substantially simultaneous Closing of the Merger on the terms and subject to the conditions of the Merger Agreement. Without prejudice to the obligations of the Investors under this letter agreement, the amount to be funded under this letter agreement shall be reduced in the manner designated by the Investors in the event that Parent does not require all of the Equity Financing with respect to which the Investors have made the Commitment in order to consummate the Offer and the Merger; provided, however, such amount shall not be reduced pursuant to this sentence until and unless the Closing occurs.


2. Termination. Each Investor’s obligation to fund its respective portion of the Commitment will terminate automatically and immediately upon the earliest to occur of: (a) the Closing; (b) the termination of the Merger Agreement in accordance with its terms; and (c) the assertion by the Company or any of its Affiliates, or any of their respective Representatives acting on their behalf, in any Legal Proceeding of any claim against any of the Investors, Parent, Purchaser or any Investor Related Party (as defined below) relating to (i) this letter agreement, (ii), that certain Limited Guarantee, dated as of the date hereof, by the Guarantors (as defined therein) in favor of the Company (the “Limited Guarantee”), (iii) the Merger Agreement or any of the transactions contemplated hereby or thereby (other than, in the case of this clause (iii), any claim by the Company to the extent expressly permitted under the Limited Guarantee), in each case other than any Legal Proceeding to specifically enforce the provisions of this letter agreement as described in Section 4 of this letter agreement or any Legal Proceeding pursuant to Section 9.5(b) of the Merger Agreement. Upon termination of this letter agreement, no Investor shall have any further obligations or liabilities hereunder, although such termination shall not relieve any Investor of any liability or obligation it may have under the Limited Guarantee (except to the extent provided in the Limited Guarantee).

3. Assignment; No Modification; Entire Agreement. (a) The rights and obligations under this letter agreement may not be assigned by any party hereto, directly or indirectly, (by operation of law or otherwise) without the prior written consent of the parties hereto, and any attempted assignment shall be null and void and of no force or effect. Notwithstanding the foregoing, (i) each Investor may assign all or a portion of its obligations to fund the Commitment to another Investor, any limited partner of an Investor or to any funds or entities managed or advised by any of the Investor’s Affiliates (which, for the purposes of this letter agreement, shall include all funds managed or advised by Affiliates of CVC Advisors (U.S.) Inc., and CVC Capital Partners SICAV-FIS S.A. and its Subsidiaries) and (ii) Parent or Purchaser may assign its rights hereunder to any of its permitted assignees under the Merger Agreement; provided, that no such assignment shall relieve the assigning party of its obligations hereunder; provided, further that such assignment is not reasonably expected to have the effect of delaying the Closing or the funding of such Investor’s Commitment beyond the date and time the Closing and such funding is required to occur pursuant to the terms of the Merger Agreement

(b) This letter agreement may not be amended, and no provision hereof may be waived or modified, except by an instrument signed by each of the parties hereto; provided that no such amended, modification or wavier shall materially and adversely affect the Company without the Company’s prior written consent.

(c) This letter agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among or between any of the parties hereto with respect to the subject matter hereof.

4. Third Party Beneficiaries. This letter agreement shall be binding solely on, and inure solely to the benefit of, the parties hereto and their respective successors and permitted assigns, and nothing set forth in this letter agreement shall be construed to confer upon or give to any Person (including the Company) other than the parties hereto and their respective successors and permitted assigns any benefits, rights or remedies under or by reason of, or any rights to enforce or cause Parent to enforce, the Commitment or any provisions of this letter agreement; provided, however, that, subject to Section 9.5(b) of the Merger Agreement, the Company is hereby made a third party beneficiary of the rights granted to Parent hereby only


for the purpose of obtaining specific performance, in the Company’s own name, of Parent’s right to cause the Commitment to be funded pursuant to the terms and conditions hereunder and Section 9.5(b) of the Merger Agreement. Each Investor accordingly agrees not to oppose the granting of any injunction, specific performance or other equitable relief on the basis that the Company has an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity; provided that, notwithstanding anything herein to the contrary, nothing will prohibit the Investors from contesting the granting of any injunction, specific performance or other equity relief on the ground that the Company is not entitled to such injunction, specific performance or other equity relief pursuant under the terms hereof or the Merger Agreement. Each Investor acknowledges and agrees that the right of specific performance under this letter agreement is an integral part of the transactions contemplated by the Merger Agreement and without those rights, the Company would not have entered into the Merger Agreement.

5. Limited Recourse; Enforcement. (a) Notwithstanding anything that may be expressed or implied in this letter agreement, or any document or instrument delivered in connection herewith, Parent, by its acceptance of the benefits of the Commitment provided herein, agrees and acknowledges that no Person other than the Investors shall have any obligations hereunder and that, notwithstanding that an Investor or any of its permitted assigns may be a limited partnership, separate limited partnership or limited liability company, no recourse hereunder or under any documents or instruments delivered in connection herewith or in respect of any oral representations or warranties made or alleged to have been made in connection herewith or therewith shall be had against any former, current or future Representative, direct or indirect controlling Person, equityholder, general or limited partner, member, stockholder, incorporator, Affiliate, successor or permitted assignee of an Investor or any former, current or future Representative, direct or indirect controlling Person, equityholder, general or limited partner, member, stockholder, incorporator, Affiliate, successor or permitted assignee of any of the foregoing (each, other than the Investors, an “Investor Related Party”), whether (i) by or through attempted piercing of the corporate (or limited liability company or limited partnership or separate limited partnership) veil, (ii) by or through a claim (whether at law or equity or in tort, contract or otherwise) by or on behalf of Parent, Purchaser or any Investor against any Investor Related Party, (iii) by the enforcement of any assessment or by any legal or equitable proceeding, or (iv) by virtue of any statute, regulation or applicable Legal Requirement, or otherwise. It is expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any Investor Related Party for any obligations of the Investors or any Investor’s successors or permitted assigns under this letter agreement or any documents or instruments delivered in connection herewith or in respect of any oral representations or warranties made or alleged to have been made in connection herewith or therewith or for any claim (whether at law or equity or in tort, contract or otherwise) based on, in respect of, or by reason of such obligations or their creation.

(b) Neither the Investors nor any of the Investor Related Parties (other than Parent or Purchaser) shall have any liability to any Person in connection with the Merger Agreement or this letter agreement (other than as explicitly set forth in this letter agreement and any liability or obligation the Investors may have under the Limited Guarantee), whether based upon contract, tort or any other claim or legal theory and whether at law or equity. The foregoing sentence shall survive any termination of this letter agreement.


(c) Subject to the terms of Section 4 hereof, this letter agreement may only be enforced by Parent at the direction of the Investors in their sole discretion. Except as set forth in Section 4 hereof, Parent shall have no right to enforce this letter agreement unless directed to do so by the Investors in their sole discretion. None of the Company’s or Parent’s creditors shall have the right to enforce this letter agreement or to cause the Company or Parent (as applicable) to enforce this letter agreement.

(d) Concurrently with the execution and delivery of this letter agreement, the Investors are executing and delivering to the Company a Limited Guarantee related to certain of Parent’s and Purchaser’s obligations under the Merger Agreement. The Company’s remedies against the Investors under such Limited Guarantee shall be, and are intended to be, the sole and exclusive direct or indirect remedies available to the Company and its respective equityholders and Affiliates against the Investors or any Investor Related Party in respect of any losses or liabilities or obligations (including, without limitation, lost profits, lost revenues, lost opportunities, diminution in value and consequential, indirect, punitive or other special damages, and whether at law, in equity, in contract, in tort, or otherwise, regardless of legal theory) arising under, or in connection with, the Merger Agreement or the failure of the Merger to be consummated or otherwise in connection with the transactions contemplated hereby and thereby or in respect of any oral representations or warranties made or alleged to have been made in connection herewith or therewith, including in the event Parent or Purchaser breaches its obligations under the Merger Agreement, whether or not Parent’s or Purchaser’s breach is caused by the breach of any Investor of its obligations under this letter agreement, except for the right of the Company to specifically enforce the provisions of this letter agreement, subject to and in accordance with the terms and conditions set forth in Section 4 hereof and Section 9.5(b) of the Merger Agreement.

6. Confidentiality. This letter agreement shall be treated as confidential and is being provided to Parent solely in connection with the Merger. This letter agreement may not be used, circulated, quoted or otherwise referred to in any document, except with the prior written consent of the Investors in each instance. Notwithstanding the foregoing, a copy of this letter agreement may be provided to the Company if the Company agrees to treat the letter agreement as confidential, except that the Company may disclose the existence of this letter agreement (a) to its Representatives that need to receive such disclosure in order to consummate the Merger, (b) to the extent required by applicable Legal Requirement and (c) to the extent required to enforce its rights to specific performance under Section 4 hereof.

7. Governing Law; Jurisdiction; Service of Process. (a) THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

(b) IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT: (I) EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE CHANCERY COURT OF THE STATE OF DELAWARE AND ANY STATE APPELLATE COURT THEREFROM OR, IF SUCH COURT


LACKS SUBJECT MATTER JURISDICTION, THE UNITED STATES DISTRICT COURT SITTING IN NEW CASTLE COUNTY IN THE STATE OF DELAWARE (IT BEING AGREED THAT THE CONSENTS TO JURISDICTION AND VENUE SET FORTH IN THIS SECTION 7(b) SHALL NOT CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE OF DELAWARE AND SHALL HAVE NO EFFECT FOR ANY PURPOSE EXCEPT AS PROVIDED IN THIS PARAGRAPH AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE PARTIES HERETO); AND (II) EACH OF THE PARTIES IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY FIRST CLASS CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO THE ADDRESS AT WHICH SUCH PARTY IS TO RECEIVE NOTICE AS SET FORTH BELOW. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY APPLICABLE LEGAL REQUIREMENTS; PROVIDED, HOWEVER, THAT NOTHING IN THE FOREGOING SHALL RESTRICT ANY PARTY’S RIGHTS TO SEEK ANY POST-JUDGMENT RELIEF REGARDING, OR ANY APPEAL FROM, SUCH FINAL TRIAL COURT JUDGMENT.

if to Parent:

c/o CVC Advisors (U.S.) Inc.

One Maritime Plaza, Suite 1610

San Francisco, CA 94111

United States of America

Attention Chris Colpitts

Email: [email protected]

with a copy to:

White & Case LLP

1221 Avenue of the Americas

New York, New York 10020-1095

Attention: Oliver Brahmst; Chang-Do Gong

Facsimile: (212) 354-8113

E-mail: [email protected]; [email protected]


If to the Investors:

CVC Capital Partners VII (A) L.P., CVC Capital Partners

Investment Europe VII L.P. and CVC Capital Partners VII

Associates L.P.

c/o CVC Capital Partners VII Limited

1 Waverly Place, Union Street

St. Helier, Jersey

JE1 1SG

Channel Islands

Attention: The Directors

Facsimile: +44 1534 850 799

with copies to:

White & Case LLP

1221 Avenue of the Americas

New York, New York 10020-1095

Attention: Oliver Brahmst; Chang-Do Gong

Facsimile: (212) 354-8113

E-mail: [email protected]; [email protected]

8. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT.

9. Representations and Warranties. Each Investor hereby represents and warrants, severally and with respect to itself and no other Investor, that:

 

  a.

such Investor is validly incorporated or organized and duly registered under the laws of the jurisdiction of its incorporation or organization and it has the power to perform its obligations under this letter agreement, which constitute legal, valid and binding obligations on such Investor;

 

  b.

such Investor has the power and authority required to enter into this letter agreement and perform its obligations hereunder in accordance with its terms;

 

  c.

the execution, delivery and performance of this letter agreement have been duly authorized by all necessary action and do not contravene any provision of such Investor’s organizational documents or any applicable Legal Requirement or contractual restriction binding on such Investor or its assets, and this letter agreement has been duly executed and delivered by such Investor;

 

  d.

all consents, approvals, authorizations, permits of, filings with and notifications to, any Governmental Body necessary for the due execution, delivery and performance of this letter agreement by it have been obtained or made and all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with, any Governmental Body is required in connection with the execution, delivery or performance of this letter agreement; and


  e.

such Investor has and will have on the Closing, and will maintain until the time it has no further obligations under this letter agreement, access to undrawn funding commitments available that are necessary to meet its obligations under this letter agreement and that such funding commitments are no less than such Investor’s percentage of the Commitment as set forth on Schedule A hereto.

10. Counterparts. This letter agreement may be executed in counterparts and by facsimile or by scanned Portable Document Format image, each of which, when so executed, shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

[Remainder of page intentionally left blank]


Please confirm the above agreement between the parties by signing and returning to the undersigned a copy of this letter agreement.

 

Sincerely,
CVC CAPITAL PARTNERS VII (A) L.P.
By: CVC CAPITAL PARTNERS VII LIMITED, its General Partner

By:

 

/s/ Carl John Hansen

 

Name: Carl John Hansen

 

Title: Director

CVC CAPITAL PARTNERS INVESTMENT EUROPE VII L.P.
By: CVC CAPITAL PARTNERS VII LIMITED, its General Partner

By:

 

/s/ Carl John Hansen

 

Name: Carl John Hansen

 

Title: Director

CVC CAPITAL PARTNERS VII ASSOCIATES L.P.
By: CVC CAPITAL PARTNERS VII LIMITED, its General Partner

By:

 

/s/ Carl John Hansen

 

Name: Carl John Hansen

 

Title: Director

[Signature Page to CVC Equity Commitment Letter]


Accepted and Agreed as of the date first written above:

PVKG INTERMEDIATE HOLDINGS INC.

 

By:

 

/s/ James Christopoulos

 

Name: James Christopoulos

  Title: Secretary

[Signature Page to CVC Equity Commitment Letter]


Schedule A

 

Investors

   Percentage of Commitment  

CVC Capital Partners VII (A) L.P.

     94.5122

CVC Capital Partners Investment Europe VII L.P.

     2.1616

CVC Capital Partners VII Associates L.P.

     3.3262

TOTAL:

     100

Exhibit (d)(6)

LIMITED GUARANTEE

This LIMITED GUARANTEE, dated as of November 6, 2018 (this “Limited Guarantee”), is made by the parties listed as “Guarantors” on the signature pages hereto (each, a “Guarantor” and, collectively, the “Guarantors”), in favor of ConvergeOne Holdings, Inc., a Delaware corporation (the “Company”). The Company is sometimes referred to herein as the “Guaranteed Party”. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Merger Agreement (as defined below).

1. Limited Guarantee. To induce the Company to enter into that certain Agreement and Plan of Merger, dated as of November 6, 2018 (as may be amended from time to time, the “Merger Agreement”), by and among PVKG Intermediate Holdings Inc., a Delaware corporation (“Parent”), PVKG Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Purchaser”) and the Company, pursuant to which, upon the terms and conditions set forth therein, Purchaser will be merged with and into the Company, with the Company continuing as the surviving corporation as a wholly owned Subsidiary of Parent (the “Merger”), each Guarantor hereby absolutely, unconditionally and irrevocably, severally, and not jointly, guarantees to the Guaranteed Party, the due and punctual payment, observance, performance and discharge by Parent and Purchaser of such Guarantor’s percentage (as set forth opposite such Guarantor’s name on Schedule A hereto) of the payment obligations of Parent and Purchaser with respect to (i) the Parent Termination Fee, (ii) the costs, expenses and interest (if any) referred to in Section 8.3(d) of the Merger Agreement, in each case, as provided by Sections 8.3(b) and 8.3(d) and (iii) the fees, costs and expenses as provided in the last sentence of Section 6.13(b) of the Merger Agreement, subject, in each case in clauses (i), (ii) and (iii), to the limitations set forth in Sections 8.3(c), 8.3(d), 8.3(e) and 9.11 of the Merger Agreement (as applicable) (clauses (ii) and (iii), collectively, the “Costs” and, collectively with clause (i), the “Obligations”); provided, that in no event shall any Guarantor’s liability under this Limited Guarantee exceed such Guarantor’s percentage (as set forth opposite such Guarantor’s name on Schedule A hereto) of the sum of (A) an aggregate amount of $107,000,000 plus (B) the Costs, which Costs shall in no event exceed $10,000,000 in the aggregate (clauses (A) and (B), collectively, the “Cap”). The parties hereto agree that this Limited Guarantee may not be enforced without giving effect to the Cap. The Guaranteed Party may, in its sole discretion, bring and prosecute a separate action or actions against the Guarantors for the full amount of the Obligations (subject to the Cap) upon the terms and subject to the conditions herein and in the Merger Agreement, regardless of whether such action is brought against Parent, Purchaser or any other Person or whether Parent, Purchaser or any other Person is joined in any such action or actions. The Guaranteed Party hereby acknowledges and agrees that in no event shall any Guarantor be required to pay any amount to the Guaranteed Party or any other Person under, in respect of, or in connection with this Limited Guarantee or the Merger Agreement other than as expressly set forth herein.

2. Nature of Limited Guarantee. The Guaranteed Party shall not be obligated to file any claim relating to the Obligations in the event that Parent or Purchaser becomes subject to a bankruptcy, reorganization or similar Legal Proceeding, and the failure of the Guaranteed Party to so file shall not affect the Guarantors’ obligations hereunder. In the event that any payment to the Company in respect of the Obligations is rescinded or must otherwise be returned for any reason whatsoever, the Guarantors shall remain liable hereunder, subject to the Cap and the other limitations set forth herein (including Section 7 hereof), with respect to the Obligations as if such payment had not been made. This Limited Guarantee is an unconditional guarantee of payment and performance and not of collectability.


3. Changes in Obligations; Certain Waivers. Each Guarantor agrees that the Guaranteed Party may at any time and from time to time, without notice to or further consent of such Guarantor, extend the time of payment of any of the Obligations, and may also make any agreement with Parent or Purchaser or any assignee of Parent or Purchaser (“Assignee”) pursuant to, in respect of or in connection with the Merger Agreement, for the extension, renewal, payment, compromise, discharge or release thereof, in whole or in part, or for any modification of the terms thereof or of any other agreement between the Guaranteed Party, Parent, Purchaser, or any Assignee without in any way impairing or affecting such Guarantor’s obligations under this Limited Guarantee, but in any case subject to Section 7. Each Guarantor agrees that its obligations hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (a) subject to clause (iv) of Section 7, the failure or delay of the Guaranteed Party to assert any claim or demand or to enforce any right or remedy against Parent, Purchaser or any Assignee; (b) any change in the time, place or manner of payment of any of the Obligations or any rescission, waiver, compromise, consolidation or other amendment or modification of any of the terms or provisions of the Merger Agreement or any other agreement evidencing, securing or otherwise executed in connection with the Obligations so long as any such changes do not have the effect of increasing the Cap or any of the Obligations; (c) the addition, substitution or release of any Person now or hereafter liable with respect to the Obligations to or from this Limited Guarantee, the Merger Agreement or any related agreement or document; (d) any change in the corporate existence, structure or ownership of such Guarantor, Parent, Purchaser or any Assignee; (e) any insolvency, bankruptcy, reorganization or other similar Legal Proceeding or Legal Requirement affecting Parent, Purchaser or any Assignee; (f) the existence of any claim, set-off or other right that such Guarantor may have at any time against Parent, Purchaser, any Assignee or the Guaranteed Party, whether in connection with the Obligations or otherwise; or (g) the adequacy of any other means the Guaranteed Party may have of obtaining payment of any of the Obligations. Each Guarantor hereby expressly waives any and all rights or defenses arising by reason of any Legal Requirement that would otherwise require any election of remedies by the Guaranteed Party. Each Guarantor waives promptness, diligence, notice of the acceptance of this Limited Guarantee and of the Obligations, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of any Obligations incurred and all other notices of any kind (except for notices to be provided to Parent and Purchaser and their counsel in accordance with the Merger Agreement), all defenses that may be available by virtue of any valuation, stay, moratorium law or other similar Legal Requirement now or hereafter in effect (including any right to require that recourse be had to the assets of any other Person before any claim is enforced against such Guarantor in respect of the obligations assumed by such Guarantor under or in connection with this Limited Guarantee and any right to require that any liability under any guarantee or indemnity given in or in connection with this Limited Guarantee be divided or apportioned with any other Person or reduced in any manner whatsoever), any right to require the marshalling of assets of Parent, Purchaser or any Assignee, and all suretyship defenses generally (other than actual and intentional fraud or willful misconduct by the Guaranteed Party or any of its Subsidiaries or Affiliates, defenses to the payment of the Obligations that are available to Parent or Purchaser under the Merger Agreement, or breach by the Guaranteed Party of this Limited Guarantee). Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the Transactions and that the waivers set forth in this Limited Guarantee are knowingly made in contemplation of such benefits. The Guaranteed Party hereby covenants and agrees that it shall not, and shall cause its

 

2


Affiliates not to, institute in the name of or on behalf of the Guaranteed Party or any other Person any Legal Proceeding or bring any other claim arising under, or in connection with, the Equity Commitment Letter, dated as of the date hereof, by the Investors (as defined therein) in favor of Parent (the “Equity Commitment Letter”), or the Merger Agreement or the Transactions, against any Guarantor/Parent Affiliate (as defined below), except for (i) claims under this Limited Guarantee (subject to the limitations described herein), (ii) any claim or action solely relating to a breach, or any action solely seeking to prevent a breach, of or under the Confidentiality Agreement, (iii) any claim by the Guaranteed Party to the extent expressly permitted under the Merger Agreement, or (iv) to the extent permitted by Section 4 of the Equity Commitment Letter (collectively, the “Non-Prohibited Claims”).

4. Additional Agreements. Each Guarantor hereby covenants and agrees that it shall not institute, and shall cause its Affiliates not to institute, any Legal Proceedings asserting that this Limited Guarantee is illegal, invalid or unenforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Legal Requirements affecting creditors’ rights generally, and general equitable principles (whether considered in equity or at law). Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against Parent, Purchaser, or any Assignee that arise from the existence, payment, performance, or enforcement of the Obligations, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Guaranteed Party against Parent, Purchaser, or any Assignee, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from Parent, Purchaser, or any Assignee, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations shall have been paid in full in cash. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the payment in full in cash of all of the Obligations, such amount shall be received and held in trust for the benefit of the Guaranteed Party and shall forthwith be paid or delivered to the Guaranteed Party in the same form as so received (with any necessary endorsement or assignment), to be credited and applied to the Obligations, in accordance with the terms of the Merger Agreement, whether matured or unmatured, or to be held as collateral for the Obligations.

5. No Waiver; Cumulative Rights. No failure on the part of the Guaranteed Party to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Guaranteed Party of any right, remedy or power hereunder preclude any other or future exercise of any right, remedy or power hereunder. Each and every right, remedy and power hereby granted to the Guaranteed Party or allowed it by Legal Requirement or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Guaranteed Party at any time or from time to time.

6. Representations and Warranties. Each Guarantor hereby represents and warrants, severally and with respect to itself and no other Guarantor, that:

(a) such Guarantor is validly incorporated or organized and duly registered under the laws of the jurisdiction of its incorporation or organization and it has the power to perform its obligations under this Limited Guarantee, which constitute legal, valid and binding obligations on such Guarantor;

 

3


(b) such Guarantor has the power and authority required to enter into this Limited Guarantee and perform its obligations hereunder in accordance with its terms;

(c) the execution, delivery and performance of this Limited Guarantee have been duly authorized by all necessary action and do not contravene any provision of such Guarantor’s organizational documents or any applicable Legal Requirement or contractual restriction binding on such Guarantor or its assets, and this Limited Guarantee has been duly executed and delivered by such Guarantor;

(d) all consents, approvals, authorizations, permits of, filings with and notifications to, any Governmental Body necessary for the due execution, delivery and performance of this Limited Guarantee by it have been obtained or made and all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with, any Governmental Body is required in connection with the execution, delivery or performance of this Limited Guarantee; and

(e) such Guarantor has and will have on the Closing, and will maintain until the time it has no further obligations under this Limited Guarantee, access to undrawn funding commitments available that are necessary to meet its obligations under this Limited Guarantee and that such funding commitments are no less than such Guarantor’s percentage of the Cap as set forth on Schedule A hereto.

7. Continuing Guarantee; Enforcement. Unless terminated pursuant to this Section 7, this Limited Guarantee shall remain in full force and effect and shall be binding on each Guarantor and its successors and assigns until the Obligations are satisfied in full, at which time, this Limited Guarantee shall automatically terminate and no Guarantor shall have any further obligations under this Limited Guarantee. Notwithstanding the foregoing, this Limited Guarantee shall automatically terminate and no Guarantor shall have any further obligations under this Limited Guarantee as of the earliest to occur of (i) the Closing, (ii) the receipt in full by the Guaranteed Party or its Affiliates of the Parent Termination Fee and all Costs (in each case, subject to the Cap), (iii) the valid termination of the Merger Agreement in accordance with its terms in any circumstance other than one in which Parent or Purchaser would be obligated to pay the Parent Termination Fee or any Costs, and (iv) the date that is three (3) months after the date of any termination of the Merger Agreement in accordance with its terms in any circumstance pursuant to which Parent or Purchaser would be obligated to pay the Parent Termination Fee or any Costs, if by such date the Guaranteed Party has not made a claim in writing to Parent or Purchaser for payment of any Obligation or to the Guarantors for the payment of any Obligation. The Guaranteed Party hereby acknowledges and agrees that to the extent that Parent or Purchaser is relieved from its payment obligations under Section 8.3 of the Merger Agreement, each Guarantor shall be similarly relieved of such Obligations. Notwithstanding the foregoing, in the event that the Guaranteed Party or any of its Affiliates assert in any Legal Proceeding that the provisions of Section 1 hereof limiting any Guarantor’s liability to its percentage of the Cap as set forth on Schedule A hereto or the provisions of this Section 7 or Section 9 or hereof are illegal, invalid or unenforceable, in whole or in part, or asserting any theory of liability against any Guarantor or any Guarantor/Parent Affiliate with respect to the Merger Agreement (or the Transactions) or the Equity Commitment Letter, other than any Non-Prohibited

 

4


Claim, then (A) the Obligations shall terminate automatically and immediately and be null and void and of no force or effect, (B) if any Guarantor previously made any payments under this Limited Guarantee, it shall be entitled to recover such payments from the Guaranteed Party and its successors and permitted assigns, and (C) no Guarantor or any Guarantor/Parent Affiliate (as defined below) shall have any liability of any kind to the Guaranteed Party or any of its Affiliates with respect to the Merger Agreement (or the Transactions) or the Equity Commitment Letter or under this Limited Guarantee or otherwise. No creditor of any of the Company, Parent or Purchaser (other than the Guaranteed Party in its capacity as such) shall have the right to enforce this Limited Guarantee or to cause the Guaranteed Party to enforce this Limited Guarantee.

8. No Assignment. Neither the Guaranteed Party nor any Guarantor may assign its respective rights, interests or obligations, including the Obligations, hereunder to any other Person (except by operation of law) without the prior written consent of the other party(ies); provided, however, that any Guarantor may assign all or a portion of its rights, interests and obligations hereunder, including the Obligations, to another Guarantor, any limited partner of a Guarantor or an Affiliate capable of making the representations set forth in Section 6 or to an entity managed or advised by an Affiliate of a Guarantor (which, for the purposes of this letter agreement, shall include all funds managed or advised by Affiliates of CVC Advisors (U.S.) Inc., and CVC Capital Partners SICAV-FIS S.A. and its Subsidiaries) capable of making the representations set forth in Section 6; provided further that no such assignment shall relieve such Guarantor of any liability or obligation hereunder, including the Obligations. Notwithstanding anything in this Limited Guarantee to the contrary, in the event any Guarantor (A) consolidates with or merges with any other Person and is not the continuing or surviving entity of such consolidation or merger or (B) transfers or conveys all or a portion of its properties and other assets to any Person such that the sum of such Guarantor’s remaining net assets plus uncalled capital is less than the maximum amount of the Obligations (less amounts paid under this Limited Guarantee prior to such event), then, and in either such case, the Guaranteed Party shall be entitled to seek recourse, whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding or by virtue of any Legal Requirement, against such continuing or surviving entity or such Person (in either case, a “Successor Entity”), as the case may be. As used in this Limited Guarantee, unless otherwise specified, the term “Guarantor” includes such Guarantor’s Successor Entity.

9. No Recourse. Notwithstanding anything to the contrary that may be expressed or implied in this Limited Guarantee or any document or instrument delivered contemporaneously herewith, and notwithstanding the fact that each Guarantor is a partnership, by its acceptance of the benefits of this Limited Guarantee, the Guaranteed Party hereby acknowledges and agrees that it has no right of recovery against, no recourse shall be had against and no personal liability shall attach to, any Guarantor or any former, current or future Representative, direct or indirect controlling Person, equityholder, general or limited partner, member stockholder, incorporator, Affiliate, successor or permitted assignee of any Guarantor, Parent or Purchaser or any former, current or future Representative, direct or indirect controlling Person, equityholder, general or limited partner, member, stockholder, incorporator, affiliate, successor or permitted assignee of any of the foregoing (collectively, but not including Parent or Purchaser, any holding company owning Parent or Purchaser or Subsidiary of Parent or Purchaser, each a “Guarantor/Parent Affiliate”), through Parent, Purchaser or otherwise, whether by or through attempted piercing of the corporate veil, by or through a claim (whether at law or equity in tort, contract or otherwise),

 

5


by or on behalf of Parent or Purchaser against any Guarantor/Parent Affiliate, by the enforcement of any assessment or by any legal or equitable proceeding or by virtue of any applicable Legal Requirement, or otherwise, except for (i) the Guaranteed Party’s rights to recover from each Guarantor (but not any Guarantor/Parent Affiliate (including any general partner or managing member or any beneficial owner thereof)) under, and to the extent provided in, this Limited Guarantee and subject to the Cap and the other limitations described herein and (ii) the rights of the Guaranteed Party to obtain specific performance under and to the extent provided in Section 4 of the Equity Commitment Letter and subject to the limitations set forth therein. Recourse against any of the Guarantors under this Limited Guarantee, subject to the limitations and conditions set forth herein, shall be the sole and exclusive remedy of the Guaranteed Party and all of its Affiliates against each Guarantor and Guarantor/Parent Affiliate in respect of any liabilities or obligations arising under, or in connection with, the Merger Agreement or the Transactions or in respect of any oral representations or warranties made or alleged to be made in connection therewith. Nothing set forth in this Limited Guarantee shall affect or be construed to affect any liability of Parent or Purchaser to the Guaranteed Party or shall confer or give or shall be construed to confer or give to any Person other than the Guaranteed Party (including any Person acting in a representative capacity) any rights or remedies against any Person other than the Guarantors as expressly set forth herein.

10. Notices. Any notice or other communication required or permitted to be delivered to any party under this Limited Guarantee shall be in writing and shall be deemed properly delivered, given and received (a) upon receipt when delivered by hand, (b) two (2) Business Days after being sent by registered mail or by courier or express delivery service, (c) if sent by email transmission prior to 6:00 p.m. recipient’s local time, upon transmission when receipt is confirmed or (d) if sent by email transmission after 6:00 p.m. recipient’s local time, the Business Day following the date of transmission; provided, that in each case the notice or other communication is sent to the physical address or email address set forth beneath the name of such party below (or to such other physical address or email address as such party shall have specified in a written notice given to the other parties hereto):

if to the Company:

c/o Clearlake Capital Group

233 Wilshire Blvd., Suite 800

Santa Monica, California 90401

Attention: Behdad Eghbali and James Pade

Fax No.: (310) 400-8801

Email: [email protected] and

[email protected]

and (but not or)

ConvergeOne Holdings Corp.

3344 Highway 149

Eagan, Minnesota 55121

Attention: Jeff Nachbor

Phone: (651) 393-3632

E-mail: [email protected]

 

6


with a copy to:

Cooley LLP

3175 Hanover Street

Palo Alto, CA 94304

Attention: Mehdi Khodadad

E-mail: [email protected]

If to the Guarantors:

CVC Capital Partners VII (A) L.P., CVC Capital Partners

Investment Europe VII L.P. and CVC Capital Partners VII

Associates L.P.

c/o CVC Capital Partners VII Limited

1 Waverly Place, Union Street

St. Helier, Jersey

JE1 1SG

Channel Islands

Attention: The Directors

Facsimile: +44 1534 850 799

with copies to:

White & Case LLP

1221 Avenue of the Americas

New York, New York 10020-1095

Attention: Oliver Brahmst; Chang-Do Gong

Facsimile: (212) 354-8113

E-mail: [email protected]; [email protected]

11. Governing Law; Service of Process. (a) THIS LIMITED GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

(b) IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS LIMITED GUARANTEE: (I) EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE CHANCERY COURT OF THE STATE OF DELAWARE AND ANY STATE APPELLATE COURT THEREFROM OR, IF SUCH COURT LACKS SUBJECT MATTER JURISDICTION, THE UNITED STATES DISTRICT COURT SITTING IN NEW CASTLE COUNTY IN THE STATE OF DELAWARE (IT BEING AGREED THAT THE CONSENTS TO JURISDICTION AND VENUE SET FORTH IN THIS SECTION 11(b) SHALL NOT CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE OF DELAWARE AND SHALL HAVE NO EFFECT

 

7


FOR ANY PURPOSE EXCEPT AS PROVIDED IN THIS PARAGRAPH AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE PARTIES HERETO); AND (II) EACH OF THE PARTIES IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY FIRST CLASS CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO THE ADDRESS AT WHICH SUCH PARTY IS TO RECEIVE NOTICE IN ACCORDANCE WITH SECTION 10. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY APPLICABLE LEGAL REQUIREMENTS; PROVIDED, HOWEVER, THAT NOTHING IN THE FOREGOING SHALL RESTRICT ANY PARTY’S RIGHTS TO SEEK ANY POST-JUDGMENT RELIEF REGARDING, OR ANY APPEAL FROM, SUCH FINAL TRIAL COURT JUDGMENT.

12. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS LIMITED GUARANTEE.

13. Counterparts. This Limited Guarantee may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. The exchange of copies of this Limited Guarantee and of signature pages by facsimile or electronic transmission shall constitute effective execution and delivery of this Limited Guarantee as to the parties and may be used in lieu of the original Limited Guarantee for all purposes. Signatures of the parties transmitted by facsimile or electronic transmission shall be deemed to be their original signatures for all purposes.

14. Amendments; Waivers. This Limited Guarantee may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by each of the parties hereto.

15. Severability. If any term or other provision of this Limited Guarantee is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Limited Guarantee shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Limited Guarantee so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

16. No Strict Construction. The language of this Limited Guarantee will be construed as to its fair meaning and not strictly for or against either party. In the event an ambiguity or question of intent or interpretation arises, this Limited Guarantee shall be construed as if drafted jointly by the parties and the parties waive the application of any Legal Requirement, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

8


17. Third-Party Beneficiaries. The parties hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other parties hereto, in accordance with and subject to the terms of this Limited Guarantee, and this Limited Guarantee is not intended to, and does not, confer upon or give to any Person (other than the parties hereto) any rights or remedies (express or implied) hereunder, including (without limitation) the right to rely upon the representations and warranties set forth herein.

18. Confidentiality. This Limited Guarantee shall be treated as confidential and is being provided to the Guaranteed Party solely in connection with the transactions contemplated by the Merger Agreement. This Limited Guarantee may not be used, circulated, quoted or otherwise referred to in any document (other than the Merger Agreement and the Equity Commitment Letter), except with the prior written consent of the Guarantors; provided, that the Guaranteed Party may disclose this Limited Guarantee to its Representatives and the Guaranteed Party may disclose the existence of this Limited Guarantee to the extent required by applicable Legal Requirement.

19. Entire Agreement. This Limited Guarantee constitutes the entire agreement with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, proposals, undertakings and agreements, whether written or oral, among Parent, Purchaser and the Guarantors or any of their Affiliates, on the one hand, and the Guaranteed Party and any of its Affiliates, on the other hand, except for the Merger Agreement, the Equity Commitment Letter and the other agreements related thereto and entered into on the date hereof.

[Remainder of page intentionally left blank]

 

9


IN WITNESS WHEREOF, each of the parties hereto has caused this Limited Guarantee to be executed and delivered as of the date first written above.

 

GUARANTORS:
CVC CAPITAL PARTNERS VII (A) L.P.
By: CVC CAPITAL PARTNERS VII LIMITED, its General Partner
By:  

/s/ Carl John Hansen

  Name: Carl John Hansen
  Title: Director
CVC CAPITAL PARTNERS INVESTMENT EUROPE VII L.P.
By: CVC CAPITAL PARTNERS VII LIMITED, its General Partner
By:  

/s/ Carl John Hansen

  Name: Carl John Hansen
  Title: Director
CVC CAPITAL PARTNERS VII ASSOCIATES L.P.
By: CVC CAPITAL PARTNERS VII LIMITED, its General Partner
By:  

/s/ Carl John Hansen

  Name: Carl John Hansen
  Title: Director

[Signature Page to Limited Guarantee]


GUARANTEED PARTY:
CONVERGEONE HOLDINGS, INC.
By:  

/s/ John A. McKenna, Jr.

Name:   John A. McKenna, Jr.
Title:   President, Chief Executive Officer and Chairman of the Board

[Signature Page to Limited Guarantee]


Schedule A

 

Guarantors

   Percentage of Obligation  

CVC Capital Partners VII (A) L.P.

     94.5122

CVC Capital Partners Investment Europe VII L.P.

     2.1616

CVC Capital Partners VII Associates L.P.

     3.3262

TOTAL:

     100


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