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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12
CAI INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
(i) Common Stock, par value $0.0001 per share, of CAI International, Inc.; 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share, of CAI International, Inc. (the “Series A Preferred Stock”); and (iii) 8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share, of CAI International, Inc. (the “Series B Preferred Stock”).
 
(2)
Aggregate number of securities to which transaction applies:
 
 
As of July 6, 2021: (i) 17,357,549 shares of common stock issued and outstanding (including 20,433 shares of common stock that are unvested outstanding restricted stock awards); (ii) 2,199,610 shares of Series A Preferred Stock that will be converted into the right to receive a liquidation preference consisting of $25.00 per share, plus accrued and unpaid dividends; (iii) 1,955,000 shares of Series B Preferred Stock that will be converted into the right to receive a liquidation preference consisting of $25.00 per share, plus accrued and unpaid dividends; (iv) 168,151 shares of common stock issuable pursuant to outstanding awards of stock options with an exercise price below $56.00 per share; (v) 90,697 shares of common stock issuable pursuant to outstanding awards of restricted stock units (the “RSUs”); and (vi) 52,930 shares of common stock issuable pursuant to outstanding awards of performance-based restricted stock units (assuming target achievement of all performance-based vesting criteria) (the “PRSUs”).
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
Solely for the purposes of calculating the filing fee, the maximum aggregate value of the transaction was determined based upon the sum of: (i) 17,357,549 shares of common stock (including 20,433 shares of common stock that are unvested outstanding restricted stock awards) multiplied by $56.00 per share; (ii) 2,199,610 shares of Series A Preferred Stock multiplied by $25.0289 (consisting of the liquidation preference of $25.00 per share, plus $0.0289 per share of accrued and unpaid dividends on such Series A Preferred Stock as of July 6, 2021); (iii) 1,955,000 shares of Series B Preferred Stock multiplied by $25.0289 (consisting of the liquidation preference of $25.00 per share, plus $0.0289 per share of accrued and unpaid dividends on such Series B Preferred Stock as of July 6, 2021); (iv) 168,151 shares of common stock issuable pursuant to outstanding awards of stock options with an exercise price below $56.00 per share, multiplied by $38.11 per share (which is the difference between $56.00 and the weighted average per share exercise price of such stock options); (v) 90,697 shares of common stock issuable pursuant to outstanding awards of RSUs multiplied by $56.00; and (vi) 52,930 shares of common stock issuable pursuant to outstanding awards of PRSUs (assuming target achievement of all performance-based vesting criteria) multiplied by $56.00.
 
 
 
 
 
In accordance with Exchange Act Rule 0-11, as amended, the filing fee of $118,969.13 was determined by multiplying the proposed maximum aggregate value of the transaction of $1,090,459,408.84 by 0.0001091.
 
(4)
Proposed maximum aggregate value of transaction:
 
 
$1,090,459,408.84
 
(5)
Total fee paid:
 
 
$118,969.13
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
(3)
Filing Party:
 
 
 
 
(4)
Date Filed:
 
 
 

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED JULY 12, 2021

CAI International, Inc.
Steuart Tower, 1 Market Plaza, Suite 2400
San Francisco, California 94105
[•], 2021
To the Common Stockholders of CAI International, Inc.:
You are cordially invited to attend a special meeting of the common stockholders (the “Special Meeting”) of CAI International, Inc., a Delaware corporation (“CAI,” the “Company,” “we,” “us,” or “our”), to be held on [•], 2021, at [•], Pacific Time. The Special Meeting will be held entirely online live via audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, stockholders, and other stakeholders. You will be able to attend and participate in the Special Meeting online by visiting www.virtualshareholdermeeting.com/CAI2021SM (the “Virtual Special Meeting Website”), where you will be able listen to the Special Meeting live, submit questions, and vote. Please note that the Special Meeting will not be held at a physical location and you will not be able to attend the Special Meeting by your physical presence.
On June 17, 2021, the Company entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”) with Mitsubishi HC Capital Inc., a Japanese corporation (“Parent”), and Cattleya Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”), relating to the proposed acquisition of the Company by Parent. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of Parent.
At the Special Meeting, you will be asked to consider and vote on proposals to:
(i)
adopt the Merger Agreement (the “Merger Proposal”);
(ii)
adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and
(iii)
approve, on a non-binding, advisory basis, certain compensation that will be, or may become, payable to our named executive officers in connection with the Merger.
If the Merger is completed, you will be entitled to receive $56.00, in cash, without interest, subject to deductions of any applicable withholding taxes, for each share of our common stock, par value $0.0001 per share (the “common stock”), that you own (unless you have properly exercised and perfected your appraisal rights with respect to your shares under Delaware law), which represents a premium of approximately (i) 47% over the closing share price of our common stock on The New York Stock Exchange (the “NYSE”) on June 17, 2021, the last trading day prior to the date the Merger Agreement was publicly announced, and (ii) 31% over the volume weighted average price of our common stock on the NYSE during the 60 trading days up to, and including, June 17, 2021.
Each share of our 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), will be converted into the right to receive an amount equal to the sum of: (i) the liquidation preference of $25.00 per share; plus (ii) the aggregate amount of all accrued and unpaid dividends on such Series A Preferred Stock as of the effective time of the Merger, in cash, without interest, subject to deductions of any applicable withholding taxes (unless the holder thereof has properly exercised and perfected its appraisal rights with respect to such shares under Delaware law). Each share of our 8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Preferred Stock”), will be converted into the right to receive an amount equal to the sum of: (i) the liquidation preference of $25.00 per share; plus (ii) the aggregate amount of all accrued and unpaid dividends on such Series B Preferred Stock as of the effective

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time of the Merger, in cash, without interest, subject to deductions of any applicable withholding taxes (unless the holder thereof has properly exercised and perfected its appraisal rights with respect to such shares under Delaware law). The vote of the holders of our Preferred Stock is not required to approve any of the proposals at the Special Meeting and is not being solicited.
The Board of Directors of the Company (the “Board”), after considering the factors more fully described in the accompanying proxy statement and after consultation with the Company’s legal and financial advisors, has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement; (ii) adopted resolutions approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) adopted resolutions recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption.
The Board unanimously recommends that you vote:
(1)
“FOR” the adoption of the Merger Agreement;
(2)
“FOR” the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and
(3)
“FOR” the approval, on a non-binding, advisory basis, of certain compensation that will be, or may become, payable to our named executive officers in connection with the Merger.
Your vote is very important, regardless of the number of shares of common stock that you own. Whether or not you plan to attend the Special Meeting via the Virtual Special Meeting Website, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope. You also may submit a proxy electronically over the Internet or by telephone. We have provided instructions on the proxy card for using these convenient services. Submitting a proxy will not prevent you from voting your shares via the Virtual Special Meeting Website if you subsequently choose to attend the Special Meeting via the Virtual Special Meeting Website. Your proxy may be revoked at any time before the vote at the Special Meeting by following the procedures outlined in the accompanying proxy statement. If you attend the Special Meeting and vote via the Virtual Special Meeting Website, your vote will revoke any proxy that you have previously submitted. We cannot complete the Merger unless the Merger Proposal is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of common stock entitled to vote at the Special Meeting as of [•], 2021, the record date for the Special Meeting. Please note that any abstention or other failure to vote your shares will have the same effect as a vote “AGAINST” the Merger Proposal.
If you hold your shares in “street name” through a broker, bank, trustee or other nominee, you should instruct your broker, bank, trustee or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your broker, bank, trustee or other nominee. Your broker, bank, trustee or other nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions. Without those instructions, your shares will not be voted, which will have the same effect as a vote “AGAINST” the Merger Proposal.
The accompanying proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. In addition, you may obtain information about us from documents that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information” in the accompanying proxy statement. A copy of the Merger Agreement is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of the Board in connection with its evaluation of the Merger Agreement and the Merger. I encourage you to read the proxy statement and its annexes, including the Merger Agreement, carefully and in their entirety, as they contain important information related to the Merger Agreement and the Merger.

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If you have any questions or need assistance voting your shares, please contact our proxy solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Shareholders, Banks and Brokers Call Toll Free: (866) 482-4943
On behalf of the Board, I thank you for your continued support and appreciate your consideration of these matters.
 
Sincerely,
 
 
 

 
Timothy B. Page
 
President and Chief Executive Officer, Chief Financial Officer and Director
The accompanying proxy statement is dated [•], 2021 and, together with the enclosed form of proxy card, is first being mailed to common stockholders on or about [•], 2021.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger Agreement or the transactions contemplated thereby, including the proposed Merger, or passed upon the adequacy or accuracy of the information contained in the accompanying proxy statement. Any representation to the contrary is a criminal offense.

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED JULY 12, 2021


CAI International, Inc.
Steuart Tower, 1 Market Plaza, Suite 2400
San Francisco, California 94105
NOTICE OF SPECIAL MEETING OF COMMON STOCKHOLDERS
TO BE HELD [•], 2021
To the Common Stockholders of CAI International, Inc.:
Notice is hereby given that a special meeting of the common stockholders (the “Special Meeting”) of CAI International, Inc., a Delaware corporation (“CAI,” the “Company,” “we,” “us,” or “our”), will be held on [•], 2021, at [•], Pacific Time. The Special Meeting will be held entirely online live via audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, stockholders, and other stakeholders. You will be able to attend and participate in the Special Meeting online by visiting www.virtualshareholdermeeting.com/CAI2021SM (the “Virtual Special Meeting Website”), where you will be able listen to the Special Meeting live, submit questions, and vote. Please note that the Special Meeting will not be held at a physical location and you will not be able to attend the Special Meeting by your physical presence.
The Special Meeting will be held for the following purposes:
1.
To consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), dated as of June 17, 2021, by and among Mitsubishi HC Capital Inc., a Japanese corporation (“Parent”), Cattleya Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”), and the Company, relating to the proposed acquisition of the Company by Parent (the “Merger Proposal”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of Parent. A copy of the Merger Agreement is attached as Annex A to the proxy statement.
2.
To consider and vote on a proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”).
3.
To consider and vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will be, or may become, payable to our named executive officers in connection with the Merger (the “Compensation Proposal”).
Any action on the items of business described above may be considered at the Special Meeting or at any time and date to which the Special Meeting may be properly adjourned or postponed.
Only holders of record of our common stock, par value $0.0001 per share (the “common stock”), as of the close of business on [•], 2021 (the “Record Date”), are entitled to notice of, and to vote at, the Special Meeting or any adjournment or postponement thereof. The vote of the holders of our Preferred Stock (as defined in the proxy statement) is not required to approve any of the proposals at the Special Meeting and is not being solicited.
A list of common stockholders of record will be available for inspection at our corporate headquarters located at Steuart Tower, 1 Market Plaza, Suite 2400 San Francisco, California 94105, during ordinary business hours during the 10-day period before the Special Meeting and on the Virtual Special Meeting Website during the Special Meeting.
The Board of Directors of the Company (the “Board”), after considering the factors more fully described in the proxy statement and after consultation with the Company’s legal and financial advisors, has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including

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the Merger, are advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement; (ii) adopted resolutions approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) adopted resolutions recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption.
The Board unanimously recommends that you vote:
(1)
“FOR” the Merger Proposal;
(2)
“FOR” the Adjournment Proposal; and
(3)
“FOR” the Compensation Proposal.
Your vote is very important, regardless of the number of shares of common stock that you own. Whether or not you plan to attend the Special Meeting via the Virtual Special Meeting Website, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope. You also may submit a proxy electronically over the Internet or by telephone. We have provided instructions on the proxy card for using these convenient services. Submitting a proxy will not prevent you from voting your shares via the Virtual Special Meeting Website if you subsequently choose to attend the Special Meeting via the Virtual Special Meeting Website. Your proxy may be revoked at any time before the vote at the Special Meeting by following the procedures outlined in the proxy statement. If you attend the Special Meeting and vote via the Virtual Special Meeting Website, your vote will revoke any proxy that you have previously submitted. We cannot complete the Merger unless the Merger Proposal is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of common stock entitled to vote at the Special Meeting as of the Record Date. Please note that any abstention or other failure to vote your shares will have the same effect as a vote “AGAINST” the Merger Proposal. Approval of each of the Adjournment Proposal and the Compensation Proposal requires the affirmative vote of a majority of the shares present in person (including by means of remote communication) or represented by proxy and entitled to vote on such proposal at the Special Meeting as of the Record Date. Abstentions will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal but the failure to vote your shares and broker non-votes, if any, will have no effect on the outcome of either the Adjournment Proposal or the Compensation Proposal.
If you hold your shares in “street name” through a broker, bank, trustee or other nominee, you should instruct your broker, bank, trustee or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your broker, bank, trustee or other nominee. Your broker, bank, trustee or other nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions. Without those instructions, your shares will not be voted, which will have the same effect as a vote “AGAINST” the Merger Proposal.
Holders of shares of common stock who do not vote in favor of the Merger Proposal and holders of shares of Preferred Stock, as applicable, will have the right to seek appraisal of the fair value of their shares if they comply with the applicable requirements of Delaware law, which are summarized in the proxy statement and reproduced in their entirety in Annex C to the proxy statement.
You are encouraged to read the proxy statement and its annexes, including all documents incorporated by reference into the proxy statement, carefully and in their entirety. If you have any questions concerning the Merger, the Special Meeting or the proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares, please contact our proxy solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Shareholders, Banks and Brokers Call Toll Free: (866) 482-4943
Whether or not you plan to attend the Special Meeting via the Virtual Special Meeting Website, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope. You also may submit a proxy electronically over the Internet or by telephone. Submitting a proxy

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will not prevent you from voting your shares via the Virtual Special Meeting Website if you subsequently choose to attend the Special Meeting via the Virtual Special Meeting Website. Your proxy may be revoked at any time before the vote at the Special Meeting by following the procedures outlined in the proxy statement.
 
By Order of the Board of Directors,
 
 
 

 
Timothy B. Page
 
President and Chief Executive Officer, Chief Financial Officer and Director
Dated: [•], 2021
The accompanying proxy statement is dated [•], 2021 and, together with the enclosed form of proxy card, is first being mailed to common stockholders on or about [•], 2021.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger Agreement or the transactions contemplated thereby, including the proposed Merger, or passed upon the adequacy or accuracy of the information contained in the accompanying proxy statement. Any representation to the contrary is a criminal offense.

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ii

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Annexes
 
iii

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED JULY 12, 2021
This proxy statement contains information related to a special meeting of the common stockholders (the “Special Meeting”) of CAI International, Inc., a Delaware corporation (“CAI,” the “Company,” “we,” “us,” or “our”), to be held on [•], 2021, at [•], Pacific Time. The Special Meeting will be held entirely online live via audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, stockholders, and other stakeholders. You will be able to attend and participate in the Special Meeting online by visiting www.virtualshareholdermeeting.com/CAI2021SM (the “Virtual Special Meeting Website”), where you will be able listen to the Special Meeting live, submit questions, and vote. Please note that the Special Meeting will not be held at a physical location and you will not be able to attend the Special Meeting by your physical presence.
On June 17, 2021, the Company entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”) with Mitsubishi HC Capital Inc., a Japanese corporation (“Parent”), and Cattleya Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”), relating to the proposed acquisition of the Company by Parent. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of Parent.
We are furnishing this proxy statement to our common stockholders as part of the solicitation of proxies by the board of directors of the Company (the “Board”) for use at the Special Meeting. At the Special Meeting, you will be asked to consider and vote on proposals to: (i) adopt the Merger Agreement (the “Merger Proposal”); (ii) adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”); and (iii) approve, on a non-binding, advisory basis, certain compensation that will be, or may become, payable to our named executive officers in connection with the Merger (the “Compensation Proposal”). A copy of the Merger Agreement is attached as Annex A to the proxy statement.
This proxy statement is dated [•], 2021 and, together with the enclosed form of proxy card, is first being mailed to common stockholders on or about [•], 2021.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger Agreement or the transactions contemplated thereby, including the proposed Merger, or passed upon the adequacy or accuracy of the information contained in this proxy statement. Any representation to the contrary is a criminal offense.
SUMMARY TERM SHEET
This summary term sheet, together with the following section entitled “Questions and Answers, highlights selected information from this proxy statement, including with respect to the Merger Agreement and the transactions contemplated thereby, including the Merger, and may not contain all of the information that may be important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger and the Merger Agreement, you should carefully read this entire proxy statement, the annexes to this proxy statement and the documents that we refer to, or incorporate by reference, in this proxy statement. Each item in this summary term sheet includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 116. The Merger Agreement is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement, which is the legal document that governs the Merger, carefully and in its entirety.
Parties Involved in the Merger (Page 35)
CAI International, Inc.
CAI is a Delaware corporation. We are one of the world’s leading transportation finance companies. We lease equipment, primarily intermodal shipping containers, to our customers. We also manage equipment for third-party investors. In operating our fleet, we lease, re-lease and dispose of equipment and contract for the repair, repositioning and storage of equipment. We were founded in 1989, as a traditional container leasing company that leased containers
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owned by us to container shipping lines. We were originally incorporated under the name Container Applications International, Inc. in the State of Nevada in August 1989. In February 2007, we were reincorporated under our present name in the State of Delaware. Please see “Where You Can Find More Information” beginning on page 116 for additional information regarding us.
Our common stock is listed on The New York Stock Exchange (the “NYSE”) under the symbol “CAI.” In addition, our Series A Preferred Stock and our Series B Preferred Stock (each as defined below) are listed on the NYSE under the symbols “CAI-PA” and “CAI-PB,” respectively.
Our principal executive office is located at Steuart Tower, 1 Market Plaza, Suite 2400, San Francisco, California 94105, and our telephone number is (415) 788-0100.
Mitsubishi HC Capital Inc.
Mitsubishi HC Capital Inc. (f.k.a. Mitsubishi UFJ Lease & Finance Company Limited) is a Japanese public company established through the merger of Mitsubishi UFJ Lease & Finance Limited and Hitachi Capital Corporation on April 1, 2021. The merger resulted in a combined company having total assets of JPY 9.7 trillion ($89 billion), making it the second largest leasing company in Japan with an extensive and complementary lineup of business.
Parent’s common stock is listed on the Tokyo Stock Exchange and the Nagoya Stock Exchange under the code “8593.”
Parent’s principal executive office is located at 5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-6525, Japan, and its telephone number is +81-3-6865-3054.
Cattleya Acquisition Corp.
Cattleya Acquisition Corp. (“Merger Sub”) is a Delaware corporation and a wholly-owned subsidiary of Parent. Merger Sub was incorporated in 2021 by Parent solely for the purposes of entering into the transactions contemplated by the Merger Agreement, and has not entered into any business activities other than in connection with the transactions contemplated by the Merger Agreement. Upon completion of the Merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the Merger.
Merger Sub’s principal executive office is located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, and may be contacted at 5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-6525, Japan, and its telephone number is +81-3-6865-3054.
The Special Meeting (Page 28)
Date, Time and Place
The Special Meeting will be held on [•], 2021, at [•], Pacific Time. The Special Meeting will be held entirely online live via audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, stockholders, and other stakeholders. You will be able to attend and participate in the Special Meeting online by visiting www.virtualshareholdermeeting.com/CAI2021SM, where you will be able listen to the Special Meeting live, submit questions, and vote. Please note that the Special Meeting will not be held at a physical location and you will not be able to attend the Special Meeting by your physical presence. To attend and participate in the Special Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If your shares are held in “street name,” you should contact your broker, trustee or other nominee to obtain your 16-digit control number or otherwise vote through the broker, trustee or other nominee. Only common stockholders with a valid 16-digit control number, will be able to attend the Special Meeting and vote, ask questions and access the list of common stockholders as of the close of business on the Record Date (as defined in “—Record Date; Shares Entitled to Vote” beginning on page 3). The Special Meeting will begin promptly at [•], Pacific Time. Online check-in will begin at [•], Pacific Time, and you should allow ample time for the online check-in procedures.
Purpose of the Special Meeting
At the Special Meeting, we will ask common stockholders to vote on each of the: (1) Merger Proposal; (2) Adjournment Proposal; and (3) Compensation Proposal.
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Record Date; Shares Entitled to Vote
Holders of the outstanding shares of common stock as of the close of business on [•], 2021, the record rate for the Special Meeting (the “Record Date”), are entitled to notice of, and to vote at, the Special Meeting.
As of the Record Date, there were [•] shares of our common stock outstanding, each entitled to one vote per share. Therefore, a total of [•] votes are eligible to be cast at the Special Meeting.
The vote of the holders of our Preferred Stock is not required to approve any of the proposals at the Special Meeting and is not being solicited.
Quorum
As of the Record Date, there were [•] shares of common stock outstanding and entitled to vote at the Special Meeting. The quorum requirement for holding the Special Meeting and transacting business is that holders of a majority of shares of our common stock entitled to vote must be present in person (including by means of remote communication) or represented by proxy at the Special Meeting. Abstentions will be counted as present for the purpose of determining whether a quorum is present, however “broker non-votes” (described in more detail below in “—Voting of Proxies” beginning on page 3), if any, will not be counted as present for the purpose of determining whether a quorum is present at the Special Meeting. If your shares are held in “street name” by your broker, bank, trustee or other nominee and you do not tell your broker, bank, trustee or other nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Special Meeting.
Vote Required
The General Corporation Law of the State of Delaware (the “DGCL”) requires that a majority of the shares of common stock outstanding and entitled to vote at the Special Meeting as of the Record Date vote in favor of the adoption of the Merger Agreement in order for the Merger to be consummated. The failure of any common stockholder to vote, abstentions, and broker non-votes, if any, will have the same effect as a vote by that stockholder “AGAINST” the Merger Proposal. Approval of each of the Adjournment Proposal and the Compensation Proposal requires the affirmative vote of a majority of the shares present in person (including by means of remote communication) or represented by proxy and entitled to vote on such proposal at the Special Meeting as of the Record Date. Abstentions will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal but the failure to vote your shares and broker non-votes, if any, will have no effect on the outcome of either the Adjournment Proposal or the Compensation Proposal.
Each share of common stock is entitled to one vote per share.
Shares Held by the Company’s Directors and Executive Officers
As of the Record Date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [•] shares of common stock, or approximately [•]% of the aggregate shares of common stock entitled to vote at the Special Meeting. The directors and executive officers of the Company have informed the Company that they currently intend to vote all of their shares “FOR” each of the proposals to be considered and voted on at the Special Meeting.
Voting of Proxies
Any stockholder of record entitled to vote at the Special Meeting may submit a proxy by returning a signed proxy card by mail in the accompanying prepaid reply envelope or granting a proxy electronically over the Internet or by telephone, or may vote via the Virtual Special Meeting Website at the Special Meeting. If you are a beneficial owner and hold your shares in “street name” through a broker, bank, trustee or other nominee, you should instruct your broker, bank, trustee or other nominee on how you wish to vote your shares using the instructions provided by your broker, bank, trustee or other nominee. Under NYSE rules, brokers, banks, trustees and other nominees have the discretion to vote on routine matters. The proposals to be considered at the Special Meeting are non-routine matters, and brokers, banks, trustees and other nominees cannot vote on any of these proposals without your instructions. As a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote those shares, referred to generally as “broker non-votes.” Broker non-votes, if any, will not be treated as shares that are present at the Special Meeting for purposes of determining whether a quorum exists and will
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have the same effect as votes “AGAINST” the Merger Proposal. Broker non-votes, if any, will have no effect on the either Adjournment Proposal or the Compensation Proposal, whether or not a quorum is present. Because none of the proposals to be voted on at the Special Meeting are routine matters for which brokers may have discretionary authority to vote, we do not expect any broker non-votes at the Special Meeting. Therefore, it is important that you cast your vote or instruct your broker, bank, trustee or other nominee on how you wish to vote your shares.
All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in the manner specified by the proxy holders. Properly executed proxies that do not contain voting instructions will be voted “FOR” the Merger Proposal, “FOR” the Adjournment Proposal and “FOR” the Compensation Proposal.
Shares represented at the Special Meeting but not voted, including shares for which proxies have been received but for which common stockholders have abstained, will be treated as present at the Special Meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.
Only shares affirmatively voted for the Merger Proposal, including properly executed proxies that do not contain specific voting instructions, will be counted “FOR” that proposal.
If you abstain from voting, it will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal, whether or not a quorum is present.
If you do not execute a proxy card and do not vote in person (including by means of remote communication) at the Special Meeting, it will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on either the Adjournment Proposal or the Compensation Proposal, whether or not a quorum is present.
Revocability of Proxies
If you are a stockholder of record on the Record Date, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by: (i) signing another proxy card with a later date and returning it to us prior to the Special Meeting; (ii) submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy; (iii) delivering a written notice of revocation to our Secretary at Steuart Tower, 1 Market Plaza, Suite 2400, San Francisco, California 94105; or (iv) attending the Special Meeting and voting via the Virtual Special Meeting Website (however, simply attending the Special Meeting will not cause your proxy to be revoked).
If you hold your shares in “street name,” you should contact your broker, bank, trustee or other nominee for instructions regarding how to change your vote. You may also vote via the Virtual Special Meeting Website at the Special Meeting if you obtain a valid proxy from your broker, bank, trustee or other nominee.
The Merger (Page 35)
Upon the terms and subject to the satisfaction or waiver of the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into the Company, and the Company will continue as the surviving corporation and as a wholly-owned subsidiary of Parent.
Effect on the Company if the Merger is Not Completed
If the Merger Agreement is not adopted by the required vote of our common stockholders, or if the Merger is not completed for any other reason, our stockholders will not receive any payment for their shares. Instead, we will remain an independent public company, each of our common stock, 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and 8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Preferred Stock”), will continue to be listed and traded on the NYSE and registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we will continue to file periodic and current reports with the Securities and Exchange Commission (the “SEC”). If the Merger is not completed, depending on the circumstances that caused the Merger not to be completed, the price of our common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it traded as of the date of this proxy statement. Under specified circumstances, we will be required to pay Parent the Termination Fee and the Merger Agreement Expenses (each as defined in “—Termination Fees and Treatment of Expenses” beginning on page 14)
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or Parent will be required to pay us the Parent Termination Fee (as defined in “—Termination Fees and Treatment of Expenses” beginning on page 14) and the Merger Agreement Expenses, in each case, upon the termination of the Merger Agreement.
If the Merger does not close, we would cause our subsidiaries to engage in a series of transactions such that our position would be as if the Migration (as defined in “—The Migration” beginning on page 7) had not occurred in all material respects.
For more details, see “The Merger—Effect on the Company if the Merger is Not Completed” beginning on page 36.
Merger Consideration
Upon completion of the Merger, the Company will cease to be a publicly traded company and at the effective time of the Merger (the “Effective Time”):
each share of common stock that is issued and outstanding immediately prior to the Effective Time (other than Excluded Shares (as defined in “The Merger—Merger Consideration” beginning on page 36)) will cease to be outstanding and will be converted into the right to receive $56.00, in cash, without interest, subject to deductions of any applicable withholding taxes (the “Common Merger Consideration”);
each share of Series A Preferred Stock that is issued and outstanding immediately prior to the Effective Time, other than Excluded Shares, will be converted into the right to receive an amount equal to the sum of: (i) the liquidation preference of $25.00 per share; plus (ii) the aggregate amount of all accrued and unpaid dividends on such Series A Preferred Stock as of the Effective Time, in cash, without interest, subject to deductions of any applicable withholding taxes (the “Series A Merger Consideration”); and
each share of Series B Preferred Stock that is issued and outstanding immediately prior to the Effective Time, other than Excluded Shares, will be converted into the right to receive an amount equal to the sum of: (i) the liquidation preference of $25.00 per share; plus (ii) the aggregate amount of all accrued and unpaid dividends on such Series B Preferred Stock as of the Effective Time, in cash, without interest, subject to deductions of any applicable withholding taxes (the “Series B Merger Consideration”).
Following the completion of the Merger, you will no longer own any shares of the capital stock of the surviving corporation. You will, however, have the right to receive the applicable Merger Consideration (as defined below), but you will no longer have any other rights as a stockholder of the Company (except that stockholders who have properly exercised and perfected their appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described in “The Merger—Appraisal Rights” beginning on page 72).
As used in this proxy statement, “Merger Consideration” means the Common Merger Consideration, the Series A Preferred Merger Consideration, the Series B Preferred Merger Consideration, the Option Merger Consideration (as defined in “—Treatment of Options, RSUs, PRSUs, RSAs and ESPP—Options” beginning on page 5), the RSU and PRSU Merger Consideration (as defined in “—Treatment of Options, RSUs, PRSUs, RSAs and ESPP—RSUs and PRSUs” beginning on page 5), the RSA Merger Consideration (as defined in “—Treatment of Options, RSUs, PRSUs, RSAs and ESPP—RSAs” beginning on page 5) or the ESPP Merger Consideration (as defined in “—Treatment of Options, RSUs, PRSUs, RSAs and ESPP—ESPP” beginning on page 5), as applicable.
Treatment of Options, RSUs, PRSUs, RSAs and ESPP
The Board has taken such actions as are necessary to cause (i) the performance conditions of each PRSU (as defined in “—RSUs and PRSUs” beginning on page 6) to be deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU) and (ii) each Option (as defined in “—Options” beginning on page 6), PRSU, RSU (as defined in “—RSUs and PRSUs” beginning on page 6) and RSA (as defined in “—RSAs” beginning on page 6) to become fully vested and free of any applicable forfeiture restrictions, in each of clauses (i) and (ii), effective as of immediately prior to the Effective Time.
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Options
As a result of the Merger:
each stock option that was granted pursuant to the CAI International, Inc. 2007 Equity Incentive Plan, as amended from time to time or the CAI International, Inc. 2019 Incentive Plan, as amended from time to time (each, an “Equity Incentive Plan” and collectively, the “Equity Incentive Plans”), that remains outstanding immediately prior to the Effective Time (each, an “Option”) that has a per share exercise price that is less than $56.00, will be cancelled at the Effective Time in exchange for an amount in cash, without interest, equal to the product of (x) the aggregate number of shares of common stock subject to such Option multiplied by (y) the excess of the Common Merger Consideration over the applicable per share exercise price of the Option (the “Option Merger Consideration”), subject to any applicable withholding taxes; and
each Option that has a per share exercise price that is equal to or greater than $56.00 will, to the extent not exercised as of immediately prior to the Effective Time, be automatically cancelled at the Effective Time with no payment made therefor and will cease to represent a right to purchase shares of common stock.
RSUs and PRSUs
As a result of the Merger, each restricted stock unit that was granted pursuant to such applicable Equity Incentive Plan and remains outstanding immediately prior to the Effective Time (each, an “RSU”) and each RSU that was granted pursuant to an Equity Incentive Plan, that is subject to vesting, in part or in whole, based on the achievement of corporate performance goals that have not been satisfied as of immediately prior to the Effective Time and that remains outstanding immediately prior to the Effective Time (each, a “PRSU”) will be cancelled and automatically converted at the Effective Time into the right to receive $56.00, in cash, without interest, for each share of common stock subject to the RSU or PRSU (the “RSU and PRSU Merger Consideration”), subject to any applicable withholding taxes.
RSAs
As a result of the Merger, each restricted share of common stock that was issued under an Equity Incentive Plan that remains outstanding and unvested immediately prior to the Effective Time (each, an “RSA”) will become fully vested and free of any applicable forfeiture restrictions, effective as of immediately prior to the Effective Time and each such share of common stock will cease to be outstanding and will be converted into the right to receive $56.00, in cash, without interest (the “RSA Merger Consideration”), subject to any applicable withholding taxes.
ESPP
Simultaneously in connection with the execution of the Merger Agreement, the Company: (i) caused any offering period (or similar period during which shares of common stock may be purchased) in progress under the Company’s 2019 Employee Stock Purchase Plan, as amended from time to time (the “ESPP”), as of the date of the Merger Agreement to be the final offering period under the ESPP and to be terminated as of the date of the Merger Agreement (the “Final Exercise Date”); (ii) made any pro-rata adjustments that may be necessary to reflect the shortened offering period (or similar period), but otherwise treat such shortened offering period (or similar period) as a fully effective and completed offering period for all purposes under the ESPP; and (iii) caused each participant’s then-outstanding share purchase right under the ESPP (the “ESPP Rights”) to terminate as of the Final Exercise Date. The Company will terminate the ESPP no later than the Effective Time.
On the Final Exercise Date, to the extent sufficient funds were credited as of such date under the ESPP within the associated accumulated payroll withholding accounts for participants to fund a share purchase for a reasonable number of shares of common stock, then such funds were used to purchase shares of common stock in accordance with the terms of the ESPP, and otherwise the current offering period terminated without a final purchase. Each share of common stock purchased under the ESPP prior to the Effective Time will be cancelled at the Effective Time and converted into the right to receive the Common Merger Consideration, subject to any applicable withholding taxes (the “ESPP Merger Consideration”). No further ESPP Rights will be granted or exercised under the ESPP after the Final Exercise Date.
As of the date of this proxy statement, there are no outstanding ESPP Rights.
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Governmental and Regulatory Approvals
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and related rules, certain transactions, including the Merger, may not be completed until notifications have been given and information furnished to the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) and the Federal Trade Commission (the “FTC”) and any applicable statutory waiting period requirements have expired or been terminated. On July 9, 2021, both the Company and Parent filed their respective Notification and Report Forms with the Antitrust Division and the FTC.
Pursuant to the terms of the Merger Agreement, the Parties are also required to make such other filings with any other governmental entities that may be required under applicable regulatory laws, including without limitation, any such filings required pursuant to the regulatory laws of (i) the Republic of Korea and Turkey and (ii) any other countries outside of the United States, in each case, pertaining to pre-merger notification and regulation of terms and conditions of merger transactions, as reasonably promptly as practicable (collectively, the “Foreign Regulatory Laws”).
Parent and the Company are required to use their reasonable best efforts to take any and all action, and to do or cause to be done, all things necessary, proper or advisable to consummate the Merger, including as reasonably promptly as practicable taking all steps as may be necessary to obtain any clearance required under the HSR Act, the Foreign Regulatory Laws and any other approvals required from any governmental authority. Parent and the Company are required to use their reasonable best efforts to defend through litigation on the merits any claim asserted in any court with respect to the transactions contemplated by the Merger Agreement by the FTC, the DOJ or any other applicable governmental authority. Notwithstanding anything to the contrary in the Merger Agreement, (i) Parent will not be required to (and the Company will not, without the consent of Parent) (x) propose, negotiate, commit to or effect, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of any business, product line, asset, contractual right, or relationship of Parent or any of its subsidiaries (other than the Company and its subsidiaries) or (y) otherwise take or commit to any action that after the Closing may limit Parent’s or its subsidiaries’ or its affiliates (other than the Company and its subsidiaries) freedom of action with respect to, or its or their ability to operate or retain, one or more of the businesses, product lines or assets of Parent or its subsidiaries or affiliates (other than the Company and its subsidiaries) or (z) enter into, or be required to take, any settlement, undertaking, consent decree, stipulation or agreement with any governmental authority in connection with the transactions contemplated by the Merger Agreement and (ii) Parent will not be required to, and the Company and its subsidiaries will not be required to (and will not without the consent of Parent), take any actions which would reasonably be expected to have a Company Material Adverse Effect. Parent has the right to direct all matters with any governmental authority consistent with its obligations hereunder. Notwithstanding anything to the contrary in the Merger Agreement, Parent will make all strategic decisions and lead all discussions, negotiations and other proceedings, and coordinate all activities with respect to any requests that may be made by, or any actions, consents, undertakings, approvals, or waivers that may be sought by or from, any governmental authority, in connection with obtaining governmental approvals for the transactions contemplated by the Merger Agreement under the HSR Act or any other regulatory laws and will take any and all steps necessary to promptly vacate, reverse or overturn any adverse decree judgment, permanent injunction or other order, including agreeing to take any of the actions set forth above, including determining the strategy for contesting, litigating or otherwise responding to objections to, or proceedings challenging, the consummation of the Merger and the other transactions contemplated by the Merger Agreement, in each case, subject to good faith consultations with the Company reasonably in advance and in consideration of the Company’s views.
The Migration
Pursuant to the Merger Agreement, prior to the Effective Time, the Company will, and will cause its subsidiaries to, take commercially reasonable efforts to carry out the actions required to (i) effect the domestication of Container Applications Limited, a Barbados corporation (“CAL”), and CAL Funding IV Limited, a Bermuda exempted company (together, the “Migrating Subsidiaries”), as Delaware limited liability companies under the applicable laws of Delaware and discontinuation as exempted companies or corporations, as applicable, under the applicable laws of Bermuda or Barbados, as applicable and (ii) after the effectiveness of the domestications and discontinuances described in the foregoing clause (i), with respect to each Migrating Subsidiary, cause each such Migrating Subsidiary to end its fiscal year at least one business day following the effectiveness of the discontinuation of the applicable Migrating Subsidiary, pursuant to the foregoing clause (i) (clauses (i) and (ii) collectively, the “Migration”).
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Furthermore, as promptly as practicable following the date of the Merger Agreement, the Company will, and will cause its subsidiaries to, use commercially reasonable efforts to provide all notices and obtain all material consents from counterparties to (i) certain of the Company’s debt agreements (the “Key Contract Consents”) and (ii) all other contracts of the Company and its subsidiaries, in each case, necessary under such contracts in order to consummate the Contribution (as defined below) and the Migration without any material breach or default thereunder (clauses (i) and (ii) collectively, the “Migration Contract Consents”).
Promptly following such time as certain conditions related to the Contribution and the taking of all actions and the making of all filings required to effect the provisions of clause (i) of the definition of the Migration (the “Migration Filings”), as described in “The Merger Agreement—Conditions to the Contribution, Migration Filings and Merger” beginning on page 101 have been satisfied, and in any event within two business days thereafter (such date of delivery, the “Bring-Down Date”), the Company will deliver its certificate, and Parent will deliver its certificate. Promptly following delivery of the certificates contemplated by the foregoing sentence (and no earlier than such time), and in any event no later than one business day thereafter (such time, the “Migration Commencement Time”), the Company will, and will cause its subsidiaries to, use commercially reasonable efforts to contribute the equity of CAL to a newly formed Bermuda exempted limited partnership (the “Contribution”).
One business day after the completion of the Contribution (and no earlier than one business day after the completion of the Contribution), the Company will, and will cause its subsidiaries to, use commercially reasonable efforts to make the Migration Filings, and thereafter effect the Migration as promptly as reasonably practicable. Notwithstanding anything to the contrary set forth in the Merger Agreement, the Closing will not occur earlier than on the next business day after the Company and Parent receive reasonably satisfactory evidence of the completion of the Migration (including the occurrence of clause (ii) of the definition thereof with respect to each Migrating Subsidiary) pursuant to the applicable laws of Barbados, Bermuda and Delaware.
For more information, please see “The Merger Agreement—The Migration” beginning on page 100.
Financing of the Merger
The consummation of the Merger is not subject to a financing condition. The Company and Parent estimate that the total amount of funds required to complete the Merger and the transactions contemplated thereby and pay related fees and expenses will be approximately $1.1 billion, with the exact amount dependent upon the willingness of various of the Company’s existing financing sources to consent to the transactions contemplated by the Merger Agreement.
For more information, please see “The Merger—Financing of the Merger” beginning on page 65.
Conditions to the Contribution, Migration Filings and Merger
The respective obligation of each party to commence the Contribution, and thereafter make the Migration Filings is subject to the satisfaction or waiver (where permissible pursuant to applicable law) of certain conditions on or prior to the Migration Commencement Time, including, but not limited to:
the approval of the holders of a majority the outstanding shares of common stock entitled to vote at the Special Meeting as of the Record Date (the “Stockholder Approval”) having been obtained;
any waiting period applicable to the consummation of the Merger under the HSR Act and the laws of other applicable countries pertaining to pre-merger notification having expired, been terminated or otherwise concluded in a manner favorable to the Merger (without the imposition of a Burdensome Condition (as defined in “The Merger Agreement—Filings and Efforts to Consummate the Merger” beginning on page 97));
the absence of certain governmental proceedings;
the receipt and obtainment of all Key Contract Consents and the Migration will not cause any default under certain contracts for which the Key Contract Consents have not been obtained; and
the taking or obtainment, as applicable, of all actions, consents or permissions required prior to the Migration Commencement Time.
The respective obligations of Parent and Merger Sub to permit the Company to commence the Contribution and Migration Filing are further subject to the satisfaction or waiver by Parent of certain conditions on or prior to the Migration Commencement Time, including, but not limited to:
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the accuracy of the representations and warranties of the Company, subject to certain exceptions (including, but not limited to, material adverse effect qualifications regarding their accuracy and matters contained in the disclosure schedule delivered by the Company to Parent at or before the execution and delivery by the Company of the Merger Agreement (the “Company Disclosure Schedule”));
the Company performing each of its material obligations required to be performed by it under the Merger Agreement; and
since the date of the Merger Agreement and prior to the Migration Commencement Time, there having not occurred any fact, circumstance, occurrence, effect, change, event or development that has had a Company Material Adverse Effect (as defined in “The Merger Agreement—Material Adverse Effect Definitions” beginning on page 89).
The Company’s obligation to commence the Contribution and Migration Filings is further subject to the satisfaction or waiver by the Company of certain conditions on or prior to the Migration Commencement Time, including, but not limited to:
the accuracy of the representations and warranties of each of Parent and Merger Sub, subject to certain exceptions (including, but not limited to, material adverse effect qualifications regarding their accuracy); and
each of Parent and Merger Sub performing all material obligations required to be performed by each of Parent and Merger Sub under the Merger Agreement at or prior to the Bring-Down Date.
The respective obligation of each party to effect the Merger is further subject to the satisfaction or waiver (where permissible pursuant to applicable law) on or prior to the Effective Time of each of the conditions set forth in the first three bullets of the first paragraph of this subsection.
The respective obligations of Parent and Merger Sub to effect the Merger is further subject to the satisfaction or waiver by Parent at or prior to the Effective Time of certain conditions, including, but not limited to:
the accuracy of the representations and warranties of the Company, subject to certain exceptions (including, but not limited to, material adverse effect qualifications regarding their accuracy and matters contained in the Company Disclosure Schedule);
the Company performing each of its material obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date or the Effective Time; and
the parties having received from the applicable governmental authorities reasonably satisfactory evidence of the completion of the Migration pursuant to the applicable laws of Barbados, Bermuda and Delaware, (ii) the Migration having occurred with respect to each of the Migrating Subsidiaries and (iii) the having made the Migration Filings in accordance with ‎the terms of the Merger Agreement.
The Company’s obligation to effect the Merger is further subject to the satisfaction or waiver by the Company of certain conditions at or prior to the Effective Time, including, but not limited to:
the accuracy of the representations and warranties of each of Parent and Merger Sub, subject to certain exceptions (including, but not limited to, material adverse effect qualifications regarding their accuracy); and
each of Parent and Merger Sub performing in all material respects all material obligations required to be performed by each of Parent and Merger Sub under the Merger Agreement at or prior to the Closing Date or the Effective Time.
For more information, please see “The Merger Agreement—Conditions to the Contribution, Migration Filings and Merger” beginning on page 101.
For additional information regarding the Migration, please see “The Merger Agreement—The Migration” beginning on page 100.
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Interests of the Company’s Directors and Executive Officers in the Merger
When considering the unanimous recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. In (i) evaluating and negotiating the Merger Agreement; (ii) approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption, the Board was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests include the following:
Treatment of Company Equity Awards. Certain of our directors and executive officers hold equity awards, the treatment of which is described in “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger—Treatment of Options, RSUs, PRSUs and RSAs” beginning on page 65;
Severance Benefits. Our named executive officers are entitled to certain severance benefits under their respective pre-existing employment or service agreements with us if their employment terminates in certain circumstances, which are described in “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger—Employment Agreements and Service Agreement” beginning on page 67;
Employment Arrangements with Parent. Certain of our officers, including our named executive officers (collectively, the “Key Executives”), have entered into binding term sheets with Parent (each, a “Term Sheet” and, collectively, the “Term Sheets”), pursuant to which, among other things, such officers are expected to continue their employment following the day on which the closing of the Merger (the “Closing”) occurs (the “Closing Date”) and, in certain cases, receive increased salaries, as well as certain cash bonus retention awards that are subject to vesting, in each chase, as further described in “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger—Employment Arrangements with Parent” beginning on page 68; and
Indemnification Rights. Our directors and executive officers are entitled to continued indemnification pursuant to the Merger Agreement, our organizational documents and certain indemnification agreements, as well as directors’ and officers’ liability insurance, which is described in “The Merger— Interests of the Company’s Directors and Executive Officers in the Merger—Insurance and Indemnification of Directors and Executive Officers” beginning on page 71.
If the Merger Proposal is approved, the shares held by our directors and executive officers will be treated in the same manner as outstanding shares held by all other common stockholders. For more information, see “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 65.
Anticipated Date of Completion of the Merger
As of the date of this proxy statement, assuming timely satisfaction of necessary closing conditions, including the approval by our common stockholders of the Merger Proposal, the completion of the Migration and receipt of regulatory approval, the Merger is expected to be completed in the late third quarter or early fourth quarter of 2021. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions, including the completion of the Migration, each as described in “The Merger Agreement—Conditions to the Contribution, Migration Filings and Merger” beginning on page 101, many of which are outside of our control.
Recommendation of the Board and Reasons for the Merger (Page 53)
After considering various factors described in “The Merger—Recommendation of the Board and Reasons for the Merger” beginning on page 53 and after consultation with the Company’s legal and financial advisors, the Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement; (ii) adopted resolutions approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) adopted resolutions recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated
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thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption (the “Board Recommendation”). The Board unanimously recommends that you vote (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; and (3) “FOR” the Compensation Proposal.
Opinion of Centerview Partners LLC (Page 58 and Annex B)
The Company retained Centerview Partners LLC (“Centerview)” as financial advisor to the Board in connection with the Merger and the other transactions contemplated by the Merger Agreement, which are collectively referred to as the “Transaction” throughout this section and the summary of Centerview’s opinion below under the caption “The Merger—Opinion of Centerview Partners LLC” beginning on page 58. In connection with this engagement, the Board requested that Centerview evaluate the fairness, from a financial point of view, to the holders of shares of the Company’s common stock (other than (a) any shares of Company common stock owned by Parent or Merger Sub or any other subsidiary or affiliate of Parent, (b) any shares of Company common stock for which appraisal rights have been properly demanded, perfected and not withdrawn or lost under Section 262 of the DGCL, and (c) any shares of Company common stock owned by the Company in treasury or by any direct or indirect wholly owned subsidiary or affiliate of the Company, which are collectively referred to as “Excluded Common Shares” throughout this section and the summary of Centerview’s opinion below under the caption “Opinion of Centerview Partners LLC”) of the $56.00 per share Common Merger Consideration proposed to be paid to holders of shares of common stock pursuant to the Merger Agreement. On June 17, 2021, Centerview rendered to the Board its oral opinion, which was subsequently confirmed by delivery of a written opinion dated June 17, 2021 that, as of June 17, 2021 and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Common Merger Consideration proposed to be paid to the holders of shares of common stock pursuant to the Merger Agreement was fair, from a financial point of view, to holders of shares of common stock (other than Excluded Common Shares).
The full text of Centerview’s written opinion, dated June 17, 2021, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated herein by reference. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the holders of shares of common stock (other than Excluded Common Shares) of the Common Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Centerview’s opinion did not address the consideration proposed to be paid to the holders of shares of Preferred Stock pursuant to the Merger Agreement, the fairness of the Common Merger Consideration relative to the consideration proposed to be paid to the holders of shares of Preferred Stock pursuant to the Merger Agreement, the allocation of the aggregate Merger Consideration among the holders of shares of common stock and holders of shares of Preferred Stock or any other term or aspect of the Merger Agreement or the Transaction and does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.
The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.
Alternative Proposals; Change in Recommendation; Intervening Events (Page 93)
Alternative Proposals
Except as permitted by the terms of the Merger Agreement described below, until the Effective Time or, if earlier, the termination of the Merger Agreement pursuant to and in accordance with the Superior Proposal Termination Provision (as defined in “—Termination Fees and Treatment of Expenses” beginning on page 14), the Company and its subsidiaries are required to cease any and all existing activities, discussions, or negotiations, if any, with any third party with respect to any Alternative Proposal (as defined in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93), and the Company is required to use its commercially reasonable efforts to cause any such third party (or its agents or advisors) to return or destroy any non-public information in respect of the Company or any subsidiary it was provided.
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Furthermore, except as permitted by the terms of the Merger Agreement described below, until the Effective Time or, if earlier, the termination of the Merger Agreement pursuant to and in accordance with the Superior Proposal Termination Provision, the Company is not permitted to, may not allow its subsidiaries to, nor authorize or permit its and its subsidiaries representatives to, directly or indirectly:
solicit, initiate or knowingly take any action to facilitate or encourage the submission of any Alternative Proposal or the making of any proposal that could reasonably be expected to lead to any Alternative Proposal; or
subject to certain exceptions described below, (i) engage in any discussions with, or provide non-public information relating to the Company or any subsidiary to, any third party that is seeking to make, has made or could reasonably be expected to make, an Alternative Proposal, (ii) except where the Board (or a committee thereof) makes a good faith determination, after consultation with outside legal counsel and its financial advisor, that the failure to do so would be inconsistent with its fiduciary duties under applicable law, grant any waiver under any standstill agreement with respect to any class of equity securities of the Company or any of its subsidiaries, or (iii) enter into any agreement (including any letter of intent or term sheet) relating to any Alternative Proposal.
Pursuant to the Merger Agreement, the Board is prohibited from effecting a Company Adverse Recommendation Change (as defined in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93), subject to the exceptions described below.
Notwithstanding the foregoing, prior to the receipt of the Stockholder Approval, the Board (or a committee thereof), directly or indirectly through any representative, may (i) engage in negotiations with any third party that has made (and not withdrawn) a bona fide Alternative Proposal in writing that was not solicited in violation of the restrictions set forth above and that the Board (or a committee thereof) determines in good faith, after consultation with outside legal counsel and its financial advisor, constitutes or could reasonably be expected to result in a Superior Proposal (as defined in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93), and (ii) enter into, and furnish to the third party non-public information relating to the Company or any subsidiary pursuant to an executed confidentiality agreement or (iii) subject to compliance with the additional obligations described below, make a Company Adverse Recommendation Change. In such event, the Company is required to have promptly notified Parent after it obtains knowledge of the receipt by the Company (or any of its representatives) of any Alternative Proposal, of any inquiry that could reasonably be expected to lead to an Alternative Proposal or its receipt of an Alternative Proposal and the material terms thereof and have provided Parent prior written notice that it intends to take such action, and the Board (or a committee thereof) is required to have determined in good faith, after consultation with outside legal counsel and its financial advisor, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law.
Change in Recommendation; Intervening Events
Pursuant to the Merger Agreement, the Board is prohibited from effecting a Company Adverse Recommendation Change, subject to the following exceptions (and as more fully described in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93):
The Board (or any committee thereof) may effect a Company Adverse Recommendation Change in response to an Alternative Proposal if it complies with certain requirements, including, but not limited to, complying with its obligations set forth in “—Alternative Proposals,” providing Parent at least four business days prior written notice of its intent to make a Company Adverse Recommendation Change, negotiating with Parent in good faith to make adjustments in the terms and conditions of the Merger Agreement so that the Alternative Proposal leading to the proposed Company Adverse Recommendation Change ceases to constitute a Superior Proposal, providing Parent with notice of any material amendments or material proposed amendments as to price and other material terms thereof, determining in good faith, after consulting with outside legal counsel and the Company’s financial advisor, that such Alternative Proposal continues to constitute a Superior Proposal after taking into account any adjustments made by Parent to the terms and conditions of the Merger Agreement, and, in the case of a Company Adverse Recommendation Change in connection with the Company’s entry into, or public announcement of its
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intention to enter into, any agreement, letter of intent, term sheet or other contract relating to any Alternative Proposal (other than an acceptable confidentiality agreement), the Company substantially concurrently properly terminates the Merger Agreement and pays the Termination Fee and the Merger Agreement Expenses to Parent.
The Board (or any committee thereof) may effect a Company Adverse Recommendation Change in response to an Intervening Event (as defined in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93) if it complies with certain procedures, including, but not limited to, promptly notifying Parent, privately and in writing, at least two business days (the “Company Adverse Recommendation Notice Period”) before effecting the Company Adverse Recommendation Change, and which notice must include a reasonably detailed description of the underlying facts giving rise to the Intervening Event, and the reasons for taking, such action and negotiating in good faith with Parent during the Company Adverse Recommendation Notice Period to make such adjustments to the Merger Agreement so that the underlying facts giving rise to, and the reasons for taking such action, cease to constitute an Intervening Event, if Parent, in its discretion, proposes in good faith to make such adjustments. Furthermore, the Board must determine in good faith, after consulting with outside legal counsel and its financial advisor and taking into account any adjustments made by Parent during the Company Adverse Recommendation Notice Period, that the failure to effect such Company Adverse Recommendation Change would be inconsistent with its fiduciary duties under applicable law. For more information, please see “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93).
Termination of the Merger Agreement (Page 105)
The Merger Agreement may be terminated at any time prior to the Effective Time:
by mutual written consent of Parent and the Company;
by either Parent or the Company:
subject to certain conditions, if the Merger has not been consummated on or before February 28, 2022 (or such later date as agreed to by the parties) (the “End Date”) (the “End Date Termination Provision”);
subject to certain conditions, if any governmental authority of competent jurisdiction has enacted, issued, promulgated, enforced, or entered any law or order making illegal, permanently enjoining, or otherwise permanently prohibiting the consummation of the Merger or the other transactions contemplated thereby, and such law or order has become final and nonappealable; or
if the Stockholder Approval has not been obtained at the Special Meeting (unless such Special Meeting has been adjourned or postponed, in which case at the final adjournment or postponement thereof); provided that in the event the Board has made a Company Adverse Recommendation Change, the Company may only terminate the Merger Agreement pursuant to this sub-bullet if it has paid the Termination Fee to Parent (the “Stockholder Approval Termination Provision”).
by the Company:
if prior to the receipt of the Stockholder Approval the Board (or a committee thereof) authorizes the Company, in accordance with the terms of the Merger Agreement, to enter into a Company Acquisition Agreement (as defined in “The Merger Agreement— Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93) in respect of a Superior Proposal; provided, that the Company substantially concurrently enters into such Company Acquisition Agreement and pays the Termination Fee to Parent (the “Superior Proposal Termination Provision”);
subject to certain conditions, if there has been a breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub set forth in the Merger Agreement such that certain of the Company’s conditions to the occurrence of the Migration Commencement Time or to the Closing of the Merger would not be satisfied and, in any such case, such breach is incapable of being cured by the End Date;
if (i) all of the conditions set forth in “The Merger Agreement—Conditions to the Contribution, Migration Filings and Merger—Conditions to Each Party’s Obligation to Effect the Merger”
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beginning on page 103 and “The Merger Agreement—Conditions to the Contribution, Migration Filings and Merger—Conditions to Obligations of Parent and Merger Sub to Effect the Merger” beginning on page 103 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to such conditions being able to be satisfied) have been satisfied or waived by Parent, (ii) the Company stood ready, willing and able to consummate the Closing on the date required by the terms of the Merger Agreement and the Company has given Parent a written notice on or after such date confirming such fact and (iii) Parent and Merger Sub have failed to consummate the Merger within 10 business days following the later of the date when it is required to consummate the Merger pursuant to the terms of the Merger Agreement and the receipt of such notice; provided, that notwithstanding anything in the End Date Termination Provision to the contrary, no party will be permitted to terminate the Merger Agreement pursuant to the End Date Termination Provision during any such 10 business day period (the “Migration Termination Provision”); or
if the Merger has not been consummated within 70 days of the later of (i) the earliest date on which the Contribution is permitted to be made pursuant to the terms of the Merger Agreement and (ii) the date of the Contribution.
by Parent (with any termination by Parent also being an effective termination by Merger Sub):
if (i) a Company Adverse Recommendation Change has occurred or (ii) after public announcement of an Alternative Proposal, the Board has failed to reaffirm the Board Recommendation within 10 business days after the receipt of any written request to do so from Parent, provided that Parent may only make such request once with respect to any particular Alternative Proposal or any material publicly announced amendment or modification thereto, or (iii) the Company or the Board has breached its obligations regarding the Special Meeting (as discussed in “The Merger Agreement—Proxy Statement and Special Meeting” beginning on page 93) or the restrictions on its ability to solicit, initiate, facilitate or encourage Alternative Proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding Alternative Proposals (as discussed in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93) in any material respect; provided that Parent will not have the right to terminate the Agreement pursuant to this bullet after the Stockholder Approval is obtained (the “Parent Termination Provision”); or
subject to certain conditions, if there has been a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in the Merger Agreement such that certain of Parent’s and Merger Sub’s conditions to the occurrence of the Migration Commencement Time or to the occurrence of the Merger would not be satisfied and, in any such case, such breach is incapable of being cured by the End Date.
Termination Fees and Treatment of Expenses (Page 106)
The Company will pay to Parent a termination fee equal to $35.0 million (the “Termination Fee”) in the event that the Merger Agreement is terminated:
by Parent because a Company Adverse Recommendation Change has occurred or the Company has breached its obligations regarding the matters set forth in “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” beginning on page 93;
by the Company, prior to the receipt of the Stockholder Approval, enter into a Company Acquisition Agreement in respect of a Superior Proposal;
the Company or Parent terminate the Merger Agreement pursuant to the Stockholder Approval Termination Provision and the Board has made a Company Adverse Recommendation Change; or
if (i) the Merger Agreement is terminated by Parent or the Company pursuant to the End Date Termination Provision or the Stockholder Approval Termination Provision, (ii) prior to the time of the Special Meeting (or adjournment or postponement thereof) at which at vote was taken to adopt the Merger Agreement but the Stockholder Approval was not obtained, an Alternative Proposal has been publicly made, commenced, submitted or announced and not publicly and irrevocably withdrawn at least five business days prior to such Special Meeting and (iii) the Company consummates a transaction with respect to any Alternative Proposal
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within 12 months after such termination, or signs a definitive agreement with respect to any Alternative Proposal within 12 months after such termination and such transaction is subsequently consummated, then the Company must pay Parent, within two business days following such consummation, the Termination Fee; provided that, solely for purposes of this paragraph, all references to “15%” in the definition of Alternative Proposal will be deemed to be references to “50%.”
If the Merger Agreement is terminated by the Company pursuant to the Migration Termination Provision, Parent is required to pay the Company termination fee equal to $35,000,000 (the “Parent Termination Fee”).
Upon any termination of the Merger Agreement in circumstances where the Termination Fee or the Parent Termination Fee is payable, the paying party will, in addition to payment of the Termination Fee or the Parent Termination Fee, as applicable, reimburse the receiving party for 100% of its out-of-pocket fees, costs, obligations owed to third parties and expenses (including reasonable fees and expenses of its counsel) actually incurred by it in connection with the consideration, negotiation or implementation of the Merger Agreement or the transactions contemplated thereby and other actions contemplated thereby in an amount not to exceed $5,000,000 (the “Merger Agreement Expenses”).
Appraisal Rights (Page 72)
If the Merger is approved by our common stockholders and becomes effective, holders of Dissenting Shares (as defined in “The Merger—Merger Consideration” beginning on page 36 of this proxy statement) will be entitled to statutory appraisal rights pursuant to Section 262 of the DGCL. This means that such stockholders are entitled to seek appraisal of their Dissenting Shares and to receive payment in cash for the “fair value” of such Dissenting Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The ultimate amount holders receive in an appraisal proceeding may be less than, equal to or more than the amount such holders would have received under the Merger Agreement. For a description of the rights of holders of Dissenting Shares and of the procedures to be followed in order to assert such rights and obtain payment of the fair value of such Dissenting Shares, see Section 262 of the DGCL, which is attached as Annex C to this proxy statement and incorporated by reference herein, as well as the information set forth below.
IN ORDER TO PROPERLY EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER, YOU MUST DELIVER A WRITTEN DEMAND FOR APPRAISAL IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 262 OF THE DGCL TO CAI BEFORE THE VOTE IS TAKEN ON THE MERGER PROPOSAL AT THE SPECIAL MEETING, MUST NOT VOTE (TO THE EXTENT YOU ARE ENTITLED TO VOTE), VIA THE VIRTUAL SPECIAL MEETING WEBSITE OR BY PROXY, IN FAVOR OF THE MERGER PROPOSAL, MUST CONTINUE TO HOLD YOUR SHARES OF RECORD FROM THE DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE TIME AND MUST COMPLY WITH THE OTHER REQUIREMENTS OF SECTION 262 OF THE DGCL. MERELY VOTING AGAINST THE MERGER PROPOSAL (TO THE EXTENT YOU ARE ENTITLED TO VOTE) WILL NOT PRESERVE YOUR RIGHT TO APPRAISAL UNDER SECTION 262 OF THE DGCL. TO THE EXTENT YOU ARE ENTITLED TO VOTE, BECAUSE A PROXY THAT IS SIGNED AND SUBMITTED BUT DOES NOT OTHERWISE CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED IN FAVOR OF THE MERGER PROPOSAL, IF YOU SUBMIT A PROXY AND WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST INCLUDE VOTING INSTRUCTIONS TO VOTE YOUR SHARES AGAINST, OR ABSTAIN WITH RESPECT TO, THE MERGER PROPOSAL. TO THE EXTENT YOU ARE ENTITLED TO VOTE, NEITHER VOTING AGAINST THE MERGER PROPOSAL, NOR ABSTAINING FROM VOTING OR FAILING TO VOTE ON THE MERGER PROPOSAL, WILL IN AND OF ITSELF CONSTITUTE A WRITTEN DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF SECTION 262 OF THE DGCL. THE WRITTEN DEMAND FOR APPRAISAL MUST BE IN ADDITION TO AND SEPARATE FROM ANY PROXY OR VOTE ON THE MERGER PROPOSAL. IF YOU HOLD YOUR SHARES THROUGH A BROKER, BANK, TRUSTEE OR OTHER NOMINEE AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BROKER, BANK, TRUSTEE OR OTHER NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH BROKER, BANK, TRUSTEE OR OTHER NOMINEE. IN VIEW OF THE COMPLEXITY OF THE DGCL, STOCKHOLDERS WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR LEGAL AND FINANCIAL ADVISORS.
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Material U.S. Federal Income Tax Consequences of the Merger (Page 77)
For U.S. federal income tax purposes, the receipt of cash by a U.S. Holder (as defined in “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77) in exchange for such U.S. Holder’s shares in the Merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger (computed as if there were no applicable withholding taxes) and such U.S. Holder’s adjusted tax basis in the shares surrendered in the Merger. Gain or loss realized generally must be calculated separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered pursuant to the Merger. A Non-U.S. Holder (as defined in “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77) generally will not be subject to U.S. federal income tax with respect to the exchange of shares for cash in the Merger, unless such Non-U.S. Holder has certain connections to the United States.
The determination of actual tax consequences of the Merger to a holder will depend on the holder’s specific situation. For more information, see “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77. Holders of shares should consult their own tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or foreign taxing jurisdiction.
Specific Performance (Page 107)
In the event of breach or threatened breach of any covenant or obligation in the Merger Agreement, the non-breaching party will be entitled (in addition to any other remedy that may be available to it whether in law or equity, including monetary damages) to seek specific performance and the issuance of injunctive and other equitable relief and the election to pursue an injunction or specific performance will not restrict, impair or otherwise limit either party from, terminating the Merger Agreement and collecting the Parent Termination Fee or Termination Fee in the event that specific performance is not granted.
Market Price of the Company’s Common Stock (Page 110)
The closing price of our common stock on the NYSE, on June 17, 2021, the last trading day prior to the announcement of the Merger, was $38.16 per share. On [•], 2021, the most recent practicable date before this proxy statement was mailed to our common stockholders, the closing price of our common stock on the NYSE was $[•] per share. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares.
Our Board approved the initiation of a regular cash dividend on our common stock at a rate of $0.25 per share per quarter, equivalent to $1.00 per share annually, effective during the third quarter of 2020. The dividend was increased to $0.30 per share effective the first quarter of 2021. In addition, under the terms of the certificates of designations for our Preferred Stock, we pay quarterly dividends on our Preferred Stock, in each case, at an annual rate of 8.50% of the $25.00 liquidation preference per annum. The Merger Agreement does not restrict our ability to declare, set aside or pay dividends on our Preferred Stock and on our common stock (not to exceed $0.30 per share of common stock per quarter), solely to the extent made on payment dates that correspond to record dates on June 28, 2021, September 27, 2021, and December 27, 2021 between signing and Closing under the Merger Agreement.
Delisting and Deregistration of CAI Common Stock and Preferred Stock (Page 72)
If the Merger is completed, our common stock and our Preferred Stock will be delisted from the NYSE and deregistered under the Exchange Act. Thereafter, we will no longer file periodic reports with the SEC on account of our common stock or our Preferred Stock.
Where You Can Find More Information (Page 116)
You can find more information about us in the periodic reports and other information we file with the SEC. The information is available, free of charge, on the SEC’s website at www.sec.gov. In addition, you may obtain free copies of the documents we file with the SEC by going to our Internet website at www.capps.com. Our Internet website address is provided as an inactive textual reference only. The information provided on our Internet website is not part of this proxy statement and, therefore, is not incorporated herein by reference. For a more detailed description of the additional information available, see “Where You Can Find More Information” beginning on page 116.
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QUESTIONS AND ANSWERS
The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that may be important to you. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to, or incorporate by reference, in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in “Where You Can Find More Information” beginning on page 116.
Q:
Why am I receiving this proxy statement and proxy card or voting instruction form?
A:
On June 17, 2021, the Company entered into the Merger Agreement providing for the merger of Merger Sub, a wholly-owned subsidiary of Parent, with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent. You are receiving this proxy statement and form of proxy card or voting instruction form in connection with the solicitation of proxies by the Board in favor of the Merger Proposal and the other matters to be voted on at the Special Meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares with respect to those matters.
Q:
What is the proposed transaction?
A:
The proposed transaction is the merger of Merger Sub with and into the Company pursuant to the Merger Agreement. Following the Effective Time, the Company would be privately held as a wholly-owned subsidiary of Parent.
Q:
What will I receive in the Merger?
A:
If the Merger is completed, you will be entitled to receive $56.00, in cash, without interest, subject to deductions of any applicable withholding taxes, for each share of our common stock that you own. For example, if you own 100 shares of common stock, you will be entitled to receive $5,600, in cash in exchange for your shares of common stock, without interest, subject to deductions of any applicable withholding taxes. In addition, the holders our Preferred Stock will receive the liquidation preference of $25.00 per share plus the aggregate amount of all accrued and unpaid dividends on such Preferred Stock that they own as of the Effective Time, in cash, without interest, subject to deductions of any applicable withholding taxes. Neither you, nor the holders of our Preferred Stock, will be entitled to receive shares in the surviving corporation or in Parent.
Q:
What will the holders of Options, RSUs, PRSUs, RSAs and ESPP Rights receive in the Merger?
A:
The Board has taken such actions as are necessary to cause (i) the performance conditions of each PRSU to be deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU) and (ii) each Option, PRSU, RSU and RSA to become fully vested and free of any applicable forfeiture restrictions, in each of clauses (i) and (ii), effective as of immediately prior to the Effective Time.
As a result of the Merger:
each Option that has a per share exercise price that is less than the Common Merger Consideration, will be cancelled at the Effective Time in exchange for an amount in cash, without interest, equal to the product of (x) the aggregate number of shares of common stock subject to such Option multiplied by (y) the excess of $56.00 over the applicable per share exercise price of the Option, subject to any applicable withholding taxes;
each Option that has a per share exercise price that is equal to or greater than $56.00 will, to the extent not exercised as of immediately prior to the Effective Time, be automatically cancelled at the Effective Time with no payment made therefor and will cease to represent a right to purchase shares of common stock;
each RSU and PRSU will be cancelled and automatically converted at the Effective Time into the right to receive $56.00, in cash, without interest, for each share of common stock subject to the RSU or PRSU, subject to any applicable withholding taxes; and
each RSA will become fully vested and free of any applicable forfeiture restrictions, effective as of immediately prior to the Effective Time and each such share of common stock will cease to be outstanding and will be converted into the right to receive $56.00, in cash, without interest, subject to any applicable withholding taxes.
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As of the date of this proxy statement, there are no outstanding ESPP Rights.
Q:
How does the Common Merger Consideration compare to the market price of the common stock?
A:
The relationship of the Common Merger Consideration to the trading price of our common stock on the NYSE constituted a premium of approximately (i) 47% over the closing share price of our common stock on the NYSE on June 17, 2021, the last trading day prior to the date the Merger Agreement was publicly announced, and (ii) 31% over the volume weighted average price of our common stock on the NYSE during the 60 trading days up to, and including, June 17, 2021.
Q:
Where and when is the Special Meeting?
A:
The Special Meeting will take place on [], 2021, at [], Pacific Time. The Special Meeting will be held entirely online live via audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, stockholders, and other stakeholders. You will be able to attend and participate in the Special Meeting online by visiting www.virtualshareholdermeeting.com/CAI2021SM, where you will be able listen to the Special Meeting live, submit questions, and vote. Please note that the Special Meeting will not be held at a physical location and you will not be able to attend the Special Meeting by your physical presence. The Special Meeting will begin promptly at [], Pacific Time. Online check-in will begin at [], Pacific Time, and you should allow ample time for the online check-in procedures.
Q:
May I attend the Special Meeting and vote via the Virtual Special Meeting Website? What do I need in order to be able to attend the Special Meeting online?
A:
Yes. All common stockholders of record as of the Record Date or their duly authorized proxies may attend the Special Meeting and vote via the Virtual Special Meeting Website. Beneficial owners of shares are invited to attend the Special Meeting via the Virtual Special Meeting Website.
To attend and participate in the Special Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If your shares are held in “street name,” you should contact your broker, trustee or other nominee to obtain your 16-digit control number or otherwise vote through the broker, trustee or other nominee. Only common stockholders with a valid 16-digit control number, will be able to attend the Special Meeting and vote, ask questions and access the list of common stockholders as of the close of business on the Record Date. The Special Meeting will begin promptly at [•], Pacific Time. Online check-in will begin at [•], Pacific Time, and you should allow ample time for the online check-in procedures. Instructions on how to attend and participate online are also posted online at www.proxyvote.com.
Even if you plan to attend the Special Meeting via the Virtual Special Meeting Website, to ensure that your shares will be represented at the Special Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy prior to the Special Meeting electronically over the Internet at www.proxycote.com or by telephone at 1-800-690-6903. If you attend the Special Meeting and vote via the Virtual Special Meeting Website, your vote will revoke any proxy previously submitted by you with respect to the shares so voted via the Virtual Special Meeting Website.
If you hold your shares in “street name,” you should instruct your broker, bank, trustee or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your broker, bank, trustee or other nominee. Your broker, bank, trustee or other nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions. If you hold your shares in “street name,” you may not vote your shares at the Special Meeting via the Virtual Special Meeting Website unless you obtain a valid proxy from your broker, bank, trustee or other nominee.
Q:
Who is entitled to vote at the Special Meeting?
A:
Holders of the outstanding shares of common stock as of the Record Date are entitled to notice of, and to vote at, the Special Meeting. Each share of common stock is entitled to one vote per share. Therefore, a total of [] votes are eligible to be cast at the Special Meeting.
The vote of the holders of our Preferred Stock is not required to approve any of the proposals at the Special Meeting and is not being solicited.
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Q:
What matters will be voted on at the Special Meeting?
A:
You will be asked to consider and vote on the following proposals:
to adopt the Merger Agreement;
adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and
approve, on a non-binding, advisory basis, certain compensation that will be, or may become, payable to our named executive officers in connection with the Merger.
Q:
What vote of our common stockholders is required to approve the Merger Proposal?
A:
Under the DGCL, stockholders holding at least a majority of the outstanding shares of common stock entitled to vote at the Special Meeting on the Record Date must affirmatively vote “FOR” the Merger Proposal. In addition, under the Merger Agreement, the receipt of such required vote is a condition to the consummation of the Merger. A failure to vote your shares, an abstention from voting or a broker non-vote will have the same effect as a vote “AGAINST” the Merger Proposal. Because none of the proposals to be voted on at the Special Meeting are routine matters for which brokers may have discretionary authority to vote, we do not expect any broker non-votes at the Special Meeting.
Q:
What vote is required to approve each of the Adjournment Proposal and the Compensation Proposal?
A:
Approval of each of the Adjournment Proposal and the Compensation Proposal requires the affirmative vote of a majority of the shares present in person (including by means of remote communication) or represented by proxy and entitled to vote on such proposal at the Special Meeting as of the Record Date.
The failure of any common stockholder of record to (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by telephone; or (iii) vote via the Virtual Special Meeting Website at the Special Meeting will not have any effect on either the Adjournment Proposal or the Compensation Proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank, trustee or other nominee how to vote your shares will not have any effect on the Adjournment Proposal or the Compensation Proposal. However, abstentions will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal.
Q:
What is “Merger-related compensation”?
A:
“Merger-related compensation” is certain compensation that is based on or otherwise relates to the Merger and may become payable to our named executive officers under our existing plans or agreements, which is the subject of the Compensation Proposal. See “Proposal 3: Advisory Vote on Merger-Related Named Executive Officer Compensation” beginning on page 109.
Q:
Why am I being asked to cast a non-binding, advisory vote to approve “Merger-related compensation” payable to CAI’s named executive officers under its plans or agreements?
A:
In accordance with the rules promulgated under Section 14A of the Exchange Act, we are providing you with the opportunity to cast a non-binding, advisory vote on the compensation that may be payable to our named executive officers in connection with the Merger.
Q:
What will happen if the common stockholders do not approve the Compensation Proposal at the Special Meeting?
A:
Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is on an advisory basis and will not be binding on CAI or Parent. Further, the underlying compensation plans and agreements are contractual in nature and are not, by their terms, subject to stockholder approval. Accordingly, payment of the “Merger-related compensation” is not contingent on common stockholder approval of the Compensation Proposal.
Q:
How many votes am I entitled to cast for each share that I own?
A:
Each share of common stock is entitled to one vote per share.
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Q:
What is a quorum?
A:
A quorum is necessary to hold a valid Special Meeting. A quorum will be present if holders of a majority of the issued and outstanding shares of common stock entitled to vote at the Special Meeting on the Record Date are represented via the Virtual Special Meeting Website or by proxy, regardless of whether the proxy has authority to vote on the Merger Proposal. If a quorum is not present at the Special Meeting, the Special Meeting may be adjourned or postponed from time to time until a quorum is obtained.
If you submit a proxy but abstain or fail to provide voting instructions on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the Special Meeting.
If your shares are held in “street name” by your broker, bank, trustee or other nominee and you do not tell your broker, bank, trustee or other nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Special Meeting.
Q:
How does the Board recommend that I vote?
A:
The Board unanimously recommends that our common stockholders vote “FOR” the Merger Proposal, “FORthe Adjournment Proposal and “FOR” the Compensation Proposal.
Q:
Why is the Board recommending that I vote “FOR” the Merger Proposal?
A:
After careful consideration and after consultation with the Company’s legal and financial advisors, the Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement; (ii) adopted resolutions approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) adopted resolutions recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption. In reaching its decision to approve the Merger Agreement and to unanimously recommend approval of each of the Merger Proposal, the Adjournment Proposal and the Compensation Proposal, the Board consulted with our management, as well as the Company’s legal and financial advisors, and considered the terms of the Merger Agreement. The Board also considered each of the items set forth under “The Merger—Recommendation of the Board and Reasons for the Merger” beginning on page 53.
Q:
What effects will the Merger have on the Company?
A:
Our common stock is currently registered under the Exchange Act and is quoted on the NYSE under the symbol “CAI.” In addition, our Series A Preferred Stock and our Series B Preferred Stock are currently registered under the Exchange Act and quoted on the NYSE under the symbols “CAI-PA” and “CAI-PB,” respectively. As a result of the Merger, the Company will cease to be a publicly traded company and will be wholly-owned by Parent. Following the consummation of the Merger, the registration of our common stock (and our Preferred Stock) and our reporting obligations under the Exchange Act will be terminated. In addition, upon the consummation of the Merger, our common stock (and our Preferred Stock) will no longer be listed on any stock exchange or quotation system, including the NYSE.
Q:
What happens if the Merger is not consummated?
A:
If the Merger Proposal is not approved by the required vote of our common stockholders, or if the Merger is not consummated for any other reason, our stockholders will not receive any payment for their shares in connection with the Merger. Instead, we will remain an independent public company and shares of our common stock (and Preferred Stock) will continue to be listed and traded on the NYSE and registered under the Exchange Act and we will continue to file periodic and current reports with the SEC. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, among other things, the risks described in the risk factors included in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021, which is incorporated by reference herein, as updated by our subsequent filings with the SEC.
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Furthermore, depending on the circumstances that caused the Merger not to be completed, the price of our common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it traded as of the date of this proxy statement or reach the price level of the Common Merger Consideration.
Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares. If the Merger is not completed, the Board will continue to evaluate and review our business operations, strategic direction and capitalization, among other things, and will make such changes, if any, as are deemed appropriate. If the Merger Proposal is not approved by common stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board will be offered or that our business, prospects or results of operations will not be adversely impacted.
If the Merger Agreement is terminated under certain circumstances, we may be required to pay to Parent the Termination Fee of $35.0 million or Parent may be required to pay us the Parent Termination Fee of $35.0 million. Furthermore, upon any termination of the Merger Agreement in circumstances where the Termination Fee or the Parent Termination Fee is payable, the paying party will, in addition to payment of the Termination Fee or the Parent Termination Fee, as applicable, be required to pay the Merger Agreement Expenses in an amount not to exceed $5.0 million. See “The Merger Agreement—Termination Fees and Treatment of Expenses” beginning on page 106.
Finally, if the Merger does not close, we would cause our subsidiaries to engage in a series of transactions such that our position would be as if the Migration had not occurred in all material respects. See “The Merger Agreement—The Migration” beginning on page 82.
Q:
What do I need to do now? How do I vote my shares?
A:
We urge you to read this proxy statement carefully, including its annexes and the documents referred to, or incorporated by reference, in this proxy statement, and to consider how the Merger affects you. Your vote is important. If you are a common stockholder of record, that is, if your shares are registered in your name with Computershare Trust Company, N.A., our transfer agent, there are four ways to vote:
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;
by visiting the Internet at the address on your proxy card;
by calling toll-free (within the U.S. or Canada) the phone number on your proxy card; or
by attending the Special Meeting and voting via the Virtual Special Meeting Website (however, simply attending the Special Meeting will not cause your shares to be voted).
A 16-digit control number, located on your proxy card, is designed to verify your identity and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone. Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet or by telephone, you may incur costs such as Internet access and telephone charges for which you will be responsible.
To vote your shares during the Special Meeting, click on the vote button provided on the screen and follow the instructions provided. If you encounter any difficulties accessing the Special Meeting during the check-in or Special Meeting time, please call the technical support number that will be posted on the log in page.
Even if you plan to attend the Special Meeting via the Virtual Special Meeting Website, you are strongly encouraged to vote your shares by proxy. If you are a record holder or if you obtain a valid proxy to vote shares that you beneficially own, you may still vote your shares at the Special Meeting via the Virtual Special Meeting Website even if you have previously voted by proxy. If you are present at the Special Meeting and vote via the Virtual Special Meeting Website, your previous vote by proxy will not be counted.
If your shares are held in “street name” through a broker, bank, trustee or other nominee, you may vote through your broker, bank, trustee or other nominee by completing and returning the voting form provided by your broker, bank, trustee or other nominee, or, if such a service is provided by your broker, bank, trustee or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone prior to the Special Meeting through your broker, bank, trustee or other nominee, you should follow the instructions on the
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voting form provided by your broker, bank, trustee or other nominee. Your broker, bank, trustee or other nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions. If you hold your shares in “street name,” you may not vote your shares at the Special Meeting via the Virtual Special Meeting Website unless you obtain a valid proxy from your broker, bank, trustee or other nominee.
Q:
What happens if I do not vote?
A:
The vote on the Merger Proposal is based on the total number of outstanding shares of common stock entitled to vote at the Special Meeting as of the Record Date, not just the shares that are voted. If you do not vote, it will have the same effect as a vote “AGAINST” the Merger Proposal.
The vote to approve each of the Adjournment Proposal and the Compensation Proposal is based on the total number of outstanding shares of common stock present in person (including by means of remote communication) or represented by proxy and entitled to vote on such proposal at the Special Meeting. If you do not vote, it will have no effect on either the Adjournment Proposal or the Compensation Proposal.
Q:
Should I send in my stock certificates or other evidence of ownership now?
A:
No. If you hold your shares in certificated form and in your name as a stockholder of record, then shortly after the Merger is completed, you will receive a letter of transmittal from the paying agent for the Merger with detailed written instructions for exchanging your shares for the applicable Merger Consideration. If your shares are held in “street name” by your broker, bank, trustee or other nominee, you may receive instructions from your broker, bank, trustee or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the applicable Merger Consideration. Do not send in your certificates, if any, now or with your proxy card.
Q:
I hold my shares in certificated form but do not know where my stock certificate is—how will I get the applicable Merger Consideration for my shares?
A:
If the Merger is completed, the transmittal materials you will receive after the completion of the Merger will include the procedures that you must follow if you cannot locate your stock certificate, including signing an affidavit attesting to the loss of your stock certificate. The paying agent may also require that you provide a bond in customary amount or an indemnity agreement in order to cover any potential loss.
Q:
What happens if I sell my shares before completion of the Merger?
A:
If you transfer your shares, you will have transferred your right to receive the applicable Merger Consideration in the Merger. In order to receive the applicable Merger Consideration, you must hold your shares through completion of the Merger.
The Record Date for common stockholders entitled to vote at the Special Meeting is earlier than the consummation of the Merger. If you transfer your shares after the Record Date but before the closing of the Merger, you will have transferred your right to receive the applicable Merger Consideration in the Merger, but retained the right to vote at the Special Meeting.
Q:
Am I entitled to exercise appraisal rights instead of receiving the applicable Merger Consideration for my shares?
A:
Dissenting stockholders of record, which includes both holders of shares of common stock and Preferred Stock, as applicable, as registered in the records of the Company, who do not vote in favor of the Merger Proposal (to the extent they are entitled to vote on the Merger Proposal) and otherwise comply with the requirements of Section 262 of the DGCL are entitled to statutory appraisal rights under Delaware law in connection with the Merger. This means that if you comply with the requirements of Section 262 of the DGCL, you are entitled to have the “fair value” (as defined pursuant to Section 262 of the DGCL, which is reproduced in its entirety as Annex C to this proxy statement) of your shares determined in accordance with Delaware law and to receive payment based on that valuation instead of receiving the applicable Merger Consideration. The ultimate amount you would receive in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the Merger Agreement. Failure to strictly comply with Section 262 of the DGCL may result in your waiver of, or inability to exercise, appraisal rights. See “The Merger—Appraisal Rights” beginning on page 72 and the text of the Delaware appraisal rights statute, Section 262 of the DGCL, which is reproduced
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in its entirety as Annex C to this proxy statement. If you vote “FOR” the Merger Proposal (to the extent they are entitled to vote on the Merger Proposal), you will waive your appraisal rights, unless you revoke your proxy, if revocable, prior to the taking of the vote at the Special Meeting and otherwise comply with Section 262 of the DGCL.
Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by the Company.
If your shares are held through a broker, bank, trustee or other nominee, you are considered the “beneficial owner” of shares held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank, trustee or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, trustee or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting via the Virtual Special Meeting Website. However, because you are not the stockholder of record, you may not vote your shares at the Special Meeting via the Virtual Special Meeting Website unless you obtain a valid proxy from your broker, bank, trustee or other nominee.
Q:
If my broker holds my shares in “street name,” will my broker vote my shares for me?
A:
No. Your broker, bank, trustee or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your broker, bank, trustee or other nominee how to vote. You should follow the procedures provided by your broker, bank, trustee or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted “AGAINST” the Merger Proposal, but will have no effect on either the Adjournment Proposal or the Compensation Proposal.
Q:
What is a proxy?
A:
A proxy is your legal designation of another person, which we refer to as a “proxy holder,” to vote your shares. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares is called a “proxy card.” Timothy B. Page, our President and Chief Executive Officer, Chief Financial Officer and Director, and Steven J. Garcia, our Vice President, Chief Legal Officer, are the proxy holders for the Special Meeting, with full power of substitution.
Q:
Can I revoke my proxy?
A:
Yes. You can revoke your proxy at any time before the vote is taken at the Special Meeting. If you are a common stockholder of record, you may revoke your proxy by notifying the Company’s Secretary in writing at Steuart Tower, 1 Market Plaza, Suite 2400, San Francisco, California 94105, or by submitting a new proxy by telephone, the Internet or mail, in each case, dated after the date of the proxy being revoked. In addition, you may revoke your proxy by attending the Special Meeting and voting via the Virtual Special Meeting Website (however, simply attending the Special Meeting will not cause your proxy to be revoked). Please note that if you hold your shares in “street name” and you have instructed a broker, bank, trustee or other nominee to vote your shares, the above-described options for revoking your voting instructions do not apply, and instead you must follow the instructions received from your broker, bank, trustee or other nominee to revoke your voting instructions.
Q:
If a common stockholder gives a proxy, how are the shares voted?
A:
Regardless of the method you use to vote, the proxy holders will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted “FOR,” “AGAINST” or “ABSTAIN” from voting on all, some or none of the specific items of business to come before the Special Meeting.
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; and (3) “FOR” the Compensation Proposal.
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Q:
How are votes counted?
A:
For the Merger Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes, if any, will have the same effect as votes “AGAINST” this proposal.
For the Adjournment Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” this proposal. Broker non-votes, if any, will have no effect on this proposal.
For the Compensation Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” this proposal. Broker non-votes, if any, will have no effect on this proposal.
Because none of the proposals to be voted on at the Special Meeting are routine matters for which brokers may have discretionary authority to vote, we do not expect any broker non-votes at the Special Meeting.
Q:
What should I do if I receive more than one set of voting materials?
A:
Please sign, date and return (or grant your proxy electronically over the Internet or by telephone) each proxy card and voting instruction card that you receive.
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a common stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.
Q:
Who will solicit and pay the cost of soliciting proxies?
A:
We have engaged Georgeson LLC (“Georgeson”) to assist in the solicitation of proxies for the Special Meeting. We estimate that we will pay Georgeson a fee of approximately $20,000 and will reimburse Georgeson for reasonable out-of-pocket expenses and will indemnify it and its affiliates against certain claims, liabilities, losses, damages and expenses. We may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to beneficial owners and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q:
Where can I find the voting results of the Special Meeting?
A:
We intend to publish the final voting results of the Special Meeting in a Current Report on Form 8-K to be filed with the SEC within four business days after the Special Meeting. All reports that we file with the SEC are publicly available when filed. See “Where You Can Find More Information” beginning on page 116.
Q:
Will I have to pay taxes on the applicable Merger Consideration I receive?
A:
The receipt of cash in exchange for shares pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes. You are urged to read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77 for a more detailed discussion of the U.S. federal income tax consequences of the Merger. Because individual circumstances may differ, you are urged to consult your own tax advisors regarding the particular tax consequences to you of the exchange of shares for cash pursuant to the Merger, in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).
Q:
What is householding and how does it affect me?
A:
The SEC permits companies to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received and only if the applicable stockholder provides advance notice and follows certain procedures.
In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of common stock held through brokerage firms. If your family has multiple accounts holding common stock, you may have already received
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a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement. The broker will arrange for delivery of a separate copy of this proxy statement promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.
For more information, please see “Householding” beginning on page 115.
Q:
When do you expect the Merger to be completed?
A:
We are working toward completing the Merger as quickly as reasonably practicable. Assuming timely satisfaction of necessary closing conditions, including the approval by our common stockholders of the Merger Proposal and completion of the Migration, we currently expect to complete the Merger in the late third quarter or early fourth quarter of 2021. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions, including completion of the Migration, each as described in “The Merger Agreement—Conditions to the Contribution, Migration Filings and Merger” beginning on page 101, many of which are outside of our control.
Q:
If the Merger is completed, how will I receive the cash for my shares?
A:
If the Merger is completed and you are not exercising appraisal rights and your shares are held in book-entry, the paying agent will issue and deliver to you a check or wire transfer for your shares without any further action on your part. If the Merger is completed and you are not exercising appraisal rights, and you are a stockholder of record with your shares held in certificated form, you will receive a letter of transmittal with instructions on how to send your shares to the paying agent in connection with the Merger. The paying agent will issue and deliver to you a check or wire transfer for your shares after you comply with these instructions. Please do not send your stock certificates with your proxy card. See “The Merger Agreement—Exchange and Payment Procedures” beginning on page 86.
If the Merger is completed and you are not exercising appraisal rights, and your shares are held in “street name” by your broker, bank, trustee or other nominee, you will receive instructions from your broker, bank, trustee or other nominee as to how to effect the surrender of, and receive payment for, your shares held in “street name.”
Q:
What happens if the market price of shares of our common stock significantly changes before the Closing?
A:
Parent is not obligated to change the Common Merger Consideration as a result of a change in the market price of our common stock.
Q:
Do any of the Company’s directors or officers have interests in the Merger that may differ from those of the Company’s stockholders generally?
A:
In considering the unanimous recommendation of the Board with respect to the Merger Proposal, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally. In (i) evaluating and negotiating the Merger Agreement; (ii) approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption, the Board was aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, see “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 65.
Q:
Are there any other risks to me from the Merger that I should consider?
A:
Yes. There are risks associated with all business combinations, including the Merger. For further details, see “Cautionary Note Regarding Forward-Looking Statements” beginning on page 27.
Q:
Who can help answer my other questions?
A:
If you have more questions about the Merger, require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card, please contact Georgeson, which is acting as our proxy solicitor in connection with the Merger.
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Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Shareholders, Banks and Brokers Call Toll Free: (866) 482-4943
If your broker, bank, trustee or other nominee holds your shares, you should also contact your broker, bank, trustee or other nominee for additional information.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement includes, or incorporates by reference, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. All statements included or incorporated by reference in this proxy statement, other than statements of historical fact, are forward-looking statements. Statements about the expected timing, completion and effects of the Merger and related transactions, the management projections (as defined in “The Merger—Management Projections”) and all other statements in this proxy statement and the annexes hereto, other than historical facts, constitute forward-looking statements. When used in this proxy statement, the words “expect,” “believe,” “anticipate,” “goal,” “plan,” “intend,” “estimate,” “may,” “will” or similar words are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. The Company may not be able to complete the Merger on the terms described herein or other acceptable terms or at all because of a number of factors, including, but not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (2) the failure to obtain the Stockholder Approval or the failure to satisfy the closing conditions in the Merger Agreement, including the Migration, (3) the potential for regulatory authorities to require divestitures, behavioral remedies or other concessions in order to obtain their approval of the Merger, (4) risks related to disruption of management’s attention from the Company’s ongoing business operations due to the Merger, (5) the effect of the announcement of the Merger on the ability of the Company to retain and hire key personnel and maintain relationships with its customers, suppliers, operating results and business generally, (6) the Merger may involve unexpected costs, liabilities or delays, (7) the Company’s business may suffer as a result of the uncertainty surrounding the Merger, including the timing of the consummation of the Merger, (8) the outcome of any legal proceeding relating to the Merger, (9) the Company may be adversely affected by other economic, business and/or competitive factors, including, but not limited to, those related to COVID-19, and (10) other risks to consummation of the Merger, including the risk that the Merger will not be consummated within the expected time period or at all, which may adversely affect the Company’s business and the price of the common stock.
Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent the Company’s views as of the date on which such statements were made. The Company anticipates that subsequent events and developments may cause its views to change. However, although the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof. Additional factors that may affect the business or financial results of the Company are described in the risk factors included in the Company’s filings with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021, which is incorporated by reference herein, as updated by the Company’s subsequent filings with the SEC. The Company expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences, except as required by applicable law.
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THE SPECIAL MEETING
This proxy statement is being furnished to our common stockholders in connection with the solicitation of proxies by the Board for use at the Special Meeting.
Date, Time and Place of the Special Meeting
We will hold the Special Meeting on [•], 2021, at [•], Pacific Time. The Special Meeting will be held entirely online live via audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, stockholders, and other stakeholders. You will be able to attend and participate in the Special Meeting online by visiting www.virtualshareholdermeeting.com/CAI2021SM, where you will be able listen to the Special Meeting live, submit questions, and vote. Please note that the Special Meeting will not be held at a physical location and you will not be able to attend the Special Meeting by your physical presence. To attend and participate in the Special Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If your shares are held in “street name,” you should contact your broker, trustee or other nominee to obtain your 16-digit control number or otherwise vote through the broker, trustee or other nominee. Only common stockholders with a valid 16-digit control number, will be able to attend the Special Meeting and vote, ask questions and access the list of common stockholders as of the close of business on the Record Date. The Special Meeting will begin promptly at [•], Pacific Time. Online check-in will begin at [•], Pacific Time, and you should allow ample time for the online check-in procedures.
Purpose of the Special Meeting
The purpose of the Special Meeting is for our common stockholders to consider and vote upon the Merger Proposal relating to the proposed acquisition of the Company by Parent. Our common stockholders must approve the Merger Proposal for the Merger to occur. If our common stockholders fail to approve the Merger Proposal, the Merger will not occur. A copy of the Merger Agreement is attached to this proxy statement as Annex A, which we encourage you to read carefully in its entirety, and the material provisions of the Merger Agreement are described under “The Merger Agreement.” Our common stockholders are also being asked to approve each of the Adjournment Proposal and the Compensation Proposal.
Record Date; Shares Entitled to Vote; Quorum
Only holders of record of our common stock as of the close of business on [•], 2021, the Record Date for the Special Meeting, are entitled to notice of, and to vote at, the Special Meeting or any adjournment or postponement thereof. As of the Record Date, [•] shares of common stock were outstanding and entitled to vote at the Special Meeting.
Each share of common stock is entitled to one vote per share. Therefore, a total of [•] votes are eligible to be cast at the Special Meeting.
The vote of the holders of our Preferred Stock is not required to approve any of the proposals at the Special Meeting and is not being solicited.
The quorum requirement for holding the Special Meeting and transacting business is that holders of a majority of shares of our common stock entitled to vote must be present in person (including by means of remote communication) or represented by proxy at the Special Meeting. Abstentions will be counted as present for the purpose of determining whether a quorum is present, however “broker non-votes” (as described below under the sub-heading “—Vote Required; Abstentions and Broker Non-Votes”), if any, will not be counted as present for the purpose of determining whether a quorum is present at the Special Meeting. If your shares are held in “street name” by your broker, bank, trustee or other nominee and you do not tell your broker, bank, trustee or other nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Special Meeting.
Treasury shares, which are shares owned by the Company itself, are not voted and do not count for this purpose. Once a share is represented at the Special Meeting, it will be counted for the purpose of determining a quorum at the Special Meeting. However, if a new Record Date is set for an adjourned Special Meeting, then a new quorum will have to be established. Proxies received but marked as abstentions will be included in the calculation of the number of shares considered to be present at the Special Meeting. Broker non-votes, if any, will not be considered to be present at the Special Meeting. If less than a majority of shares of our common stock entitled to vote must be present
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in person (including by means of remote communication) or represented by proxy at the Special Meeting, the common stockholders entitled to vote thereat, present in person (including by means of remote communication) or represented by proxy, may adjourn the Special Meeting from time to time without notice other than announcement at the Special Meeting (unless a new Record Date is set) to any common stockholder not present at the Special Meeting, to a later date until a quorum is present.
Vote Required; Abstentions and Broker Non-Votes
For the Company to complete the Merger, under the DGCL, stockholders holding at least a majority of the outstanding shares of common stock entitled to vote at the Special Meeting on the Record Date must affirmatively vote “FOR” the Merger Proposal. In addition, under the Merger Agreement, the receipt of such required vote is a condition to the consummation of the Merger. A failure to vote your shares, an abstention from voting or a broker non-vote will have the same effect as a vote “AGAINST” the Merger Proposal.
Approval of each of the Adjournment Proposal and the Compensation Proposal requires the affirmative vote of a majority of the shares present in person (including by means of remote communication) or represented by proxy and entitled to vote on such proposal at the Special Meeting as of the Record Date. Abstentions will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal but the failure to vote your shares and broker non-votes, if any, will have no effect on the outcome of either the Adjournment Proposal or the Compensation Proposal.
In accordance with NYSE rules, brokers, banks, trustees or other nominees who hold shares in “street name” for their customers do not have discretionary authority to vote the shares with respect to any of the proposals at the Special Meeting. Accordingly, if brokers, banks, trustees or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to any of the proposals at the Special Meeting. Under such circumstance, a “broker non-vote” would arise. Broker non-votes, if any, will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on either the Adjournment Proposal or the Compensation Proposal. For shares held in “street name,” only shares affirmatively voted “FOR” the Merger Proposal will be counted as a favorable vote for such proposal. Because none of the proposals to be voted on at the Special Meeting are routine matters for which brokers may have discretionary authority to vote, we do not expect any broker non-votes at the Special Meeting.
Shares Held by the Company’s Directors and Executive Officers
As of the Record Date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [•] shares of common stock, or approximately [•]% of the aggregate shares of common stock entitled to vote at the Special Meeting. The directors and executive officers of the Company have informed the Company that they currently intend to vote all of their shares “FOR” each of the proposals to be considered and voted on at the Special Meeting.
Voting of Proxies
Attendance and Voting at the Special Meeting
All holders of shares of common stock as of the Record Date for voting at the Special Meeting, including common stockholders of record and beneficial owners of shares registered in the “street name” of a broker, bank, trustee or other nominee, are invited to attend the Special Meeting via the Virtual Special Meeting Website.
To attend and participate in the Special Meeting, visit www.virtualshareholdermeeting.com/CAI2021SM and enter the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you wish to submit a question during the Special Meeting, log into the Virtual Special Meeting Website, www.virtualshareholdermeeting.com/CAI2021SM, type your question into the “Ask a Question” field, and click “Submit.” If your question is properly submitted during the relevant portion of the Special Meeting agenda, we will respond to your question during the live webcast.
If we experience technical difficulties during the Special Meeting (e.g., a temporary or prolonged power outage), we will determine whether the Special Meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Special Meeting will need to be reconvened on a later day (if the technical difficulty is more
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prolonged). In any situation, we will promptly notify common stockholders of the decision via www.virtualshareholdermeeting.com/CAI2021SM. If you encounter technical difficulties accessing our Special Meeting or asking questions during the Special Meeting, a support line will be available on the login page of the Virtual Special Meeting Website.
Please note that if your shares of common stock are held by a broker, bank or other nominee, and you wish to vote at the Special Meeting, you must obtain a proxy, executed in your favor, from your broker, bank, trustee or other nominee giving you the right to vote your shares at the Special Meeting.
Submitting a Proxy or Providing Voting Instructions
To ensure that your shares are voted at the Special Meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the Special Meeting via the Virtual Special Meeting Website.
Shares Held by Record Holder. If you are a common stockholder of record, you may submit a proxy using one of the methods described below:
Submit a Proxy by Telephone or via the Internet. This proxy statement is accompanied by a proxy card with instructions for submitting votes by telephone or via the Internet. You may vote by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Your shares will be voted as you direct in the same manner as if you had completed, signed, dated and returned your proxy card, as described below.
Submit a Proxy Card. If you complete, sign, date and return the enclosed proxy card by mail so that it is received in time for the Special Meeting, your shares will be voted in the manner directed by you on your proxy card. If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of each of the Merger Proposal, the Adjournment Proposal and the Compensation Proposal. If you are a common stockholder of record and fail to return your proxy card, unless you are a holder of record on the Record Date and attend the Special Meeting and vote via the Virtual Special Meeting Website, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote “AGAINST” the Merger Proposal, but will not affect the vote regarding either the Adjournment Proposal or the Compensation Proposal.
Shares Held in “Street Name.” If your shares are held by a broker, bank, trustee or other nominee on your behalf in “street name,” your broker, bank, trustee or other nominee will send you instructions as to how to provide voting instructions for your shares. Many banks and brokerage firms have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions via a voting instruction form.
In accordance with NYSE rules, brokers, banks, trustees or other nominees who hold shares in “street name” for their customers do not have discretionary authority to vote the shares with respect to the Merger Proposal, the Adjournment Proposal or the Compensation Proposal. Accordingly, if brokers, banks, trustees or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to the Merger Proposal, the Adjournment Proposal or the Compensation Proposal. Under such circumstance, a “broker non-vote” would arise. Broker non-votes, if any, will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on either the Adjournment Proposal or the Compensation Proposal. For shares held in “street name,” only shares affirmatively voted “FOR” the Merger Proposal will be counted as a favorable vote for such proposal. Because none of the proposals to be voted on at the Special Meeting are routine matters for which brokers may have discretionary authority to vote, we do not expect any broker non-votes at the Special Meeting.
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Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to revoke and change it any time before it is voted at the Special Meeting. If you are a common stockholder of record, you may revoke your proxy at any time before the vote is taken at the Special Meeting by:
submitting a new proxy with a later date, by using the telephone or Internet proxy submission procedures described above, or by completing, signing, dating and returning a new proxy card by mail to the Company;
attending the Special Meeting and voting via the Virtual Special Meeting Website (however, simply attending the Special Meeting will not cause your proxy to be revoked); or
delivering to the Secretary of the Company a written notice of revocation to: c/o CAI International, Inc., Steuart Tower, 1 Market Plaza, Suite 2400, San Francisco, California 94105.
Please note, however, that only your last-dated proxy will be effective. Attending the Special Meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card to the Company or by sending a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company before the Special Meeting.
If you hold your shares in “street name” through a broker, bank, trustee or other nominee, you will need to follow the instructions provided to you by your broker, bank, trustee or other nominee in order to revoke your proxy or submit new voting instructions.
Tabulation of Votes
All votes will be tabulated by a representative of Broadridge Financial Solutions, Inc., who will act as the inspector of elections appointed for the Special Meeting and will separately tabulate affirmative and negative votes, abstentions and broker non-votes, if any.
Recommendation of the Board
The Board, after considering the factors more fully described in “The Merger—Recommendation of the Board and Reasons for the Merger” and after consultation with the Company’s legal and financial advisors, has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement; (ii) adopted resolutions approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) adopted resolutions recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption.
The Board unanimously recommends that you vote: (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; and (3) “FOR” the Compensation Proposal.
For a discussion of the material factors considered by the Board in reaching its conclusions, please refer to “The Merger—Recommendation of the Board and Reasons for the Merger.”
Adjournments and Postponements
Although it is not currently expected, the Special Meeting may be adjourned or postponed for the purpose of soliciting additional proxies. In the event that there is present, in person (including by means of remote communication) or represented by proxy, sufficient favorable voting power to secure the vote of the common stockholders of the Company necessary to approve the Merger Proposal, the Company does not anticipate that it will adjourn or postpone the Special Meeting.
The Special Meeting may be adjourned by the affirmative vote of a majority of the shares present in person (including by means of remote communication) or represented by proxy and entitled to vote on the Adjournment Proposal at the Special Meeting. Any signed proxies received by the Company in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances.
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Any adjournment or postponement of the Special Meeting for the purpose of soliciting additional proxies will allow the Company’s common stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned or postponed.
Solicitation of Proxies
The Board is soliciting your proxy, and we will bear the cost of soliciting proxies. We have engaged Georgeson to assist in the solicitation of proxies for the Special Meeting. We estimate that we will pay Georgeson a fee of approximately $20,000 and will reimburse Georgeson for reasonable out-of-pocket expenses and will indemnify it and its affiliates against certain claims, liabilities, losses, damages and expenses. We may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to beneficial owners and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Appraisal Rights
If the Merger is approved and becomes effective, holders of shares of common stock who have not voted in favor of the Merger and holders of shares of Preferred Stock, as applicable, who have properly demanded statutory appraisal rights for such shares in accordance with Section 262 of the DGCL and who have complied in all respects with Section 262 of the DGCL with respect to such Dissenting Shares will be entitled to statutory appraisal rights pursuant to Section 262 of the DGCL. This means that such stockholders are entitled to seek appraisal of their Dissenting Shares and to receive payment in cash for the “fair value” of such Dissenting Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The ultimate amount holders receive in an appraisal proceeding may be less than, equal to or more than the amount such holders would have received under the Merger Agreement. For a description of the rights of holders of Dissenting Shares and of the procedures to be followed in order to assert such rights and obtain payment of the fair value of such Dissenting Shares, see Section 262 of the DGCL, which is attached as Annex C to this proxy statement and incorporated by reference herein, as well as the information set forth below. A summary of stockholders’ appraisal rights under the DGCL is provided under “The Merger—Appraisal Rights.”
IN ORDER TO PROPERLY EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER, YOU MUST DELIVER A WRITTEN DEMAND FOR APPRAISAL IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 262 OF THE DGCL TO CAI BEFORE THE VOTE IS TAKEN ON THE MERGER PROPOSAL AT THE SPECIAL MEETING, MUST NOT VOTE (TO THE EXTENT YOU ARE ENTITLED TO VOTE), VIA THE VIRTUAL SPECIAL MEETING WEBSITE OR BY PROXY, IN FAVOR OF THE MERGER PROPOSAL, MUST CONTINUE TO HOLD YOUR SHARES OF RECORD FROM THE DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE TIME AND MUST COMPLY WITH THE OTHER REQUIREMENTS OF SECTION 262 OF THE DGCL. MERELY VOTING AGAINST THE MERGER PROPOSAL (TO THE EXTENT YOU ARE ENTITLED TO VOTE) WILL NOT PRESERVE YOUR RIGHT TO APPRAISAL UNDER SECTION 262 OF THE DGCL. TO THE EXTENT YOU ARE ENTITLED TO VOTE, BECAUSE A PROXY THAT IS SIGNED AND SUBMITTED BUT DOES NOT OTHERWISE CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED IN FAVOR OF THE MERGER PROPOSAL, IF YOU SUBMIT A PROXY AND WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST INCLUDE VOTING INSTRUCTIONS TO VOTE YOUR SHARES AGAINST, OR ABSTAIN WITH RESPECT TO, THE MERGER PROPOSAL. TO THE EXTENT YOU ARE ENTITLED TO VOTE, NEITHER VOTING AGAINST THE MERGER PROPOSAL, NOR ABSTAINING FROM VOTING OR FAILING TO VOTE ON THE MERGER PROPOSAL, WILL IN AND OF ITSELF CONSTITUTE A WRITTEN DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF SECTION 262 OF THE DGCL. THE WRITTEN DEMAND FOR APPRAISAL MUST BE IN ADDITION TO AND SEPARATE FROM ANY PROXY OR VOTE ON THE MERGER PROPOSAL. IF YOU HOLD YOUR SHARES THROUGH A BROKER, BANK, TRUSTEE OR OTHER NOMINEE AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BROKER, BANK, TRUSTEE OR OTHER NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH BROKER, BANK, TRUSTEE OR OTHER NOMINEE. IN VIEW OF THE COMPLEXITY OF THE DGCL,
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STOCKHOLDERS WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR LEGAL AND FINANCIAL ADVISORS.
See “The Merger—Appraisal Rights” for additional information.
Other Matters
If you hold your shares in certificated form, you should not return your stock certificate or send documents representing shares with the proxy card. If the Merger is completed, the paying agent for the Merger will send you a letter of transmittal and instructions for exchanging your shares for the applicable Merger Consideration. If the Merger is completed and if your shares are held in book-entry form, the paying agent will issue and deliver to you a check or wire transfer for your shares.
Questions and Additional Information
If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares, please contact our proxy solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Shareholders, Banks and Brokers Call Toll Free: (866) 482-4943
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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
We are asking you to adopt the Merger Agreement.
For a summary of and detailed information regarding this proposal, see the information about the Merger Agreement and the Merger throughout this proxy statement, including the information set forth in “The Merger” and “The Merger Agreement.” A copy of the Merger Agreement is attached to this proxy statement as Annex A. You are urged to read the Merger Agreement carefully in its entirety.
Under applicable law, we cannot complete the Merger without the affirmative vote of at least a majority of the outstanding shares of common stock entitled to vote at the Special Meeting as of the Record Date, voting in favor of the Merger Proposal. If you abstain from voting, fail to cast your vote, via the Virtual Special Meeting Website or by proxy, or fail to give voting instructions to your broker, bank, trustee or other nominee, it will have the same effect as a vote “AGAINST” the Merger Proposal.
The Board unanimously recommends that you vote “FOR” the Merger Proposal.
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THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.
Parties Involved in the Merger
CAI International, Inc.
CAI is a Delaware corporation. We are one of the world’s leading transportation finance companies. We lease equipment, primarily intermodal shipping containers, to our customers. We also manage equipment for third-party investors. In operating our fleet, we lease, re-lease and dispose of equipment and contract for the repair, repositioning and storage of equipment. We were founded in 1989, as a traditional container leasing company that leased containers owned by us to container shipping lines. We were originally incorporated under the name Container Applications International, Inc. in the State of Nevada in August 1989. In February 2007, we were reincorporated under our present name in the State of Delaware. Please see “Where You Can Find More Information” for additional information regarding us.
Our common stock is listed on the NYSE under the symbol “CAI.” In addition, our Series A Preferred Stock and our Series B Preferred Stock are listed on the NYSE under the symbols “CAI-PA” and “CAI-PB,” respectively.
Our principal executive office is located at Steuart Tower, 1 Market Plaza, Suite 2400, San Francisco, California 94105, and our telephone number is (415) 788-0100.
Mitsubishi HC Capital Inc.
Parent is a Japanese public company established through the merger of Mitsubishi UFJ Lease & Finance Limited and Hitachi Capital Corporation on April 1, 2021. The merger resulted in a combined company having total assets of JPY 9.7 trillion ($89 billion), making it the second largest leasing company in Japan with an extensive and complementary lineup of business.
Parent’s common stock is listed on the Tokyo Stock Exchange and the Nagoya Stock Exchange under the code “8593.”
Parent’s principal executive office is located at 5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-6525, Japan, and its telephone number is +81-3-6865-3054.
Cattleya Acquisition Corp.
Merger Sub, a Delaware corporation and a wholly-owned subsidiary of Parent. Merger Sub was incorporated in 2021 by Parent solely for the purposes of entering into the transactions contemplated by the Merger Agreement, and has not entered into any business activities other than in connection with the transactions contemplated by the Merger Agreement. Upon completion of the Merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the Merger.
Merger Sub’s principal executive office is located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, and may be contacted at 5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-6525, Japan, and its telephone number is +81-3-6865-3054.
Effect of the Merger
Upon the terms and subject to the satisfaction or waiver of the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into the Company, and the Company will continue as the surviving corporation as a wholly-owned subsidiary of Parent. As a result of the Merger, the Company’s common stock (and Preferred Stock) will no longer be publicly traded and will be delisted from the NYSE. You will, however, have the right to receive the applicable Merger Consideration (as detailed below), but you will no longer have any other rights as a stockholder of the Company (except that stockholders who have properly exercised and perfected their appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described below in “—Appraisal Rights”). In
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addition, the Company’s common stock (and Preferred Stock) will be deregistered under the Exchange Act, and the Company will no longer file periodic or current reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the surviving corporation.
The Effective Time will occur upon the filing of the certificate of merger with the Secretary of State of Delaware, or at such other time as the parties to the Merger Agreement shall agree and specify in the certificate of merger.
Effect on the Company if the Merger is Not Completed
If the Merger Proposal is not approved by the required vote of our common stockholders, or if the Merger is not consummated for any other reason, our stockholders will not receive any payment for their shares in connection with the Merger. Instead, we will remain an independent public company, shares of our common stock (and Preferred Stock) will continue to be listed and traded on the NYSE and registered under the Exchange Act and we will continue to file periodic and current reports with the SEC. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, among other things, the risks described in the risk factors included in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021, which is incorporated by reference herein, as updated by our subsequent filings with the SEC.
If the Merger does not close, we would cause our subsidiaries to engage in a series of transactions such that our position would be as if the Migration had not occurred in all material respects.
Furthermore, depending on the circumstances that caused the Merger not to be completed, the price of our common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it traded as of the date of this proxy statement or reach the price level of the Common Merger Consideration.
Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares. If the Merger is not completed, the Board will continue to evaluate and review our business operations, strategic direction and capitalization, among other things, and will make such changes, if any, as are deemed appropriate. If the Merger Proposal is not approved by common stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board will be offered or that our business, prospects or results of operations will not be adversely impacted.
If the Merger Agreement is terminated under certain circumstances, we may be required to pay to Parent the Termination Fee of $35.0 million or Parent may be required to pay us the Parent Termination Fee of $35.0 million. Furthermore, upon any termination of the Merger Agreement in circumstances where the Termination Fee or the Parent Termination Fee is payable, the paying party will, in addition to payment of the Termination Fee or the Parent Termination Fee, as applicable, be required to pay the Merger Agreement Expenses in an amount not to exceed $5.0 million. See “The Merger Agreement—Termination Fees and Treatment of Expenses.”
Merger Consideration
At the Effective Time:
each share of common stock that is issued and outstanding immediately prior to the Effective Time (other than any shares of common stock or Preferred Stock (i) owned by Parent or Merger Sub or any other subsidiary of Parent, (ii) which are held immediately prior to the Effective Time by a stockholder who did not vote in favor of the Merger and who is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (“Dissenting Shares”), or (iii) owned by the Company in treasury or by any direct or indirect wholly-owned subsidiary of the Company (collectively, the “Excluded Shares”)) will cease to be outstanding and will be converted into the right to receive $56.00, in cash, without interest, subject to deductions of any applicable withholding taxes (the “Common Merger Consideration”);
each share of Series A Preferred Stock that is issued and outstanding immediately prior to the Effective Time, other than Excluded Shares, will be converted into the right to receive an amount equal to the sum
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of: (i) the liquidation preference of $25.00 per share; plus (ii) the aggregate amount of all accrued and unpaid dividends on such Series A Preferred Stock as of the Effective Time, in cash, without interest, subject to deductions of any applicable withholding taxes; and
each share of Series B Preferred Stock that is issued and outstanding immediately prior to the Effective Time, other than Excluded Shares, will be converted into the right to receive an amount equal to the sum of: (i) the liquidation preference of $25.00 per share; plus (ii) the aggregate amount of all accrued and unpaid dividends on such Series B Preferred Stock as of the Effective Time, in cash, without interest, subject to deductions of any applicable withholding taxes.
As of the Effective Time, all shares, other than Excluded Shares, will be cancelled and will thereafter represent only the right to receive the applicable Merger Consideration to be paid in accordance with, and subject to, the conditions of the Merger Agreement. At the Effective Time, each Excluded Share (other than Dissenting Shares) will be automatically canceled without payment of any consideration. In addition, each Dissenting Share will not be converted into the right to receive the applicable Merger Consideration, unless and until such stockholder fails to perfect or effectively withdraws or loses such stockholder’s right to appraisal under Section 262 of the DGCL, at which time each such share will be converted into and will be exchangeable only for the right to receive, as of the later of the Effective Time and the time that such right to appraisal is irrevocably lost, the applicable Merger Consideration. Dissenting Shares will be treated in accordance with Section 262 of the DGCL, as more fully described in “—Appraisal Rights.”
Treatment of Options, RSUs, PRSUs, RSA and ESPP
The Board has taken such actions as are necessary to cause (i) the performance conditions of each PRSU to be deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU) and (ii) each Option, PRSU, RSU and RSA to become fully vested and free of any applicable forfeiture restrictions, in each of clauses (i) and (ii), effective as of immediately prior to the Effective Time.
Options
As a result of the Merger:
each Option that has a per share exercise price that is less than the Common Merger Consideration, will be cancelled at the Effective Time in exchange for an amount in cash, without interest, equal to the product of (x) the aggregate number of shares of common stock subject to such Option multiplied by (y) the excess of $56.00 over the applicable per share exercise price of the Option, subject to any applicable withholding taxes; and
each Option that has a per share exercise price that is equal to or greater than $56.00 will, to the extent not exercised as of immediately prior to the Effective Time, be automatically cancelled at the Effective Time with no payment made therefor and will cease to represent a right to purchase shares of common stock.
RSUs and PRSUs
As a result of the Merger, each RSU and each PRSU will be cancelled and automatically converted at the Effective Time into the right to receive $56.00, in cash, without interest, for each share of common stock subject to the RSU or PRSU, subject to any applicable withholding taxes.
RSAs
As a result of the Merger, each RSA will become fully vested and free of any applicable forfeiture restrictions, effective as of immediately prior to the Effective Time and each such share of common stock will cease to be outstanding and will be converted into the right to receive $56.00, in cash, without interest, subject to any applicable withholding taxes.
ESPP
Simultaneously in connection with the execution of the Merger Agreement, the Company: (i) caused any offering period (or similar period during which shares may be purchased) in progress under the ESPP as of the date of the Merger Agreement to be the final offering period under the ESPP and to be terminated as of the date of the
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Merger Agreement; (ii) made any pro-rata adjustments that were necessary to reflect the shortened offering period (or similar period), but otherwise treated such shortened offering period (or similar period) as a fully effective and completed offering period for all purposes under the ESPP; and (iii) caused each participant’s then-outstanding ESPP rights to terminate as of the Final Exercise Date. The Company will terminate the ESPP no later than the Effective Time.
On the Final Exercise Date, to the extent sufficient funds were credited as of such date under the ESPP within the associated accumulated payroll withholding accounts for participants to fund a share purchase for a reasonable number of shares of common stock, then such funds were used to purchase shares of common stock in accordance with the terms of the ESPP, and otherwise the then-current offering period terminated without a final purchase. Each share of common stock purchased under the ESPP prior to the Effective Time will be cancelled at the Effective Time and converted into the right to receive the Common Merger Consideration, subject to any applicable withholding taxes. No further ESPP Rights will be granted or exercised under the ESPP after the Final Exercise Date.
As of the date of this proxy statement, there are no outstanding ESPP Rights.
Background of the Merger
The Board and the senior management team of the Company regularly review the Company’s performance, future growth prospects, business composition, use of capital and overall strategic direction, with the objective of maximizing long-term stockholder value. At various times, these reviews have included consideration of a variety of strategic alternatives as an independent company, including potential changes to the Company’s operating segments, as well as potential transactions with third parties. As part of the Board review process, independent directors have regularly engaged with the Company’s stockholders, soliciting their input on key matters, including corporate governance, the strategic direction of the Company, and other important stockholder interests.
In connection with the Board’s reviews and stockholder interactions, the Board and senior management have taken a number of actions to enhance stockholder value. Such actions have included investment in the Company’s earning assets when market conditions were deemed favorable, while deferring investment when market conditions were deemed more challenged, continued review of the Company’s capital structure and prevailing interest rates to opportunistically raise capital, and consistent evaluation of the Company’s capital return policy. Since 2020, the Company has effectively streamlined the business, returning to a pure-play container lessor following the disposition of the Company’s logistics and rail businesses in 2020. Since 2018, the Company has repurchased approximately 14% of its outstanding shares of common stock and, in June 2020, enhanced its capital return program with the initiation of a regular cash dividend on the Company’s common stock at a rate of $1.00 per share annually, which has since been increased 20% to $1.20 per share annually, effective the first quarter of 2021.
Between June 2019 and December 2019, representatives of the Company received various communications from, and held a number of in person, video and telephonic meetings with, representatives of certain of the Company’s then-largest stockholders to discuss stockholder concerns and opinions. In these communications and calls, among other things, representatives of such stockholders: (i) expressed concern regarding the Company’s depressed stock price to book value ratio, at one point noting that, in one such stockholder’s calculation, the Company’s common stock was trading at a 30% discount to book value, (ii) expressed concern regarding the strategic direction of the Company and other operational matters, including repeated desire for the Company to sell its rail and logistics businesses, (iii) repeatedly encouraged the Board to engage a financial advisor to review all strategic alternatives, including, but not limited to, a sale of the Company via an auction process and repurchasing shares on a larger scale, (iv) communicated that the Company’s share price did not reflect the intrinsic value of the Company, and (v) stated that, unless the Company retained an investment bank to assist with a strategic alternatives review process to maximize stockholder value, certain of such stockholders would consider all available options, including making their concerns public, nominating their own slate of directors for stockholder consideration at the next election of directors, and engaging a proxy solicitor and a law firm to represent such stockholder in a potential proxy contest. During this time, the Company’s representatives emphasized to representatives of such stockholders that the Board was committed to fulfilling its fiduciary duty of acting in the best interest of the Company’s stockholders.
As part of its regular consideration of potential opportunities to strengthen the Company’s business and maximize long-term stockholder value, and taking into account communications from stockholders during this timeframe, the Board held various meetings at which the Board, among other things: (i) considered and reviewed the viewpoints of such stockholders in deciding whether to initiate a strategic alternatives process, including the timing of any public announcement thereof, (ii) discussed the repeated pressure such stockholders were putting on the
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Company to engage a financial advisor, (iii) received presentations from representatives of Perkins Coie LLP, the Company’s primary outside legal counsel (“Perkins Coie”), and Potter Anderson & Corroon LLP, the Company’s outside Delaware legal counsel (“Potter Anderson”), regarding, among other things, the Board’s fiduciary duties in a strategic alternative review process, (iv) authorized each of David Remington, the Company’s Chairman of the Board, and Victor Garcia, the Company’s then-current President, Chief Executive Officer and director, to interview various investment banks to potentially serve as the Company’s financial advisor to advise the Company in connection with (a) activist and other stockholder proposals, both formal and informal, and (b) analyze and consider various strategic and financial alternatives, including a potential sale of the Company and the optimal timing and availability of any other alternatives to maximize stockholder value for the Company, and (v) engaged a public relations firm to assist in stockholder outreach.
Between June 15, 2019 and September 11, 2019, the Company’s representatives contacted and interviewed four investment banks, including Centerview, regarding an engagement as the Company’s financial advisor. During various meetings with such investment banks, representatives of such investment banks discussed their respective qualifications as well as proposed approaches for the Company to maximize stockholder value. The Company’s representatives asked questions and received answers from such investment banks.
On June 20, 2019, as part of the Board’s commitment to stockholder responsiveness and maximizing stockholder value, the Company sold $15.8 million of rail cars from its railcar leasing portfolio to The InStar Group (“InStar”). The Company had also previously sold $39.6 million of railcars from its railcar leasing portfolio to Exxon Mobil Corporation on November 30, 2018, and $165.3 million of railcars from its railcar leasing portfolio to InStar on February 26, 2019.
On August 7, 2019, the Company issued a press release announcing its financial results for the second quarter of 2019 and announcing its intention to sell its remaining rail fleet. The Company’s common stock closed trading at $21.30 per share on the NYSE.
From August 19, 2019 through September 20, 2019, without the Board’s knowledge or authorization, Mr. Garcia, in his individual capacity, had discussions with third parties regarding a potential management buy-out or take-private transaction of the Company (collectively, the “MBO Activities”).
On September 4, 2019, after further review of materials from potential financial advisors and conversations with such parties, Mr. Remington advised the Board via email that he and Mr. Garcia recommended that the Board engage Centerview as the Company’s financial advisor. The rest of the Board informally approved and agreed with the engagement, with the formal approval occurring at a meeting of the Board on September 11, 2019, and the Company entering into an engagement letter with Centerview to serve as the Company’s financial advisor on September 13, 2019.
On September 7, 2019, the Board held a meeting by teleconference, which was also attended by representatives of Company management, representatives of Centerview, a representative of Perkins Coie, and representatives of Joele Frank Wilkinson Brimmer Katcher, the Company’s public relations firm (“Joele Frank”). The purpose of the meeting was to, among other things, have a representative of Perkins Coie refresh the Board on prior discussions with Potter Anderson and with Perkins Coie regarding the Board’s fiduciary duties, discuss whether to make a public announcement regarding the strategic alternatives process, and discuss recent calls among Mr. Remington, Mr. Garcia and certain of the Company’s then-largest stockholders. In addition, the Board discussed unsolicited inbound interest in acquiring the Company in the form of a telephone call to Mr. Garcia from the chief executive officer of a potential strategic buyer (“Party A”).
On September 11, 2019, the Board approved the engagement of Centerview as the Company’s financial advisor. The Board had considered many factors in selecting a financial advisor, including relationships with other potential strategic or financial buyers, relevant experience and reputation. In addition, the Board discussed all the financial advisor candidates and Mr. Remington’s reasons for recommending Centerview.
Also, on September 11, 2019, Mr. Garcia responded to an unsolicited email from Mr. Kenji Yasuno, the Senior Managing Executive Officer of what was then Mitsubishi UFJ Lease and Finance Company Limited (the former name of Parent), which owned MUL Railcars, Inc. (“MUL Railcar”), a competitor of the Company’s rail business, and Beacon Intermodal Leasing, LLC (“Beacon”), a competitor of the Company’s container business, in which Mr. Yasuno requested a meeting to learn more about the Company. Later that day, Mr. Garcia accepted Mr. Yasuno’s
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request for a meeting and a meeting among Messrs. Garcia, Timothy Page, the Company’s then-current Chief Financial Officer and current President, Chief Executive Officer and director, Yasuno, and Toshio Oka, Executive Officer and General Manager of Parent, was subsequently scheduled for October 9, 2019.
On September 13, 2019, the chief executive officer of Party A contacted Mr. Garcia stating that he wanted to discuss combining the Company and Party A, and wanted to share his thoughts on benefits, potential structure and value. A meeting was scheduled for October 1, 2019, and then rescheduled for November 13, 2019, with Mr. Remington and Andrew Ogawa, a member of the Board.
On September 15, 2019, the chief executive officer of Party A accepted Mr. Garcia’s invitation for a meeting and said that he would be joined by Party A’s lead independent director.
On September 17, 2019, the Board held a telephonic meeting, which was also attended by Company management, and a representative of Perkins Coie, Centerview and Joele Frank. The Board discussed the need to take an additional impairment charge on the Company’s rail business assets due to continued deterioration of the railcar business and underlying value of the railcar assets.
Between September 23, 2019 and September 26, 2019, members of the Board other than Mr. Garcia (the “Non-Executive Directors”) held several meetings, certain of which were attended by representatives of Centerview, Perkins Coie and Potter Anderson. Mr. Garcia was excluded from these meetings due to the conflicts of interest raised by the MBO Activities. During such meetings, among other things, the Non-Employee Directors discussed the advantages and disadvantages of public announcement of the retention of Centerview as a strategic advisor, and/or the exploration of strategic alternatives, as well as the aforementioned communications from activist stockholders.
On September 28, 2019, Mr. Garcia sent an email to Mr. Yasuno, inviting Mr. Yasuno and Mr. Oka to dinner after their scheduled meeting on October 9, 2019, which was accepted by Mr. Yasuno on September 29, 2019.
On September 30, 2019, the Non-Executive Directors met with Mr. Garcia to discuss the MBO Activities.
On October 9, 2019, the Non-Executive Directors held a telephonic meeting, which was also attended by a representative of Perkins Coie. At this meeting, the Non-Executive Directors decided that it was in the best interest of the Company and its stockholders to form a special committee of the Board to insulate the strategic alternatives process from any participation by Mr. Garcia. All members of the Board (other than Mr. Garcia) were appointed to the special committee (the “Special Committee”).
Subsequently, on October 9, 2019, Mr. Garcia and Mr. Page met and subsequently had dinner with Mr. Yasuno and Mr. Oka of Parent, at which meeting Mr. Yasuno and Mr. Oka expressed interest in a potential acquisition of the Company.
Later, on October 10, 2019, Mr. Garcia emailed Mr. Remington that he and Mr. Page had a meeting, followed by dinner, with Mr. Yasuno and Mr. Oka. Mr. Garcia noted that this would be a normal visit to catch up, since Mr. Yasuno and Mr. Oka were going to be in San Francisco, California in connection with visiting a San Francisco-based aircraft lessor that Parent owned. Mr. Garcia said that Mr. Yasuno and Mr. Oka expressed interest in the Company’s rail business and mentioned that Parent might be interested in combining the Company and Beacon. Mr. Garcia also reported that he thanked Mr. Yasuno and Mr. Oka for their interest and duly noted their comment.
On October 11, 2019, Mr. Garcia advised Mr. Remington via email that he had received a call from another potential strategic buyer (“Party B”).
On October 14, 2019, the Non-Executive Directors met with Mr. Garcia to deliver a written “walling off” protocol to separate Mr. Garcia from all matters relating to the strategic alternatives process due to the MBO Activities.
Also, on October 29, 2019, the Company issued a press release reporting its financial results for the third quarter of 2019. The Company’s common stock closed trading at $24.22 per share on the NYSE.
On October 30, 2019, Mr. Remington and John Williford, a member of the Board, met with two representatives of Party B at Perkins Coie’s offices in San Francisco, California. At the meeting, Party B submitted a non-binding
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indication of interest to purchase the Company, other than the Company’s rail assets, at a price of $26 to $30 per share. The non-binding indication of interest was also sent via email just before the meeting to Mr. Garcia, Mr. Remington and Mr. Williford. At the close of business on October 30, 2019, the Company’s common stock closed trading at $23.77 per share on the NYSE.
On November 1, 2019, Mr. Oka emailed Mr. Garcia and said that he and Mr. Yasuno planned to visit San Francisco, California on November 21, 2019 and would like to arrange another in-person meeting to discuss a potential acquisition of the Company, including the rail business. Mr. Garcia responded and accepted the invitation and noted that Mr. Page would also attend the meeting.
On November 3, 2019, Mr. Garcia sent an email to Mr. Remington advising him of the planned meeting with the representatives of Parent on November 21, 2019 and invited Mr. Remington and other members of the Board to participate in the meeting. It was subsequently decided that Mr. Remington and Mr. Williford would meet representatives of Parent on November 21, 2019 to discuss Parent’s interest in acquiring the Company without Mr. Garcia and Mr. Page, and that Mr. Garcia and Mr. Page would meet with representatives of Parent to discuss a sale of the rail business in a separate meeting.
Between November 5, 2019 and February 26, 2020, the Company negotiated and entered into non-disclosure agreements with potential bidders, including Party A, Party B, Party C (as defined below), Party D (as defined below) and Parent.
On November 13, 2019, Mr. Remington and Mr. Ogawa met with Party A’s chief executive officer and a member of Party A’s board of directors at Perkins Coie’s San Francisco, California offices. At the meeting, Party A made a non-binding offer to purchase the Company in the form of 50% cash and 50% Party A stock, with an aggregate value of 80% of the value of one share of Party A common stock for each share of the Company’s common stock. The aggregate offer represented an approximate value of $27.50 per share of the Company’s common stock. The Company’s common stock closed trading at $23.53 per share on the NYSE.
On November 14, 2019, the Special Committee held a meeting, which was also attended by Company management, other than Mr. Garcia, and representatives of Centerview and Perkins Coie. Centerview presented an analysis of the Company’s strategic alternatives, including a possible sale of the Company. The Special Committee discussed these alternatives, including the aforementioned non-binding offers received from each of Party A and Party B. The Special Committee concluded that both non-binding offers were inadequate. The Company’s common stock closed trading at $23.19 per share on the NYSE on November 14, 2019. The meeting of the Special Committee was adjourned until the next day.
On November 15, 2019, the Special Committee continued the meeting that began November 14, 2019, and Centerview presented alternative ways for the Company to proceed with respect to the strategic alternatives process, including expanding outreach beyond the parties that had made incoming inquiries. The Special Committee discussed, among other things, whether it should instruct Centerview to widen its search and the potential responses to the non-binding offers from each of Party A and Party B. The Special Committee requested that Centerview prepare and provide to Mr. Remington, based on Centerview’s familiarity with the industry, a list of potential buyers with the capacity to engage in a purchase of the Company to supplement the inbound interest. The Company’s common stock closed trading at $23.28 per share on the NYSE.
On November 17, 2019, the Board adopted a resolution via unanimous written consent that, in light of the formation of the Special Committee and its role in overseeing the Company’s review of strategic alternatives, Centerview would report to, and only take instructions from, the Special Committee (as opposed to the Board, which included Mr. Garcia).
On November 21, 2019, Mr. Remington and Mr. Williford met Mr. Yasuno and Mr. Oka of Parent at Perkins Coie’s offices in San Francisco, California. At the meeting, Mr. Yasuno and Mr. Oka advised Mr. Remington and Mr. Williford that Parent was interested in making an offer to purchase the Company, excluding rail, but that it would take one to two additional months before an offer could be presented to the Board.
On November 26, 2019, the Special Committee held a telephonic meeting, which was also attended by representatives of Centerview and Perkins Coie. The purpose of the meeting was to discuss, among other things: (i) the Company’s response to Party A’s offer; (ii) Party B’s bid and potential willingness to change its earlier-stated position and to include the Company’s rail business in Party B’s offer; (iii) the meetings with Mr. Yasuno and Mr. Oka
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of Parent; (iv) other matters related to a strategic alternatives process, including entering into non-disclosure agreements, and the possible sale of the logistics business assets. In addition, Centerview presented its valuation metrics and the Special Committee discussed the valuation analysis.
On December 4, 2019, Mr. Remington and Mr. Ogawa had a telephonic meeting with Party A’s chief executive officer and a member of Party A’s board of directors, during which Mr. Remington and Mr. Ogawa rejected Party A’s initial bid because the Board felt it substantially and materially undervalued the Company given that the proposed implicit value was less than the Company’s book value, less than the reasonably computed long-term economic value and the fact that at the time the Company’s common stock was trading substantially below book value. Mr. Remington and Mr. Ogawa also advised Party A that the Company had received multiple other unsolicited inbound offers. The Company’s common stock closed trading at $24.05 per share on the NYSE.
On December 9, 2019, the Special Committee held a telephonic meeting, which was also attended by a representative of Perkins Coie. At the meeting, the Special Committee discussed whether it was appropriate and in the best interest of the Company’s stockholders to publicly announce that the Company had engaged Centerview as its financial advisor in connection with a strategic alternatives process.
On December 11, 2019, the Special Committee held a meeting at the Company’s San Francisco, California office, which was also attended by representatives from Centerview and Joele Frank. At the meeting, the Special Committee decided to make a public announcement of the engagement of Centerview as the Company’s financial advisor in order to explore strategic alternatives to maximize stockholder value.
On December 16, 2019, the Company issued a press release announcing that the Company had engaged Centerview as its financial advisor in order to explore strategic alternatives to maximize stockholder value. The Company’s common stock closed trading at $28.95 per share on the NYSE.
On December 17, 2019, the Special Committee held a telephonic meeting, which was also attended by a representative of Perkins Coie, at which the Special Committee decided to discontinue efforts to sell the rail and logistics divisions outside of the main strategic alternatives process.
On December 18, 2019, representatives of Centerview had an introductory call with representatives of a potential financial sponsor buyer (“Party C”) following recent unsolicited inbound interest by Party C.
On December 19, 2019, Mr. Ogawa met with representatives of Party B in Tokyo, Japan. At the meeting, representatives of Party B indicated, among other things, that they were interested in making an all-cash offer, would like to acquire the Company as a platform and keep management in place and had engaged a financial advisor. However, the representatives of Party B did not make an offer and no potential purchase price was mentioned.
On December 20, 2019, Mr. Ogawa met with representatives of Parent in Tokyo, Japan. At the meeting, representatives of Parent indicated, among other things, that they were interested in making an all-cash offer, that they believed the Company would be a great fit as part of Parent’s overall business and that they had engaged a financial advisor.
On December 27, 2019, Mr. Yasuno emailed Mr. Remington to advise him that Parent would be unable to meet the timeline for presenting an offer to the Company that it had earlier communicated and requested a meeting with Mr. Remington in San Francisco, California in early January 2020, which was subsequently scheduled for January 10, 2020. Mr. Yasuno did not explain the reason for the delay.
On December 28, 2019, Mr. Remington sent an update regarding the strategic alternatives process to the Special Committee in which he noted that as of such date the Company had 11 active inbound parties, including Party A, Party B, Party C and Parent, and that the Company was in the process of negotiating non-disclosure agreements with eight of those 11 parties. Mr. Remington noted that two investment banks were also inbound parties acting as financial intermediaries, with undisclosed clients. Mr. Remington also noted for the Special Committee that there were 21 additional potential parties to be contacted by Centerview.
On January 6, 2020, the Special Committee held a meeting at Perkins Coie’s offices in Palo Alto, California, which was also attended by representatives of Centerview and Perkins Coie. During the meeting, Centerview provided an update on the strategic alternatives process. The Special Committee also discussed whether to continue the process with inbound parties or to expand to a broader sale process.
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On January 10, 2020, Mr. Remington, Mr. Williford, Mr. Ogawa, and representatives of Centerview met with Mr. Yasuno and Mr. Oka and representatives of Parent’s financial advisor at Perkins Coie’s San Francisco, California offices. In the meeting, Mr. Yasuno explained that at that time Parent could not participate in a strategic process, but could not go into more detail or disclose for how long Parent would be restricted from participating in such a process. However, Mr. Yasuno communicated to Mr. Remington, Mr. Williford and Mr. Ogawa that Parent remained highly interested in purchasing the Company.
On January 13, 2020, at the direction of the Special Committee, Centerview began reaching out to potential buyers of the Company and, in connection therewith, Centerview also distributed process letters to such buyers inviting them to submit non-binding proposals for a potential acquisition of the Company. Centerview communicated to potential buyers that non-binding indications of interest would be due on February 12, 2020.
From January 14, 2020 through March 10, 2020, Centerview held discussions with 39 Special Committee-approved parties about their respective interest in pursuing a potential transaction with the Company. Most of these parties communicated a lack of interest or ability to participate in a potential transaction for reasons such as the pandemic-depressed market. Of the parties contacted, 19 indicated an interest in receiving additional information on the Company’s operations as a basis for evaluation and subject to executing confidentiality agreements, were provided such information related to the Company through meetings with representatives of Company or the Company’s virtual data room, as well as draft merger agreements. Thereafter, following the negotiation and execution of non-disclosure agreements with 20 parties, 17 parties participated in discussions with the Company’s management as well as certain members of the Special Committee to further evaluate a potential transaction and 4 parties submitted preliminary indications of interest.
On January 15, 2020, Mr. Yasuno emailed Mr. Remington to, among other things, recommunicate Parent’s interest in making an offer for the Company, but noted that Parent would still be unable to do so on the requested timeline. Mr. Yasuno indicated that he would consult with Parent’s advisors and discuss internally about the idea of sharing information only between legal advisors at this point and whether Parent could engage in a due diligence process based on the executed non-disclosure agreement in order to request non-public information, so that Parent could be prepared to move ahead quickly with a compelling offer when the time came.
From January 24, 2020 through March 2, 2020, Mr. Garcia and Mr. Page as well as certain members of the Special Committee participated in management meetings with representatives of the 17 interested parties, including representatives of Party A, Party B, Party C, a potential financial sponsor buyer (“Party D”) and Parent.
On February 10, 2020, Mr. Yasuno replied to a February 8, 2020 email from Mr. Remington asking if there had been a change in status and stated that Parent had received the process letter from Centerview and Parent would still be unable to submit a proposal on the requested timeline, but that Parent remained enthusiastic about the potential transaction and hoped to be able to submit a proposal once its previously noted, but not described, issue was resolved. Mr. Yasuno also requested to stay in touch with Mr. Remington and to hold a meeting in mid-March 2020 to discuss a potential offer should the opportunity still exist.
On February 12, 2020, Parent delivered a letter in response to the process letter in which it stated that it remained interested, but that it could not engage until the summer of 2020.
In February 2020, the COVID-19 pandemic began its impact on global markets and commerce, including the Company’s operations. The spread of COVID-19 throughout the world and the strong actions taken by many countries to reduce exposures led to a sharp decrease in global economic activity during the beginning of the second quarter of 2020, which, at the time, the Company expected to continue during 2020. While the COVID-19 pandemic and the related global economic effects had not materially impacted the Company’s business, operations, or financial results to date, the Company expected at the time that, among other things, the global economic impact would result in a decline in overall incremental demand for the Company’s services over the remainder of the year and would elevate the risk of delayed payment or default by the Company’s customers. Along those lines, the Company modeled a number of downside stress scenarios and their impact on liquidity. Furthermore, worldwide financial markets experienced periods of extraordinary disruption and volatility, which was exacerbated by the COVID-19 pandemic and ultimately impacted the number of active bidders. At such time, the Company publicly disclosed that the extent to which the COVID-19 outbreak would impact the Company’s business and operations would depend on future developments that were highly uncertain and could not be predicted.
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From March 2020 through mid-June 2020, the Special Committee and the Board each met numerous times to discuss, among other things, the Company’s financial position due to the COVID-19 pandemic, whether the strategic alternatives process should be paused due to COVID-19, extending the bid period and the consequences of making a potential executive leadership change at this stage of the strategic alternatives process.
On March 1, 2020, Mr. Yasuno emailed representatives of Centerview to follow up on the letter Parent submitted on February 12, 2020 in response to the process letter in order to reaffirm that Parent continued to be enthusiastic about a potential transaction and that Parent would contact Centerview again in mid-March 2020.
On March 5, 2020, Mr. Remington and Mr. Ogawa had a telephonic meeting with representatives of Party B, who stated that it was withdrawing from the process due to the time it was taking Party B to integrate a previous acquisition. The withdrawal was confirmed in a letter from Party B, dated March 10, 2020.
Also, on March 5, 2020, the Company issued a press release reporting its financial results for the fourth quarter and full year of 2019. The Company’s common stock closed trading at $22.76 per share on the NYSE.
On March 12, 2020, the Special Committee held a telephonic meeting, which was also attended by a representative of Perkins Coie. Mr. Remington provided an update on the strategic alternatives process, including updated bids. At this time, he summarized the non-binding offers as (i) Party A: 0.80 shares of Party A stock for each share of the Company’s common stock, which was equivalent to a price of approximately $21.86 per share of the Company’s common stock; (ii) Party C: $24 to $27 per share, in cash; (iii) another potential financial sponsor buyer: $23 to $26 per share, in cash; (iv) another potential financial sponsor buyer: $23.25 per share, in cash, for just the Company’s container business, but not the logistics or rail business; (v) a potential strategic buyer declined to make an offer given market conditions and economic uncertainty associated with the COVID-19 pandemic; and (vi) Party D declined to make an offer at this time based on their view of market conditions and uncertainty over global pandemic driven economic growth, but indicated potential interest when the market stabilized in the future and acknowledged a potential value of the Company in the $30 per share range. In addition, the Special Committee discussed the Company’s valuation and the effect of the COVID-19 pandemic on global markets, including on the market price per share of the Company’s common stock. The Company’s common stock closed trading at $15.24 per share on the NYSE.
On March 16, 2020, the Special Committee and a representative of Perkins Coie held a telephonic meeting. The initial portion of the meeting also included a briefing from Mr. Garcia and Mr. Page, who had been invited to brief the Special Committee on the impact that the COVID-19 pandemic was having on the Company. After their presentation, Mr. Garcia and Mr. Page left the meeting and the Special Committee discussed Centerview’s analysis of the bids and whether to continue the exploration of strategic alternatives process or to halt the process due to the onset of the COVID-19 pandemic.
On March 18, 2020, the Special Committee held a meeting by teleconference, which was also attended by a representative of Perkins Coie, to discuss, among other things, the outstanding bids and the Company’s liquidity overall, including the financial impacts and process in connection with the COVID-19 pandemic.
On March 25, 2020, Mr. Remington had a telephonic meeting with representatives of Parent, which was also attended by representatives of Centerview, during which the representatives of Parent reiterated Parent’s interest in a potential transaction, but that Parent could not engage before the summer due to what Parent later disclosed in September 2020 regarding its own business integration.
On March 26, 2020, Mr. Remington and Mr. Ogawa had a telephone call with the chief executive officer and the lead independent director of Party A to discuss Party A’s continued interest in acquiring the Company. Party A’s chief executive officer cited the strategic benefits that Party A saw in combing the two companies, and then discussed Party A’s concerns with both the Company’s rail and logistics business, to which he attributed only a small positive value. The representatives of Party A then noted that Party A was considering changing its offer from a combination of cash and stock to only stock due to the then-current market volatility.
Also, on March 26, 2020, the Special Committee held a telephonic meeting, which was also attended by a representative of Perkins Coie, to discuss, among other things, the impact of COVID-19 on the Company’s business and discussions with the Company’s lenders related thereto, concerns the Special Committee had with the current leadership structure of the Company and the possible effects of changing leadership in the middle of the strategic alternatives process. With respect to the impact of COVID-19 on the Company’s business and discussions with the Company’s lenders related thereto, Mr. Page described his discussions with the Company’s lenders, who reaffirmed
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their support of the Company and the shipping industry in general, who also noted that the shipping industry (which includes container leasing companies) was very important to the world economy. With respect to a potential leadership change, the Special Committee concluded that any change to leadership should occur only after the strategic alternatives process was terminated. In addition, the Special Committee discussed whether to continue the strategic alternatives process and the potential for stockholder activist actions if the strategic alternatives process was terminated given the uncertainty created by the onset of the COVID-19 pandemic. Mr. Remington also described Centerview’s recommendation to continue the process with parties that had the wherewithal to consummate a potential transaction in light of the then-current macroeconomic backdrop given the uncertainty of COVID-19’s potential impact on the Company’s financial performance and liquidity. After discussion, the Special Committee decided to continue the strategic alternatives process. The Special Committee further discussed the various bids received to date and the Special Committee discussed how it could most effectively negotiate with third-party bidders.
On March 30, 2020, Mr. Remington and Mr. Ogawa had a telephonic meeting with representatives of Party D, representatives of Party D’s financial advisor and representatives of Centerview to discuss the market volatility being driven by COVID-19. The representatives of Party D presented their thinking about the then-current market conditions, along with what they saw as a continued deterioration in multiple indicators, including that one-third of the world was in quarantine, and speculated that container demand would be a lagging indicator. The representatives of Party D also noted that they were concerned that container shipping lines would also come under stress and pass on that stress to container leasing companies.
During April 2020 and May 2020, representatives of Party A, Party C and Party D conducted due diligence on the Company and the Company conducted reverse due diligence on Party A.
On April 14, 2020, representatives of Centerview provided the Special Committee with a relationship disclosure memorandum.
On May 5, 2020, the Company issued a press release reporting its financial results for the first quarter of 2020. The Company’s common stock closed trading at $15.48 per share on the NYSE.
On May 20, 2020, the Board held a meeting via videoconference, which was also attended by Mr. Page and a representative of Perkins Coie. The initial portion of the Board meeting pertained to operational issues, including approval of new pricing guidelines for leases. After the operational discussion, Mr. Garcia left the meeting. Mr. Remington then provided the remaining Board members (i.e., the members of the Special Committee) and Mr. Page with an update regarding the strategic alternatives process. Mr. Remington informed the remaining members of the Board that Party D had decided not to move forward with an offer because of a number of factors, including: (i) concern about a weak market for container leasing in 2020; (ii) concern about a “change of control” default under certain of the Company’s then-outstanding financing documents; and (iii) a belief that the Board would require a price that approximated book value, and that book value was too great a premium over the then-current market price. Mr. Remington then told the remaining Board members that he had advised Centerview that it should contact Party A and advise Party A that it would need to increase its preliminary offer if it expected to have its impending offer accepted by the Board.
On June 1, 2020, the Special Committee held a telephonic meeting, which was also attended by representatives of Party C, and representatives of Centerview and Perkins Coie, during which representatives from Party C presented on the background of the potential offer they would be submitting to the Special Committee. The Company’s common stock closed trading at $18.58 per share on the NYSE.
On June 2, 2020, Party C submitted a non-binding offer to purchase the Company at $24 per share, in cash. The Company’s common stock closed trading at $19.44 per share on the NYSE. Party C had communicated that its proposal included negative value being ascribed to both rail and logistics. Therefore, Party C was asked to provide a container only proposal. Subsequently, representatives of Centerview held calls with representatives of Party C. During these conversations, Party C verbally revised its non-binding offer to $27 per share, in cash, excluding the rail and logistics businesses.
On June 2, 2020, the Special Committee held a telephonic meeting, which was also attended by representatives of the Company’s management and representatives of Centerview and Perkins Coie, during which the Special Committee discussed Party C’s revised offer and the impact of disposing of the rail and logistics businesses separately on overall bid prices for the Company.
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On June 5, 2020, Party A submitted a revised written offer to purchase the Company via a stock for stock acquisition with an exchange ratio of 0.76 of Party A’s shares for each share of the Company’s common stock consisting of 10% cash and 90% stock and no stock buyback, which was equivalent to a price of approximately $24.53 per share of the Company’s common stock. Party A indicated that the decrease to the valuation was a result of the significant tax restructuring costs and a lower valuation of the rail and logistics businesses. The Company’s common stock closed trading at $21.87 per share on the NYSE. Following the submission of Party A’s revised written offer, representatives of Centerview held calls with representatives of Party A. During these conversations, it was verbally communicated that Party A would increase its bid to an exchange ratio of 0.80, with 10% cash and 90% stock and no stock buyback to make its proposal more competitive, subject to the completion of due diligence and further analysis of certain issues.
On June 6, 2020, the Special Committee held a telephonic meeting, which was also attended by a representative of Perkins Coie. The Special Committee discussed Party A’s comments to the auction merger agreement and Party A’s offer that was submitted on June 5, 2020, and other issues in connection with the strategic alternatives process, including the continued impact of the COVID-19 pandemic on the strategic alternatives process.
On June 7, 2020, Party A submitted a revised written offer to purchase the Company at an exchange ratio of 0.80 with 10% cash and 90% stock and no buy back, which was equivalent to a price of approximately $25.82 per share of the Company’s common stock. Party A also clarified how it was valuing the rail and logistics businesses. Party A indicated that it was valuing the two businesses at approximately a $25 million discount (i) to current book value, with respect to the rail business, and (ii) based on total book value (less any related shutdown or sale costs, and not including any goodwill and intangible assets related to logistics acquisitions), with respect to the logistics business. On June 5, 2020, the last business day prior to June 7, 2020, the Company’s common stock closed trading at $21.87 per share on the NYSE.
On June 8, 2020, the Special Committee held a telephonic meeting, which was also attended by representatives of Centerview and Perkins Coie, during which the Special Committee discussed Party A’s updated offer. In addition, the Special Committee discussed the other bids independently and in relation to Party A’s offer.
On June 10, 2020, Party C revised its bid in writing in the form of a price bridge, dependent on the amount of losses it would incur in disposing of the rail and logistics businesses, with a range of $24.50 per share to $28.00 per share, in cash, or $27.20 per share, in cash, if the transaction involved the sale of rail business and the shutdown of the logistics business. The Company’s common stock closed trading at $16.38 per share on the NYSE.
Also, on June 10, 2020, representatives of Centerview had a telephone call with Party A’s financial advisor, who verbally provided a further updated final bid, wherein the exchange ratio had been increased to 0.85. The updated bid was the same as the previous bid in all other respects.
On June 11, 2020, the Special Committee held a telephonic meeting, which was also attended by representatives of Company management and representatives of Potter Anderson and Perkins Coie, during which the Special Committee discussed, among other things, the revised bids from Party A and Party C. Potter Anderson provided the Special Committee a review of the Special Committee’s fiduciary duties in reviewing the bids and reaching a decision. The Special Committee also discussed whether long-term value was being reduced by the depressed nature of the near-term valuation. Ultimately, the Special Committee decided to reject both bids and to terminate the strategic alternatives process because the Special Committee deemed the bids inadequate from a financial point of view. The Special Committee believed it was unrealistic to think that any bidder would offer fair value in a pandemic-depressed market, especially considering two of the bidders cited the pandemic-depressed market as their reason for not bidding.
On June 12, 2020, the Board held a telephonic meeting, which was also attended by representatives of Company management (excluding Mr. Garcia) and a representative of Perkins Coie. The Board ratified the Special Committee’s decision to reject bids and to terminate both the strategic alternatives process and Centerview’s engagement. In addition, the Board decided to terminate Mr. Garcia and nominated Mr. Page as the Company’s interim President and Chief Executive Officer, and also appointed Mr. Page to serve as a member of the Board, which appointment became effective on June 14, 2020. The Company’s common stock closed trading at $19.37 per share on the NYSE.
On June 15, 2020, the Company issued a press release announcing the termination of the strategic alternatives review process, initiation of regular cash dividends on its common stock at the rate of $0.25 per share per quarter and the change in leadership, whereby Mr. Page, the Company’s then Chief Financial Officer, was appointed
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Executive Vice President and Interim President and Chief Executive Officer to succeed Mr. Garcia, and Mr. Page’s appointment to the Board. The Company noted in the press release that, as a result of the strategic alternatives process, the Company and the Board believed that the Company could best maximize stockholder value by focusing on its profitable core container business and that current market conditions were not conducive to a transaction beneficial to stockholders. The press release also noted that the Company and the Board were committed to exiting the rail and logistics businesses. The Company’s common stock closed trading at $18.34 per share on the NYSE.
Prior to the termination of the strategic alternatives process, interest was solicited from 39 potential bidders, which included 31 financial sponsors and 8 strategic buyers. Of these, there were management meetings with 17 interested parties, with about half of each type of group receiving a management presentation. In addition, there were four indications of interest received as first round bids. However, two potential bidders withdrew their indications of interest and cited their view of COVID-19-driven unstable market conditions.
On June 16, 2020, Mr. Yasuno emailed Mr. Remington and Mr. Ogawa, in which he stated that Parent would like to keep an open channel of communication with the Company with respect to a potential acquisition of the Company in the future.
Between July 1, 2020 and October 7, 2020, Mr. Page, Mr. Remington, Mr. Ogawa had various telephonic meetings with representatives of Parent, including Mr. Yasuno and Mr. Oka, to discuss, among other things, the Board’s willingness to listen to incoming inquiries, the lessons the Company learned from the strategic process that had just been completed, preferred timing for any potential offer to purchase the Company such that the Board could attempt to ensure that stockholders of the Company would receive maximum value. With respect to the timing for any potential offer, Mr. Remington suggested during such calls that a more beneficial time for the Company to entertain an offer, and for Parent to be presenting one, would be towards the end of 2021 after the Company had disposed of rail, had continued to demonstrate good financial performance, and when the market for transportation stocks would in theory no longer be depressed.
On August 6, 2020, the Company issued a press release reporting its financial results for the second quarter of 2020 and that the Board had declared the Company’s first quarterly cash dividend of $0.25 per common share. The Company’s common stock closed trading at $18.40 per share on the NYSE.
On August 14, 2020, the Company completed the sale of substantially all of the assets of its logistics business to NFI, a North American logistics provider, for cash proceeds of $6.2 million. The Company’s common stock closed trading at $21.96 per share on the NYSE.
On August 17, 2020, the Company issued a press release announcing the sale of the logistics business. The Company’s common stock closed trading at $21.96 per share on the NYSE.
On August 20, 2020, the Board held a telephonic meeting, which was also attended by a representative of Company management and a representative of Perkins Coie, during which the Board discussed the recent discussions with stockholders and Parent.
On September 3, 2020, the Board held a telephonic meeting, which was also attended by representatives of Company management and Perkins Coie, during which Mr. Remington provided an update on Parent’s indication of interest.
On September 21, 2020, the Board held a telephonic meeting, which was also attended by representatives of Company management and Perkins Coie, during which the Board discussed, among other things, Parent’s continued indication of interest.
On September 28, 2020, Mr. Yasuno emailed Mr. Remington to, among other things, reiterate that Parent was still enthusiastic about acquiring the Company and to schedule a time to discuss further in several weeks. Mr. Yasuno added that Parent had just announced the conclusion of agreement on business integration with Hitachi Capital Corporation that was planned to become effective on April 1, 2021.
On October 29, 2020, the Company issued a press release reporting its financial results for the third quarter of 2020 and that the Board had declared a cash dividend of $0.25 per common share. The Company’s common stock closed trading at $26.74 per share on the NYSE.
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On November 30, 2020, the Company issued a press release announcing the agreement to sell its remaining railcar fleet to affiliates of Infinity Transportation for cash proceeds of $228.1 million. The Company’s common stock closed trading at $31.65 per share on the NYSE.
Also, on November 30, 2020, representatives of Centerview received an unsolicited email from Party B’s financial advisor, inquiring as to whether the Company would be interested in resuming the strategic alternatives process in light of the announcement of the sale of the rail business.
On December 1, 2020, Mr. Remington and Mr. Page had a call with representatives of Centerview and Perkins Coie to discuss Party B’s renewed interest.
On December 3, 2020, Centerview received an unsolicited call from Party A’s financial advisor, during which Party A’s financial advisor communicated, among other things, that Party A had continued interest in a combination of Party A and the Company.
On December 4, 2020, Mr. Remington and Mr. Page had a call with representatives of Centerview and Perkins Coie to discuss Party A’s renewed interest and to reply that the Board was committed to fulfilling its fiduciary duties and would entertain any offers.
On December 8, 2020, Mr. Remington had a videoconference with the chairman of the board of directors of a potential strategic buyer (“Party E”), who expressed an interest in purchasing the Company.
On December 9, 2020, Mr. Page, Mr. Remington and Mr. Ogawa had a telephone call with Mr. Yasuno, Mr. Oka and another representative of Parent at Parent’s suggestion. During the call, the representatives of Parent congratulated Mr. Page, Mr. Remington and Mr. Ogawa on the sale of the rail business, but mentioned that Parent was still not in a position to engage in discussions regarding a potential transaction until March or April 2021.
On December 10, 2020, the Board held a meeting via videoconference, which was also attended by representatives of Company management and Perkins Coie, during which the Board discussed, among other things, the recent unsolicited strategic inquiries that it had received from Party A and Party E. The Board decided to explore the inquiries, but to refrain from discussions until after February 2021, when the Company’s fourth quarter of 2020 and full year 2020 earnings had been released, in part because the Board expected the results to be favorable to the Company. The Board believe that during that time it could coordinate with Centerview regarding populating a data room with due diligence materials. The Board also believed that delaying its response to Party A and Party E might also benefit stockholders by giving Parent an opportunity to participate in the process.
On December 11, 2020, Mr. Remington, Mr. Ogawa, Mr. Page, and representatives of Centerview and Perkins Coie held a videoconference to obtain Centerview’s advice regarding the questions raised in the Board meeting the prior day pertaining to how to best respond to incoming strategic inquiries. The parties discussed the feasibility of a short and targeted strategic alternatives process as well as the optimal timing to initiate the process.
On December 15, 2020, Mr. Remington and Mr. Page had a videoconference with the chair of the board of directors of Party E in response to Party E’s inbound indication of interest. The representatives of the Company communicated that while the Company appreciated Party E’s inquiry as to whether the Company was receptive to Party E’s offer, at the current time the Company preferred to respond definitively after the Company reported earnings in February 2021. A similar message was conveyed by a representative of Centerview to Party A’s financial advisor.
On December 29, 2020, the Company completed the sale its remaining railcar fleet to affiliates of Infinity Transportation for cash proceeds of $228.1 million and issued a press release announcing the same. The Company’s common stock closed trading at $31.18 per share on the NYSE.
On February 14, 2021, Mr. Yasuno emailed Mr. Remington to inform him that Parent had been conducting preparatory work to enable Parent to start official discussions with the Company regarding the acquisition of the Company as soon as it became possible, which would be no sooner than after the completion of the aforementioned business integration.
On February 16, 2021, the Company issued a press release reporting its financial results for the fourth quarter and full year of 2020 and that the Board had declared a cash dividend of $0.30 per common share and approved an expansion of the Company’s share repurchase program. The Company’s common stock closed trading at $37.95 per share on the NYSE.
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On February 17, 2021, the Board authorized a limited re-opening of the strategic alternatives process. In determining whether to re-engage in a strategic alternatives process, several Board members expressed a belief that the process should be efficient. They were concerned that a repeat of the long process from 2020 would damage the Company by both hurting employee morale and giving the Company the stigma of being “in play.” To mitigate the aforementioned potential risks, the Board designed a one-month process, whereby bidders would be required to engage in an intense discovery period, provide detailed comments on the Merger Agreement and make a “last and final” bid. The Board also authorized the re-engagement of Centerview, pursuant to an engagement letter that was subsequently executed on March 1, 2021. In addition, the Board approved a response to each of Party A, Party E and Parent, and also an outreach to five additional potentially interested parties recommended by Centerview and agreed to by the Board. Accordingly, the number of additional parties contacted was limited to those who would be most likely to participate and had the ability to do so based on the strategic alternatives process completed in June 2020. Furthermore, given that the Company had just concluded a very fulsome process with public disclosure less than 12 months prior, the Board was of the view that it had sufficient information with which to make such a selection. The Company’s common stock closed trading at $41.47 per share on the NYSE.
On February 22, 2021, by an action of unanimous written consent of the Board, the Board determined that Centerview should be retained as the Company’s financial advisor with respect to the re-opening of the strategic alternatives process.
On February 24, 2021, the Board held an update call via videoconference, which was also attended by representatives of Centerview and Perkins Coie. The purpose of the call was for representatives of Centerview to brief the Board on incoming inquiries from prospective bidders, as well as Centerview’s thoughts on running a targeted process that would determine if the much improved economy and the Company’s self-help program, which generally consisted of selling the rail and logistics business, implementing a regular dividend and resuming stock buybacks, would lead to a better valuation from prospective bidders and more attractive bids that would be in the best interest of the Company’s stockholders to accept.
From February 25, 2021 through April 30, 2021, Centerview held discussions with the parties approved by the Board at the February 17, 2021 meeting. Most of the parties concluded that they were not interested in evaluating a potential transaction given the then current valuation of the public company lessors. During this time, representatives of the Company’s management held calls with representatives of Parent, Party A and Party E regarding due diligence matters, which were also attended by representatives of Perkins Coie and Centerview, and representatives of such parties’ respective financial and legal advisors. Party A, Party E, and Parent continued to express an interest in evaluating a potential transaction, ultimately providing indications of interest on April 30, 2021.
On March 1, 2021, pursuant to the resolutions adopted on February 17, 2021, the Company entered into a new engagement letter with Centerview, dated as of February 20, 2021, in order to re-engage Centerview as the Company’s financial advisor.
On March 2, 2021, Mr. Remington and Mr. Page had a videoconference with Party E’s chief executive officer to inform Party E that the Company had decided to initiate a new strategic alternatives process. A short discussion ensued about aspects of the process.
Also, on March 2, 2021, the Board held a meeting via videoconference, which was also attended by representatives of Centerview and representatives of Perkins Coie. Among other topics, representatives of Centerview advised the Board on: (i) a conversation between representatives of Centerview and Party A’s financial advisor, at which a representative of Party A’s financial advisor conveyed Party A’s continued strong interest in purchasing the Company; (ii) a summary of “pros and cons” in re-opening a discussion regarding a possible strategic transaction with Party A, which included, among other things, the synergies of the combined companies, possible leakage of information to a competitor. The representatives of Centerview also discussed the material terms that a process letter would contain, and the number of companies that would be solicited in a targeted outreach. The process letter would provide, among other things, that offers would be “best and final” and the auction merger agreement would contain an explicit “go shop” right, with a “break fee”, permitting solicitation of other bids after a merger agreement was executed. Thereafter, the members of the Board expressed substantial support on proceeding with a targeted process with a one-month period for bidders to respond.
On March 7, 2021, Mr. Remington, Mr. Ogawa and Mr. Page had a videoconference with Mr. Yasuno and Mr. Oka of Parent. Mr. Remington said that, given the long-expressed interest of Parent in acquiring the Company, along with Parent’s apparent inability to act currently on that interest as Parent had previously told the Company that
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Parent could not actively engage in a process and conduct due diligence until April 1, 2021, as a matter of courtesy and in case Parent might be able to accelerate its ability to act on its interest, representatives of the Company wanted to inform Parent of the then-current unsolicited interest of third parties to purchase the Company. Mr. Remington further noted that (i) two unsolicited parties had expressed an interest in purchasing the Company, (ii) the Board had responded by initiating a new strategic process, and (iii) in order to have a sufficiently competitive process, the Company directed Centerview to reach out to a small group of previously interested parties to participate in the process. Mr. Remington then noted that the purpose of the call was to see if Parent was interested in participating in the process based on the following terms: one month of due diligence, starting with access to a data room and ending with bid; one bidding round, with a best and final bid; and a commencement of the process as soon as the following week and possibility as late as starting April 1, 2020. The representatives of Parent stated that they were not sure if they could meet the outlined timeframe and would get back to the Company about Parent’s ability to participate in the process.
On March 8, 2021, Mr. Remington, Mr. Page attended a videoconference with a representative of Centerview and a representative of Perkins Coie, during which the representative of Perkins Coie provided Mr. Remington and Mr. Page with an overview of the Board’s fiduciary duties in connection with a potential sale of the Company and representatives of Centerview presented their recommendations regarding the structure of a potential targeted strategic alternatives process.
On March 11, 2021, the Board held a meeting via videoconference, which was also attended by representatives of Centerview and Perkins Coie. The purpose of the meeting was to decide on whether to proceed with a targeted strategic alternatives process and to provide the full Board with access to the advice from the Company’s financial advisor and primary outside counsel that had been provided to Mr. Remington and Mr. Page during in the call held on March 8, 2021. A representative of Perkins Coie discussed the legal framework under which the Board should consider the potential process, including an overview of the prior strategic alternatives process in 2020 and another overview of its fiduciary duties in connection with a potential sale of the Company. Following Perkins Coie’s presentation, the representatives of Centerview and the Board discussed Centerview’s recommendations regarding the structure of a targeted strategic alternatives process and Centerview’s advice that, in light of the extensive strategic alternatives process in 2019 through 2020, a more targeted strategic process could be effectively run. The representatives of Centerview recommended contacting eight parties, including three potential strategic buyers, including Parent, and five potential financial sponsor buyers that appeared financially qualified and known to be interested in infrastructure investments (collectively, the “2021 Outreach Parties”). Furthermore, it was noted that the 2021 Outreach Parties were selected because of their industry knowledge, their prior expressed interest in the Company, and their perceived “ability to do a deal.” In addition, Board members expressed their support of an efficient process of roughly four to five weeks and believed that it was an opportune time from the perspective of stockholders to sell, and that it had taken all reasonable steps to select the bidders best positioned to complete a transaction in a timely manner and at a favorable price. Further, the Board decided to extend the timeframe for the targeted strategic alternatives process for all potentially interested parties until the end of April 2021. The Board concluded that, based on the in-depth review of the proposed design of the targeted strategic alternatives process that it had engaged in over time, including meetings with representatives of Centerview formally (in Board meetings) and informally (in Board updates) on February 12, 2021, February 24, 2021, March 2, 2021 and March 11, 2021 and the advice of representatives of Centerview, as well as the experience of Board members, that a targeted strategic alternatives process could be conducted with a limited number of potential bidders in a manner designed to be in the best interest of the Company’s stockholders. The Board then unanimously approved proceeding with a targeted strategic alternatives process, consistent with Centerview’s recommendations.
On March 12, 2021, Mr. Yasuno emailed Mr. Remington to let him know that Parent would be able to engage in the strategic alternatives process, as outlined by the Company, on April 1, 2021.
On March 14, 2021, Mr. Remington emailed Mr. Yasuno to inform him that the Board had decided to set April 30, 2021 as the bid date for Parent and other bidders to provide Parent with a draft of an amendment to the non-disclosure agreement that the parties had entered into on January 6, 2020, which included a standstill provision.
Between March 14, 2021 and March 22, 2021, representatives of Centerview distributed process letters to representatives of the 2021 Outreach Parties.
On March 15, 2021, Mr. Remington attended a videoconference with representatives of Centerview and representatives of Perkins Coie to discuss acceptable joint venture bidding partners for Party E.
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On April 21, 2021, Mr. Remington attended a videoconference with the chairman of the board of directors of Party E, at his request, to discuss prospective aspects of Party E’s bid.
Also, on April 21, 2021, Mr. Remington had a call with Mr. Page, representatives of Centerview and representatives of Perkins Coie to report on the videoconference with the chairman of the board of directors of Party E.
On April 27, 2021, at the request of Parent, a conference call was held among representatives of Parent’s financial advisor, Davis Polk & Wardwell LLP, Parent’s outside U.S. counsel (“Davis Polk”), Centerview and Perkins Coie. During the call, Davis Polk and Parent’s financial advisor explained that, due to a Japanese tax issue, if Parent was to bid for the Company, the Migrating Subsidiaries, the Company’s primary offshore subsidiaries, would need to first “migrate” to the United States. The parties then discussed an analysis of how the proposed Migration would be effected.
Also, on April 27, 2021, the Board held a telephonic meeting, which was also attended by representatives of Perkins Coie. Among other things, the Board discussed the status of the targeted strategic alternatives process, including the timing for receipt of bids, and tentatively reserved time on the mornings of May 4, 2021 for a Board meeting to review and make preliminary decisions about bids, and a further Board meeting on May 6, 2021 to make final decisions, both meetings to be attended by the Company’s outside legal and financial advisors.
On April 28, 2021, Mr. Remington, Mr. Ogawa and Mr. Page had a video call with Mr. Yasuno and Mr. Oka, at the request of Mr. Yasuno and Mr. Oka. Mr. Yasuno and Mr. Oka wanted to know whether the Migration, as a condition of Parent’s bid, would be acceptable to the Company. The Company’s representatives said that the Company was open to the Migration, understood the rationale from a Japanese tax perspective, and preliminarily did not think the Migration would be problematic.
On April 29, 2021, the Company issued a press release reporting its financial results for the first quarter of 2021 and that the Board had declared a cash dividend of $0.30 per common share. The Company’s common stock closed trading at $43.54 per share on the NYSE.
On April 30, 2021, the Board (other than Mr. Remington), representatives of Perkins Coie and representatives of Centerview attended a reverse due diligence call with representatives of Party A.
Also, on April 30, 2021, following entry into non-disclosure agreements or amended non-disclosure agreements with the parties, as applicable, the Board received three proposals: (i) a bid from Party A for a stock for stock merger at an exchange ratio of 0.85 per share of the Company’s common stock, which was equivalent to a price of $42.64 per share of the Company’s common stock; (ii) a bid from Party E to acquire the Company for $48.55 per share, in cash; (iii) a bid from Parent to acquire the Company for $56.00 per share of common stock, in cash, as well as a mark-up of the draft Merger Agreement. The Company’s common stock closed trading at $42.55 per share on the NYSE.
On May 4, 2021, the Board held a telephonic meeting, which was also attended by representatives of Centerview and representatives of Perkins Coie, to further review and discuss the bids received on April 30, 2021, as well as review key issues related to Parent’s proposal, including a discussion led by representative of Perkins Coie regarding Parent’s mark-up of the auction merger agreement and the general terms of the agreement. At the meeting, the Board formed a new special committee (the “Second Special Committee”), comprised of Mr. Remington and Mr. Page, which was tasked with engaging in discussions and negotiations regarding a definitive agreement should the Board determine to move forward with one of the potential bidders, though authority to ultimately approve any transaction remained with the Board.
On May 7, 2021, the Board held a meeting via videoconference, which was also attended by representatives of Centerview and representatives of Perkins Coie, to further discuss the bids received on April 30, 2021 and whether to negotiate with bidders. At the meeting, the Board determined to move forward with Parent because of the per share offer price, the overall strength of the offer, the seriousness of the bid considering the amount of work that had been done to put together the proposal and mark up the draft Merger Agreement, and the overall likelihood of closing. The Board also discussed aspects of the Migration and the absence of a “go shop” provision, noting that the Company could still entertain unsolicited offers.
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On May 10, 2021, the Second Special Committee met with representatives of Centerview and representatives of Perkins Coie via videoconference to discuss an issues list related to Parent’s mark-up of the draft Merger Agreement. Key issues discussed included the price, the “fiduciary out provisions,” the Migration, Parent’s right to terminate the Merger Agreement and the Termination Fee.
From May 10, 2021 to June 15, 2021 representatives of Centerview held numerous discussions with the financial advisor of Parent. Those discussions focused on the structural, and financial considerations pertaining to the Migration as well as the economics of a potential transaction. Representatives of Centerview communicated to the financial advisor of Parent that the offer price needed to improve from the original proposal of $56.00 per share, for the Board to have the ability to terminate the Merger Agreement in the event of a Superior Proposal and an unconditional obligation on the part of Parent to close the Merger subsequent to the completion of the Migration. In subsequent discussions it was communicated that Parent would not increase its proposal of $56.00 per share, but would accommodate the Company paying its normal course dividends through the end of 2021.
On May 12, 2021, representatives of Perkins Coie provided representatives of Davis Polk with a revised draft of the Merger Agreement.
On May 14, 2021, representatives of Centerview provided the Special Committee with an updated relationship disclosure memorandum.
On May 20, 2021, Mr. Page, Mr. Yasuno and Mr. Oka met via videoconference, during which the representatives of Parent explained it was very important to Parent to retain the Company’s management team post-Closing. As a result, the representatives of Parent indicated Parent was prepared to provide employment contracts and retention packages to Mr. Page and certain other individuals, the key terms of which were to be summarized in what became the Term Sheets.
Between May 20, 2021 and June 6, 2021, Mr. Page and certain other individuals, Parent and Davis Polk negotiated the Term Sheets.
On May 21, 2021, representatives of Davis Polk provided representatives of Perkins Coie with a further revised draft of the draft Merger Agreement.
On May 26, 2021, Mr. Remington, Mr. Ogawa and Mr. Page attended a videoconference with Mr. Yasuno, Mr. Oka and another representative of Parent to discuss, among other things, the status and progress of the negotiations with respect to the open items in the draft Merger Agreement, including, among other things, with respect to the payment of regular common stock dividends and the Migration.
On May 28, 2021, representatives of Perkins Coie met with representatives of Davis Polk via videoconference to negotiate open items in the Merger Agreement, including, but not limited to the “fiduciary out provisions,” including a “force the vote” provision (the removal of which the Board subsequently negotiated), the Migration, the amount of the Termination Fee and circumstances under which such fee would be payable, the request for a Parent Termination Fee and circumstances under which such fee would be payable, the conditions applicable to initiating the Migration and completing the Merger, and the payment of regular common stock dividends.
On May 31, 2021, Mr. Remington, Mr. Ogawa and Mr. Page attended a videoconference with Mr. Yasuno, Mr. Oka and other representatives of Parent, to discuss, among other things, the status and progress of the negotiations with respect to the open items in the draft Merger Agreement, including, among other things, with respect to the payment of regular common stock dividend, the “fiduciary out” provisions in the draft Merger Agreement, a request for the Parent Termination Fee and interim operating covenants.
On June 2, 2021, Parent delivered a “package” proposal to Centerview that addressed a number of issues that were still open between the parties. Parent proposed accepting a number of the Company’s positions, while maintaining its positions on a number of items. The “package” introduced the right to terminate the Merger Agreement in the event that the Closing had not occurred within a specified timeframe following initiation of the Migration.
Between June 6, 2021 and June 10, 2021, representatives of Perkins Coie and representatives of Davis Polk negotiated open provisions of the draft Merger Agreement and representatives of Parent and their legal advisors continued their due diligence review of the Company. Key issues that were negotiated included, among other things, the transaction risks associated with the Migration and, in particular, the risk associated with completing the Migration in a situation in which the Merger did not subsequently close, mutually acceptable “fiduciary out”
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provisions, termination rights and the payment of a corresponding Company Termination Fee and Parent Termination Fee, as applicable, expense reimbursement, regulatory filings, management team employment contracts, operating and other covenants, transaction litigation rights, maintenance of the current debt structure, and required consents.
Also, on June 10, 2021, representatives of the Company, Centerview, Perkins Coie, Parent, Parent’s financial advisor and Davis Polk met via videoconference to discuss the signing of the transaction and announcement logistics, assuming that the parties could reach agreement on the remaining open items in the Merger Agreement.
On June 13, 2021, Mr. Page emailed executed copies of the Term Sheets to a representative of Parent.
On June 15, 2021, representatives of Davis Polk met with representatives of Perkins Coie via videoconference to negotiate open items in the Merger Agreement, including, but not limited to Company representations and warranties, interim operating covenants and the Migration covenants, and the disclosure schedules. Later that day, representatives of Davis Polk provided representatives of Perkins Coie with a revised draft of the draft Merger Agreement.
On June 16, 2021, representatives of Perkins Coie provided representatives of Davis Polk with a revised draft of the draft Merger Agreement. Representatives of Perkins Coie and representatives of Davis Polk corresponded several times via teleconference to finalize the remaining open items in the Merger Agreement, including, but not limited to the Company’s interim operating covenants.
On June 17, 2021, representatives of Davis Polk provided representatives of Perkins Coie with a proposed final draft of the Merger Agreement. Subsequently, the Board held a meeting via videoconference, which was also attended by representatives of Company management, representatives of Centerview and representatives of Perkins Coie. Representatives of Centerview reviewed with the Board Centerview’s financial analysis of the Common Merger Consideration, and rendered to the Board an oral opinion, which was subsequently confirmed by delivery of a written opinion dated such date, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in preparing its opinion, the Common Merger Consideration to be paid to the holders of shares of Company common stock (other than as specified in such opinion) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Perkins Coie then discussed the Board’s fiduciary duties and provided the Board with a summary of the key legal terms of the draft Merger Agreement and led a discussion thereof. Following additional discussion and deliberation, by a unanimous vote of the Board, the Board determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement, and recommended to the stockholders of the Company to vote to approve the Merger Agreement. For a detailed discussion of Centerview’s opinion, please see below under the caption “—Opinion of Centerview Partners LLC”. The Company’s common stock closed trading at $38.16 per share on the NYSE.
Later that day, the Company and Parent executed the Merger Agreement. Following the close of trading on the NYSE, each of the Company and Parent issued a press release announcing the proposed Merger.
Recommendation of the Board and Reasons for the Merger
Recommendation of the Board
The Board has unanimously: (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and its stockholders on the terms and conditions set forth in the Merger Agreement; (ii) adopted resolutions approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) adopted resolutions recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption.
The Board unanimously recommends that you vote: (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; and (3) “FOR” the Compensation Proposal.
Reasons for the Merger
In evaluating the Merger Agreement, the Merger and the transactions contemplated thereby, including the Merger, the Board consulted with management, and representatives of the Company’s financial advisor and legal
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advisors. In unanimously recommending that common stockholders vote in favor of the Merger Proposal, the Board considered a number of factors, including the following (which factors are not necessarily presented in order of relative importance):
the Board’s understanding of the Company’s business, assets, financial condition, liquidity position and results of operations, its competitive position and historical and prospective performance, and the nature of the industry in which the Company competes.
the fact that the all-cash Merger Consideration will provide certainty of value and liquidity to stockholders, while eliminating the effect of long-term business and execution risks to stockholders.
the relationship of the $56.00 per share Common Merger Consideration to the trading price of our common stock on the NYSE, including that the Common Merger Consideration constituted a significant premium of approximately (i) 47% over the closing share price of our common stock on the NYSE on June 17, 2021, the last trading day prior to the date the Merger Agreement was publicly announced, and (ii) 31% over the volume weighted average price of our common stock on the NYSE during the 60 trading days up to, and including, June 17, 2021.
the relationship of the $56.00 per share Common Merger Consideration to the discounted cash flow net present value of the Company.
the relationship of the $56.00 per share Common Merger Consideration to public comparable data of price to book value.
the current and historical market prices of our common stock, including the market performance of our common stock relative to those of other participants in our industry and the general market.
the evaluation of multiple strategic alternatives and the solicitation of bids from multiple strategic and financial sponsor parties, as discussed under “—Background of the Merger.”
the Board’s belief that, if any third parties were interested in exploring a transaction with the Company, such potential acquirers were contacted by Centerview or would have been motivated to approach the Company.
the advantages of entering into the Merger Agreement in comparison with the risks of remaining an independent public company, including, but not limited to, the risks and uncertainties with respect to:
achieving the Company’s growth plans in light of the current and foreseeable market conditions, including the risks and uncertainties in the U.S. and global economy generally and the Company’s industry specifically, and risks related to the current stage of the economic cycle and macroeconomic challenges that could result in a market downturn in the coming months or years, in each case, especially in light of COVID-19;
competing with the Company’s competitors in a market with increasing container leasing industry consolidation and container shipping company consolidation as well as the risk that potential opportunities could diminish in the future as the Company’s competitors continue to pursue acquisitions;
competing for lessees in a market with likely further container shipping company consolidation;
the increasing importance of operational scale and financial resources in maintaining efficiency and remaining competitive in the container leasing industry;
achieving projected fiscal year 2021 performance and long-term financial projections as a standalone company is unlikely to result in value to the Company’s stockholders that would exceed, on a present-value basis, the value of the applicable Merger Consideration; and
the various additional risks and uncertainties that are set forth in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021, which is incorporated by reference herein, as updated by our subsequent filings with the SEC.
our ability to service, pay down or pay off our high debt levels while maintaining our operations and funding current and future capital expenditures.
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its belief, based on discussions and negotiations with Parent, that $56.00 per share was the highest price Parent would be willing to pay.
the fact that the Company sought out and engaged other potential purchasers and the Board determined that there were no other potential purchasers that would be reasonably likely to engage in a transaction in the near term at a price per share equal to or greater than the price being offered by Parent and on other acceptable terms.
the extensive arm’s length negotiations with Parent.
the likelihood that the Merger will be consummated, based on, among other things:
the Board’s evaluation of the conditions to the Merger;
that the condition to closing related to the accuracy of the Company’s representations and warranties, is generally subject to a Company Material Adverse Effect qualification, as described under “The Merger Agreement—Representations and Warranties;”
the absence of a financing condition;
Parent’s representation that it has and will have sufficient financial resources to pay the aggregate Merger Consideration and consummate the Merger;
the Board’s and management’s assessment, after discussion with representatives of Centerview, that Parent has the financial capability to complete the Merger;
that the Company will be permitted to continue to pay quarterly dividends on its Preferred Stock and on its common stock (not to exceed $0.30 per share of common stock per quarter), solely to the extent made on payment dates that correspond to record dates on June 28, 2021, September 27, 2021, and December 27, 2021, between signing and Closing under the Merger Agreement;
the relative likelihood of obtaining required regulatory approvals;
the relative likelihood of completing the Migration, including the obtainment of the Migration Contract Consents, within the required timeframe such that the Closing can take place prior to the End Date;
that the End Date under the Merger Agreement is expected to allow for sufficient time to complete the Merger, obtain required regulatory approvals and complete the Migration;
the Company’s ability to elect tax treatment that will be neutral to it in the event the Migration is completed, but the Merger is not completed; and
the remedies available under the Merger Agreement to the Company in the event of a breach by Parent, including, but not limited to, our ability, under certain circumstances pursuant to the Merger Agreement, to seek specific performance to prevent breaches of the Merger Agreement, and to enforce specifically the terms of the Merger Agreement, as described under “The Merger Agreement—Specific Performance.”
the terms of the Merger Agreement and the related agreements, including, but not limited to:
the Company’s ability to consider and respond to, under certain circumstances specified in the Merger Agreement, an Alternative Proposal;
the Board’s right, after complying with the terms of the Merger Agreement, to terminate the Merger Agreement in order to enter into an agreement with respect to a Superior Proposal upon payment of the Termination Fee and the Merger Agreement Expenses, as described under “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events” and “The Merger Agreement—Termination Fees and Treatment of Expenses;” and
Parent’s obligation to pay the Parent Termination Fee and Merger Agreement Expenses under certain circumstances. For more information, see “The Merger Agreement—Termination Fees and Treatment of Expenses.”
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that the Merger would be subject to the approval of the Company’s stockholders holding at least a majority of the outstanding shares of common stock to vote at the Special Meeting as of the Record Date, and the stockholders would be free to reject the Merger.
the availability of appraisal rights and payment of fair value under Delaware law to registered holders of shares, and beneficial owners of shares whose nominees follow the required statutory procedures, who timely file a written objection to the Merger Agreement, do not vote in favor of the Merger Proposal (to the extent they are entitled to do so) and comply with all of the required procedures under Delaware law, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under the Merger Agreement.
the Board’s view that the Merger Agreement was the product of arm’s-length negotiations and contained overall reasonable terms and conditions.
the timing of the Merger and the risk that if the Board did not accept Parent’s offer at the time it was made, the Board might not have had another opportunity to do so.
the opinion of Centerview rendered to the Board on June 17, 2021, which was subsequently confirmed by delivery of a written opinion dated such date that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Common Merger Consideration to be paid to the holders of shares of common stock (other than as specified in such opinion) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described below under the caption “—Opinion of Centerview Partners LLC.”
The Board also considered a number of uncertainties and risks concerning the Merger that generally weighed against entering into the Merger Agreement, including the following (which factors are not necessarily presented in order of relative importance):
the fact that the announcement and pendency of the Merger, or the risks and costs to the Company if the Merger does not close, could result in the diversion of management and employee attention (including efforts and consequences relating to the Migration), and potentially have a negative effect on the Company’s business and relationships with customers, suppliers and vendors.
the effect of a public announcement of the Company entering into the Merger Agreement on the Company’s operations, stock price and employees and its ability to attract and retain key management and personnel while the Merger is pending.
the fact that stockholders will not participate in any future earnings or growth of the Company and will not benefit from any appreciation in value of the Company, including any appreciation in value that could be realized as a result of improvements to our operations.
the unlikely possibility that Parent will be unable to pay the aggregate Merger Consideration on the Closing Date.
the requirement that the Company pay Parent the Termination Fee of $35.0 million and the Merger Agreement Expenses in an amount not to exceed $5.0 million, upon certain termination circumstances. For more information, see “The Merger Agreement—Termination Fees and Treatment of Expenses.”
the possibility that the amounts that may be payable by the Company upon the termination of the Merger Agreement, as set forth in “The Merger Agreement—Termination Fees and Treatment of Expenses,” could discourage other potential acquirers from making a competing bid to acquire the Company.
the restrictions on the Company’s conduct of business prior to the consummation of the Merger, including the requirement that it conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent the Company from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, the Company might have pursued.
the fact that an all-cash transaction would be taxable to the Company’s stockholders that are U.S. Holders for U.S. federal income tax purposes.
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the fact that under the terms of the Merger Agreement, the Company is unable to solicit other acquisition proposals.
the fact that, by reason of the factors described immediately above, the likelihood of any third party submitting to the Board or the Company (on an unsolicited basis pursuant to the “window shop” exceptions to the Company’s no-solicitation covenant in the Merger Agreement) an Alternative Proposal constituting or reasonably likely to lead to a Superior Proposal is materially diminished.
the risk that, while the Merger is expected to be completed, there can be no assurance that all conditions to the parties’ obligations to complete the Merger, including the Migration, will be satisfied, and as a result, it is possible that the Merger may not be completed even if approved by the Company’s common stockholders.
the risk that the Company is required to complete the Migration as a condition to Parent and Merger Sub’s obligation to close the Merger, and that it is possible that after completing the Migration, Parent could default on its obligation to close the Merger.
the fact that notwithstanding any Company Adverse Recommendation Change, unless the Merger Agreement has been earlier terminated in accordance with the terms thereof, the Merger Agreement will, subject to certain exceptions, be submitted to the Company’s common stockholders at the Special Meeting. For more information, see “The Merger Agreement—Alternative Proposals; Change in Recommendation; Intervening Events.”
the significant costs involved in connection with entering into the Merger Agreement and completing the Merger and the substantial time and effort of the Company’s management required to complete the Merger, which may disrupt the Company’s business operations.
the fact that the Company’s business, operations, financial results and liquidity position could suffer in the event that the Merger is not consummated.
the risk that the Merger might not be completed and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of the Company’s common stock on the NYSE.
the risk of litigation arising in respect of the Merger Agreement, the Merger, or the other transactions contemplated by the Merger Agreement.
the fact that the completion of the Merger will require antitrust and other regulatory approvals in the United States and certain other countries, including the requirement of Parent and the Company to use their reasonable best efforts to defend through litigation on the merits any claim asserted in any court with respect to the transactions contemplated by the Merger Agreement by the FTC, the DOJ or any other applicable governmental authority.
the risk that the Migration may not be completed within the required timeframe such that the Closing can take place prior to the End Date.
the fact that if the Merger is not consummated and the Migration has been completed, the Company will have to take certain steps in order to modify its legal and tax structure in order to avoid possible negative tax consequences.
the risk that the Company may not obtain the Migration Contract Consents such that the Closing can take place prior to the End Date.
the fact that there can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.
In addition, the Board was aware of and considered the interests that certain of our directors and executive officers may have in the Merger that differ from, or are in addition to, those of our other stockholders. For more information, please see “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.”
The foregoing discussion is not meant to be an exhaustive list, but summarizes many, if not all, of the material factors considered by the Board in its consideration of the Merger. After considering these and other factors, the Board concluded that the potential benefits of the Merger outweighed the uncertainties and the risks. In view of the variety of factors considered by the Board and the complexity of these factors, the Board did not find it practicable
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to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the Board applied such member’s own personal business judgment to the process and may have assigned different weights to different factors. The Board unanimously adopted the Merger Agreement and approved the other transactions contemplated by thereby, including the Merger, and unanimously recommends that common stockholders approve the Merger Proposal based upon the totality of the information presented to, and considered by, the Board.
Opinion of Centerview Partners LLC
On June 17, 2021, Centerview rendered to the Board its oral opinion, subsequently confirmed in a written opinion dated such date, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Common Merger Consideration of $56.00 per share to be paid to the holders of shares of common stock pursuant to the Merger Agreement was fair, from a financial point of view, to holders of shares of common stock (other than Excluded Common Shares).
The full text of Centerview’s written opinion, dated June 17, 2021, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated herein by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety to the full text of Centerview’s written opinion attached as Annex B. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, to the holders of shares of common stock (other than Excluded Common Shares) of the Common Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Centerview’s opinion did not address the consideration proposed to be paid to the holders of shares of Preferred Stock pursuant to the Merger Agreement, the fairness of the Common Merger Consideration relative to the consideration proposed to be paid to the holders of shares of Preferred Stock pursuant to the Merger Agreement, the allocation of the aggregate Merger Consideration among the holders of shares of common stock and holders of shares of Preferred Stock or any other term or aspect of the Merger Agreement or the Transaction and does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.
The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.
In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:
a draft of the Merger Agreement dated June 16, 2021, referred to in this summary of Centerview’s opinion as the “Draft Agreement”;
Annual Reports on Form 10-K of the Company for the years ended December 31, 2020, December 31, 2019 and December 31, 2018;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain publicly available research analyst reports for the Company;
certain other communications from the Company to its stockholders; and
certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including certain financial forecasts, analyses and projections relating to the Company prepared by management of the Company and furnished to Centerview by the Company for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Company Forecasts,” and which are collectively referred to in this summary of Centerview’s opinion as the “Company Internal Data.”
Centerview also participated in discussions with members of the senior management and representatives of the Company regarding their assessment of the Company Internal Data. In addition, Centerview reviewed publicly
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available financial and stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of certain other transactions that Centerview deemed relevant, and conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.
Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with the Company’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at the Company’s direction, that the Company Internal Data (including, without limitation, the Company Forecasts) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby and Centerview relied, at the Company’s direction, on the Company Internal Data for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the Company Internal Data or the assumptions on which it was based. In addition, at the Company’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of the Company, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. Centerview assumed, at the Company’s direction, that the final executed Merger Agreement would not differ in any respect material to Centerview’s analysis or opinion from the Draft Agreement reviewed by Centerview. Centerview also assumed, at the Company’s direction, that the Transaction will be consummated on the terms set forth in the Merger Agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or Centerview’s opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerview’s analysis or Centerview’s opinion. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.
Centerview’s opinion expressed no view as to, and did not address, the Company’s underlying business decision to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to the Company or in which the Company might engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date of Centerview’s written opinion, to the holders of shares of common stock (other than Excluded Common Shares) of the Common Merger Consideration to be paid to such holders pursuant to the Merger Agreement. For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the Transaction, including, without limitation, the structure or form of the Transaction, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, including holders of shares of Preferred Stock, creditors or other constituencies of the Company or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the Transaction, whether relative to the Common Merger Consideration to be paid to the holders of shares of common stock pursuant to the Merger Agreement or otherwise. Further, Centerview expressed no opinion as to the consideration proposed to be paid to the holders of shares of Preferred Stock pursuant to the Merger Agreement, the fairness of the Common Merger Consideration relative to the consideration proposed to be paid to the holders of shares of Preferred Stock pursuant to the Merger Agreement, or the allocation of the aggregate Merger Consideration among the holders of shares of common stock and holders of shares of Preferred Stock. Centerview’s opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as
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of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’ written opinion. Centerview’s opinion does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.
Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction. The issuance of Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.
Summary of Centerview Financial Analysis
The following is a summary of the material financial analyses prepared and reviewed with the Board in connection with Centerview’s opinion, dated June 17, 2021. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s view of the actual value of the Company. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Centerview. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the Transaction. None of the Company, Parent, Merger Sub or Centerview or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before June 15, 2021 and is not necessarily indicative of current market conditions.
Selected Public Company Analysis
Centerview reviewed and compared certain financial information, ratios and multiples for the Company to corresponding financial information, ratios and multiples for publicly traded companies that Centerview deemed comparable, based on its experience and professional judgment, to the Company, which selected publicly traded companies we refer to in this summary of Centerview’s opinion as the “selected companies”. The selected companies consisted of:
Textainer Group Holdings Limited
Triton International Limited
Although neither of the selected companies is directly comparable to the Company, these companies were selected, among other reasons, because they are publicly traded companies with certain operational and financial characteristics, which, for purposes of its analyses, Centerview considered to be similar to those of the Company. However, because neither of the selected companies is exactly the same as the Company, Centerview believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected public company analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.
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Using publicly available information obtained from SEC filings and other data sources and closing stock prices as of June 15, 2021, Centerview calculated for each company, the ratio of price of a share of such company’s common stock to the company’s book value per share (a ratio referred to as “P/BV”). To arrive at each company’s book value per share, Centerview divided the company’s total stockholders’ equity minus preferred equity, plus net deferred tax liabilities by its fully diluted common shares outstanding. This analysis resulted in a median P/BV multiple, including deferred tax liabilities, of 1.34x.
Based on its experience and professional judgment, for purposes of its analysis, Centerview selected a P/BV reference range of 1.25x to 1.45x. In selecting this reference range, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics of the Company and the selected companies that could affect their public trading values in order to provide a context in which to consider the results of the quantitative analysis. Centerview applied the P/BV reference range to the Company’s first quarter 2021 book value, including deferred tax liabilities. Centerview calculated an implied per share equity value range for each share of common stock of $46.02 to $53.35. Centerview then compared these ranges to the implied value of the Common Merger Consideration of $56.00 per share of common stock.
Discounted Cash Flow Analysis
Centerview performed a discounted cash flow analysis of the Company based on the Company Forecasts, which included both a “base case” and an “upside case.” A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
In performing this analysis, Centerview calculated a range of illustrative equity values for the Company by applying a discount rate range of 10.0% to 12.5% (reflecting Centerview’s analysis of the Company’s cost of equity) and the mid-year convention to (a) the forecasted after-tax levered free cash flows of the Company for the last three fiscal quarters of 2021 and for fiscal years 2022 through 2025 set forth in Company management’s base case and upside case forecasts at the direction of the Company and assumptions discussed with the Company management and (b) a range of illustrative terminal values for the Company, calculated by Centerview applying terminal price to next twelve month earnings multiples ranging from 6.0x to 8.0x terminal year net income. Centerview then divided these implied equity values by the number of fully-diluted outstanding shares of common stock as of March 31, 2021, as set forth in the Company Internal Data to derive a range of implied per share equity value for each share of common stock as of March 31, 2021, of $37.55 to $50.15, based on the base case Company Forecasts, and $40.44 to $54.21, based on the upside case Company Forecasts. Centerview then compared these ranges to the implied value of the Common Merger Consideration of $56.00 per share of common stock.
Other Factors
Centerview noted for the Board certain additional factors solely for informational purposes, including, among other things, the following:
Selected Public Company Analysis. Using the same P/BV reference range for the Company as described above, Centerview noted the Company’s first quarter 2021 book value, excluding deferred tax liabilities, implied a per share equity value range for each share of common stock of $44.21 to $51.25 per share of common stock.
Historical Stock Price Trading Analysis. Centerview reviewed the historical closing trading prices of the shares of common stock for the 52-week period prior to June 15, 2021, which reflected low and high closing trading prices during such 52-week period of $15.63 to $48.73 per share of common stock.
General
The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.
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Centerview’s financial analyses and opinion were only one of many factors taken into consideration by the Board in its evaluation of the Transaction. Consequently, the analyses described above should not be viewed as determinative of the views of the Board or management of the Company with respect to the Common Merger Consideration or as to whether the Board would have been willing to determine that a different consideration was fair. The consideration for the Transaction was determined through arm’s-length negotiations between the Company and Parent and was approved by the Board. Centerview provided advice to the Company during these negotiations. Centerview did not, however recommend any specific amount of consideration to the Company or the Board or that any specific amount of consideration constituted the only appropriate consideration for the Transaction.
Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion Centerview had been engaged to provide financial advisory services to the Company, including in connection with various strategic matters, and Centerview received approximately $1,000,000 in compensation from the Company for such services. In the two years prior to the date of its written opinion, Centerview had not been engaged to provide financial advisory or other services to Parent or Merger Sub, and Centerview did not receive any compensation from Parent during such period. Centerview may provide financial advisory and other services to or with respect to the Company or Parent or their respective affiliates in the future, for which Centerview may receive compensation. Certain (i) of Centerview and Centerview affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, the Company, Parent or any of their respective affiliates or any other relevant parties that may be involved in the Transaction.
The Board selected Centerview as its financial advisor in connection with the Transaction based on Centerview’s reputation, knowledge of the Company and its industry, relationships with other potential strategic or financial buyers and experience. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Transaction.
In connection with Centerview’s services as the financial advisor to the Board, the Company has agreed to pay Centerview an aggregate fee that is estimated to be approximately $21,000,000, $1,000,000 of which was payable upon the rendering of Centerview’s opinion and the remainder of which is payable contingent upon consummation of the Transaction. In addition, the Company has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.
Management Projections
The Company does not, as a matter of course, publicly disclose forecasts or internal projections as to its future performance, revenues, earnings or other results due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, in connection with the Board’s consideration of the Merger, the Company’s management prepared and developed unaudited financial projections regarding the Company’s future performance for the fiscal years 2021 to 2025. On June 7, 2021, management discussed with the Board a set of unaudited financial projections, with “base case” and “upside case” models (the “management projections”). On June 10, 2021, the Board approved the use of the management projections by Centerview in connection with its financial analysis, as described under “—Opinion of Centerview Partners LLC.” A summary of the management projections has been included below.
The management projections were made available to the Board and Centerview, but were not made available to, or discussed with, potential purchasers, including Parent, in connection with the process resulting in the execution of the Merger Agreement. The summary of the management projections set forth below is included herein only because the management projections were used at the Board’s direction by Centerview in connection with its financial analysis relating to the Common Merger Consideration, but the management projections were not distributed to potential purchasers. However, the inclusion of such information should not be regarded as an indication that any party considered, or now considers, the management projections to be a reliable prediction of future results. The management projections are subjective in many respects and are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Although presented with numerical specificity, the management projections are based upon, and reflect, numerous judgments, estimates and assumptions made by the Company’s management with respect to, among other things, industry performance,
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general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Company’s business, all of which are difficult to predict and many of which are beyond the Company’s control. As such, the management projections constitute forward-looking statements and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, including the factors described under “Cautionary Note Regarding Forward-Looking Statements.” As a result, we cannot assure you that the estimates and assumptions made in preparing the management projections will prove accurate, that the projected results will be realized or that actual results will not be significantly higher or lower than projected results. In addition, the management projections cover multiple years through fiscal year 2025 and such information by its nature becomes less reliable with each successive year. Accordingly, this summary of the management projections is not being included in this proxy statement to influence your decision whether to vote in favor of any proposal.
Some or all of the assumptions that have been made regarding, among other things, the occurrence or the timing of certain events or impacts may have changed since the date the management projections were prepared, and the summary of the management projections set forth below does not take into account any circumstances or events occurring after the date the management projections were prepared, including the announcement of the Merger and transaction-related expenses. The management projections do not take into account the effect of any failure of the Merger to occur and should not be viewed as accurate in that context.
The management projections were not prepared with a view to public disclosure. The management projections are included in this proxy statement only because they were made available to Centerview for use in connection with its financial analysis, as described under “—Opinion of Centerview Partners LLC,” but they were not distributed to potential purchasers, including Parent, in connection with the process resulting in the execution of the Merger Agreement. The management projections do not, and were not intended to, act as public guidance regarding our financial performance. Accordingly, the inclusion of the management projections in this proxy statement should not be regarded as an indication that Parent, the Board, the Company’s management, Centerview or any of their respective affiliates or representatives or any other recipient of this information considered, or now considers, the management projections to be predictive of future results. No one has made or makes any representation to any stockholder regarding the information included in the management projections set forth below. We have made no representation to Parent or Merger Sub in the Merger Agreement concerning these financial forecasts.
Furthermore, the management projections were not prepared with a view to compliance with (1) generally accepted accounting principles (“GAAP”) in the United States; (2) the published guidelines of the SEC regarding projections and forward-looking statements; or (3) the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. KPMG LLP, our independent registered public accounting firm, has not examined, reviewed, compiled or otherwise applied procedures to the management projections and, accordingly, assumes no responsibility for, and expresses no opinion on, them. The management projections included in this proxy statement have been prepared by, and are the responsibility of, the Company’s management.
EBIT, EBIT Margin Percentage and EBITDA (each as defined below) contained in the management projections set forth below are non-GAAP financial measures, which are financial performance measures that are not calculated in accordance with GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures and may be different from similarly titled non-GAAP financial measures used by other companies, which limits their usefulness as a comparative measure. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. The items excluded from net income to arrive at these non-GAAP financial measures are significant components for understanding and assessing the Company’s financial performance and liquidity. Accordingly, these non-GAAP financial measures should be considered together with, and not as alternatives to, financial measures prepared in accordance with GAAP.
Financial measures provided to a financial advisor are excluded from the definition of non-GAAP financial measures under SEC rules and, therefore, are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not relied upon by Centerview for purposes of its financial analysis as described above in “—Opinion of Centerview Partners LLC” or the Board in connection with its consideration of the Merger. Accordingly, we have not provided reconciliations of the non-GAAP financial measures included in the management projections to the most directly comparable GAAP financial measures.
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Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility, to update or otherwise revise the management projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the management projections are shown to be in error or no longer appropriate. In light of the foregoing factors and the uncertainties inherent in the management projections, stockholders are cautioned not to place undue reliance on the projections included in this proxy statement.
The summaries of the financial forecasts performed by management include information presented in tabular format. In order to fully understand management’s analyses and projections, the tables must be read together with the assumptions underlying such forecasts. The tables alone do not constitute a complete description of management’s analyses and projections. Considering the data described below without considering the full narrative description of management’s analyses and projections, including the assumptions underlying the analyses and projections, could create a misleading or incomplete view of management’s analyses and projections.
In preparing the management projections, our management made the following material assumptions for each of the base case and the upside case, except as noted below:
cost per standard cargo unit (new container pricing) of $2,989 in fiscal year 2021, $2,275 in fiscal year 2022 and $2,100 in each of fiscal years 2023, 2024 and 2025;
average utilization per fiscal year of 99.6% in fiscal year 2021, 98.8% in fiscal year 2022 and 98.0% in each of fiscal years 2023, 2024 and 2025;
base fleet per diem rate per standard cargo unit as of the end of each fiscal year of $0.552 in fiscal year 2021, $0.544 in fiscal year 2022, $0.535 in fiscal year 2023, $0.527 in fiscal year 2024 and $0.520 in fiscal year 2025;
cash on cash return for new investment of 10.5% in each of fiscal years 2021 through 2025;
new finance lease unlevered internal rate of return of 7.5% in each of fiscal years 2021 through 2025;
total container investment per year of:
with respect to the base case, $1,100 million in fiscal year 2021 and $600.0 million in each of fiscal years 2022, 2023, 2024 and 2025; and
with respect to the upside case, $1,300 million in fiscal year 2021 and $700.0 million in each of fiscal years 2022, 2023, 2024 and 2025;
gain on sale of containers of $16.3 million in fiscal year 2021, $9.0 million in fiscal year 2022, $9.5 million in fiscal year 2023, $10.0 million in fiscal year 2024 and $10.5 million in fiscal year 2025;
handling cost as a percentage of total operating lease revenue of 1.0% in each of fiscal years 2021 through 2025;
repair costs as a percentage of total operating lease revenue of 2.0% in each of fiscal years 2021 through 2025;
other expenses as a percentage of total operating lease revenue of 1.5% in each of fiscal years 2021 through 2025; and
depreciation expense per standard cargo unit on new investment of $13.88 in fiscal year 2021, $9.30 in fiscal year 2022 and $8.18 in each of fiscal years 2023, 2024 and 2025.
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Summary of Projections
Base Case
($ in millions)
Fiscal Year Ending December 31,
 
2021E
2022E
2023E
2024E
2025E
Net Income to Common Stockholders
$129
$124
$128
$144
$155
Capital Expenditures
$(1,124)
$(645)
$(599)
$(600)
$(600)
After-Tax Levered Free Cash Flow(1)
$3
$53
$71
$87
$105
Upside Case
($ in millions)
Fiscal Year Ending December 31,
 
2021E
2022E
2023E
2024E
2025E
Net Income to Common Stockholders
$132
$132
$138
$156
$169
Capital Expenditures
$(1,324)
$(741)
$(699)
$(700)
$(700)
After-Tax Levered Free Cash Flow(1)
$3
$54
$73
$91
$109
(1)
After-tax levered free cash flow is a non-GAAP financial measure and was calculated by Centerview as net income to common stockholders, plus depreciation and amortization, capital expenditures, container sales proceeds, net, principal payments, change in debt, deferred taxes, bad debt expense, amortization of debt issuance costs and change in net working capital.
Financing of the Merger
Consummation of the Merger is not subject to Parent’s ability to obtain financing.
The Company and Parent estimate that the total amount of funds required to complete the Merger and the transactions contemplated thereby and pay related fees and expenses will be approximately $1.1 billion, with the exact amount dependent upon the willingness of various of the Company’s existing financing sources to consent to the transactions contemplated by the Merger Agreement..
We believe that Parent will have sufficient cash on the Closing Date to complete the Merger, but we cannot assure you of that. Its amount of cash might be insufficient if, among other things, Parent’s cash position at the Closing Date is materially different than at the date of the Merger Agreement.
Interests of the Company’s Directors and Executive Officers in the Merger
When considering the unanimous recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. In (i) evaluating and negotiating the Merger Agreement; (ii) approving and declaring the advisability of the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Merger Agreement; and (iii) recommending that the stockholders of the Company entitled to vote adopt the Merger Agreement and directing that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to the stockholders of the Company entitled to vote for adoption, the Board was aware of and considered these interests to the extent that they existed at the time, among other matters.
Treatment of Options, RSUs, PRSUs and RSAs
The Board has taken such actions as are necessary to cause (i) the performance conditions of each PRSU to be deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU) and (ii) each Option, PRSU, RSU and RSA to become fully vested and free of any applicable forfeiture restrictions, in each of clauses (i) and (ii), effective as of immediately prior to the Effective Time.
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Options
As a result of the Merger:
each Option that has a per share exercise price that is less than the Common Merger Consideration, will be cancelled at the Effective Time in exchange for an amount in cash, without interest, equal to the product of (x) the aggregate number of shares of common stock subject to such Option multiplied by (y) the excess of $56.00 over the applicable per share exercise price of the Option, subject to any applicable withholding taxes; and
each Option that has a per share exercise price that is equal to or greater than $56.00 will, to the extent not exercised as of immediately prior to the Effective Time, be automatically cancelled at the Effective Time with no payment made therefor and will cease to represent a right to purchase shares of common stock.
RSUs and PRSUs
As a result of the Merger, each RSU and each PRSU will be cancelled and automatically converted at the Effective Time into the right to receive $56.00, in cash, without interest, for each share of common stock subject to the RSU or PRSU, subject to any applicable withholding taxes.
RSAs
As a result of the Merger, each RSA will become fully vested and free of any applicable forfeiture restrictions, effective as of immediately prior to the Effective Time and each such share of common stock will cease to be outstanding and will be converted into the right to receive $56.00, in cash, without interest, subject to any applicable withholding taxes.
These interests are described in more detail below, and certain of them, including the compensation that may become payable in connection with the Merger to Messrs. Page and Hallahan and Ms. Cutino, who are our named executive officers, are subject to a non-binding, advisory vote of our common stockholders and are quantified in the narrative and tables below. For more information, please see “Proposal 3: Advisory Vote on Merger-Related Named Executive Officer Compensation.” The dates used below to quantify these interests have been selected for illustrative purposes only and do not necessarily reflect the dates on which certain events will occur.
The Board voted in favor of approving the Merger Agreement and the Merger.
Equity Award Holdings
The following table sets forth the number of shares of common stock subject to unvested Options, RSUs, PRSUs and RSAs held by our directors and executive officers as of the Record Date under an Equity Incentive Plan and the estimated value of these shares in the Merger, assuming continued service by the applicable director or executive officer until consummation of the Merger and without giving effect to any lapse of forfeiture restrictions or vesting acceleration as may apply in connection with the completion of the Merger. Upon completion of the Merger, these awards will be treated as set forth in “—Treatment of Options, RSUs, PRSUs and RSAs,” above. The vested shares of common stock held by our directors and executive officers will be treated in the same manner as outstanding shares of common stock held by other stockholders entitled to receive the Common Merger Consideration. For additional information regarding the Options, RSUs and PRSUs held by our named executive officers, see “—Named Executive Officer Golden Parachute Compensation.”
In calculating the amounts set forth in the table below, the following assumptions were used:
the Effective Time is July 6, 2021, the latest practicable date prior to the date of this proxy statement;
the relevant price per share of our common stock is $56.00, which is equal to the Common Merger Consideration;
performance conditions of each PRSU being deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU); and
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the number of outstanding unvested Options, RSUs, PRSUs and RSAs held by each named individual is as of July 6, 2021, noting that no Options, RSUs, PRSUs or RSAs have been granted to directors or executive officers between June 17, 2021 and July 6, 2021. The actual number of Options, RSUs, PRSUs and RSAs that will be cancelled and extinguished in exchange for the right to receive the Option Merger Consideration, RSU and PRSU Merger Consideration or RSA Merger Consideration, as applicable, will depend on the number of Options, RSUs, PRSUs and RSAs that are outstanding and unvested, in each case, that are held by such individuals at the actual Effective Time. The following table does not capture vesting that would occur between July 6, 2021 and the Closing or attempt to forecast any grants, dividends, deferrals or forfeitures following the date of this proxy statement.
Name
Number of
Unvested
Options
(#)
Aggregate
Value of
Unvested
Options
($)
Number of
Unvested
RSUs
(#)
Aggregate
Value of
Unvested
RSUs
($)(1)
Number of
Unvested
PRSUs
(#)
Aggregate
Value of
Unvested
PRSUs
($)(1)
Number of
Unvested
RSAs
(#)
Aggregate
Value of
Unvested
RSAs
($)(2)
Executive Officers
 
 
 
 
 
 
 
 
Timothy B. Page
14,873
832,888
17,441
976,696
Daniel J. Hallahan
9,708
543,648
11,622
650,832
Camille G. Cutino
5,256
294,336
6,218
348,208
Non-Employee Directors
 
 
 
 
 
 
 
 
Kathryn G. Jackson
3,699
207,144
Andrew S. Ogawa
3,699
207,144
David G. Remington
5,302
296,912
Gary M. Sawka
3,699
207,144
John H. Williford
3,699
207,144
 
29,837
1,670,872
35,281
1,975,736
20,098
1,125,488
(1)
Represents the sum of the number of shares of common stock subject to unvested RSUs or PRSUs, as applicable, multiplied by $56.00.
(2)
Represents the sum of the number of shares of common stock subject to unvested RSAs, multiplied by $56.00.
Employment Agreements and Service Agreement
The consummation of the transactions contemplated by the Merger Agreement is expected to constitute a “change in control” for purposes of each of the employment or service agreements discussed below.
Mr. Page
We initially entered into an employment agreement with Mr. Page effective mid-May 2011 in connection with his appointment as our Chief Financial Officer, which was later amended in August 2016. In June 2020, we entered into a new employment agreement (the “Page Employment Agreement”) with Mr. Page in connection with his promotion to Interim President and Chief Executive Officer.
In the event Mr. Page’s employment is terminated for “Cause” (as defined in the Page Employment Agreement) or due to Company insolvency, Mr. Page is entitled only to any accrued compensation and benefits through the effective date of his termination. In addition, in the event Mr. Page’s employment is terminated without Cause, for death or disability, or by Mr. Page for “Good Reason” (as defined in the Page Employment Agreement), and subject to Mr. Page’s execution and non-revocation of a general release of claims against the Company and continued compliance with certain restrictive covenants, Mr. Page is entitled to receive a lump sum payment equal to 100% of his then-current base salary, or, if such termination occurs within 24 months of a “Change in Control” (as defined in the Page Employment Agreement), 200% of his then-current base salary, plus, in either case, a cash bonus equal to the average of the annual cash bonus amounts paid over the preceding two years. Mr. Page is also entitled to COBRA health benefits for whichever of the following periods is the shortest: (A) the longer of (i) the remaining term of the Page Employment Agreement or (ii) 18 months following the date of Mr. Page’s termination of employment; or (B) until such time that Mr. Page is no longer entitled to COBRA continuation coverage under the Company’s group health plans.
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Mr. Hallahan
In August 2013, we entered into a service agreement with Mr. Hallahan, which was amended in March 2017 (the “Hallahan Service Agreement”).
In the event Mr. Hallahan’s employment is terminated within 24 months following the occurrence of a “Change of Control” (as defined in the Hallahan Service Agreement”), Mr. Hallahan is entitled, subject to his continued compliance with certain restrictive covenants, to receive a lump sum payment equal to one year of his base salary, plus a cash bonus equal to the average of the annual cash bonus amounts paid over the preceding two years.
Ms. Cutino
In October 2019, we entered into an employment agreement with Ms. Cutino with a term extending to October 2022 (the “Cutino Employment Agreement”).
In the event Ms. Cutino’s employment is terminated for “Cause” (as defined in the Cutino Employment Agreement) or due to Company insolvency, Ms. Cutino is entitled only to any accrued compensation and benefits through the effective date of her termination. In addition, in the event Ms. Cutino’s employment is terminated without Cause, for death or disability, or by Ms. Cutino for “Good Reason” (as defined in the Cutino Employment Agreement), and subject to Ms. Cutino’s execution and non-revocation of a general release of claims against the Company and continued compliance with certain restrictive covenants, Ms. Cutino is entitled to receive a lump sum payment equal to 100% of her then-current base salary, or, if such termination occurs within 24 months of a “Change in Control” (as defined in the Cutino Employment Agreement), 200% of her then-current base salary, plus, in either case, a cash bonus equal to the average of the annual cash bonus amounts paid over the preceding two years. Ms. Cutino is also entitled to COBRA health benefits for whichever of the following periods is the shortest: (A) the longer of (i) the remaining term of the Cutino Employment Agreement or (ii) 18 months following the date of termination; or (B) until Ms. Cutino is no longer entitled to COBRA continuation coverage under the Company’s group health plans.
Employment Arrangements with Parent
In connection with the transactions contemplated by the Merger Agreement, certain of our officers, including our named executive officers, entered into the Term Sheets, which provide for amendments to their current respective employment arrangements, contingent upon and effective on the Closing. In addition, prior to December 31, 2023, Parent, in consultation with the surviving corporation, will establish a long-term incentive compensation plan (the “LTI Plan”), with initial grants to be made in 2023 or beginning in 2024 at the latest. Except as noted below, the terms and conditions of each named executive officer’s current employment arrangement will remain unchanged. The following is a summary of the Term Sheets entered into by our named executive officers.
Mr. Page
The employment period pursuant to the Term Sheet will end on December 31, 2023. Mr. Page’s base salary will be $650,000, which is an approximately 18% increase over his current base salary. Mr. Page’s base salary is subject to annual review by the board of directors of the surviving corporation, with any increase subject to approval by Parent. Mr. Page will also be eligible for an annual cash performance-based bonus. The target amount for such annual cash performance-based bonus in 2021 will be set at 100% of Mr. Page’s base salary. The annual bonus program for any subsequent calendar year will be subject to review and approval by the board of directors of the surviving corporation, subject to approval by Parent.
In addition, the Term Sheet provides for a cash retention award equal to 2.25x Mr. Page’s new base salary, or $1,462,500 (the “Page Retention Award”), which will vest as follows:
50% of the Page Retention Award will vest in two equal tranches, or $365,625 on December 31, 2022, and $365,625 on December 31, 2023; and
50% of the Page Retention Award, or $731,250, will vest upon the completion of the audit of a two-year performance period ending December 31, 2023,
in each case, subject to Mr. Page’s continued service with the surviving corporation.
Finally, Mr. Page will enter into a non-compete agreement, whereby, on the termination of his employment, Mr. Page will agree to not compete in the container leasing business for a period of two years immediately thereafter.
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Mr. Hallahan
The employment period pursuant to the Term Sheet will end on December 31, 2023. Mr. Hallahan’s base salary will be $424,811, which is an approximately 0.01% increase over his current base salary (as converted from pound sterling to U.S. dollars using an exchange rate of 1.3806 as of July 6, 2021). Mr. Hallahan’s base salary is subject to annual review by the board of directors of the surviving corporation, with any increase subject to approval by Parent. Mr. Hallahan will also be eligible for an annual cash performance-based bonus. The target amount for such annual cash performance-based bonus in 2021 will be set at 60% of Mr. Hallahan’s base salary. The annual bonus program for any subsequent calendar year will be subject to review and approval by the board of directors of the surviving corporation, subject to approval by Parent.
In addition, the Term Sheet provides for a cash retention award equal to 1.5x Mr. Hallahan’s new base salary, or $637,216 (the “Hallahan Retention Award”), which will vest as follows:
50% of the Hallahan Retention Award will vest in two equal tranches, or $159,305 on December 31, 2022, and $159,305 on December 31, 2023; and
50% of the Hallahan Retention Award, or $318,608, will vest upon the completion of the audit of a two-year performance period ending December 31, 2023,
in each case, subject to Mr. Hallahan’s continued service with the surviving corporation and as converted from pound sterling to U.S. dollars using an exchange rate of 1.3806 as of July 6, 2021.
Finally, Mr. Hallahan will continue to receive a car allowance, as per the Hallahan Service Agreement.
Ms. Cutino
The employment period pursuant to the Term Sheet will end on December 31, 2023. Ms. Cutino’s base salary will remain at $309,000. Ms. Cutino’s base salary is subject to annual review by the board of directors of the surviving corporation, with any increase subject to approval by Parent. Ms. Cutino will also be eligible for an annual cash performance-based bonus. The target amount for such annual cash performance-based bonus in 2021 will be set at 40% of Ms. Cutino’s base salary. The annual bonus program for any subsequent calendar year will be subject to review and approval by the board of directors of the surviving corporation, subject to approval by Parent.
In addition, the Term Sheet provides for a cash bonus retention award equal to 1.25x Ms. Cutino’s base salary, or $386,250 (the “Cutino Retention Award”), which will vest as follows:
50% of the Cutino Retention Award will vest in two equal tranches, or $96,562 on December 31, 2022, and $96,563 on December 31, 2023; and
50% of the Cutino Retention Award, or $193,125, will vest upon the completion of the audit of a two-year performance period ending December 31, 2023,
in each case, subject to Ms. Cutino’s continued service with the surviving corporation.
Named Executive Officer Golden Parachute Compensation
In accordance with Item 402(t) of Regulation S-K, the table below sets forth the estimated amounts of compensation that each of our named executive officers (as determined in accordance with SEC regulations) may receive in connection with the Merger. In calculating the amounts set forth in the table below, the following assumptions were used:
the Effective Time is July 6, 2021, the latest practicable date prior to the date of this proxy statement;
the relevant price per share of our common stock is $56.00, which is equal to the Common Merger Consideration;
performance conditions of each PRSU being deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU);
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each such named executive officer’s employment is (i) with respect to Mr. Page and Ms. Cutino, terminated without “Cause” or for “Good Reason;” or (ii) with respect to Mr. Hallahan, terminated for any reason other than in connection with various circumstances that generally constitute a “bad leaver” termination (clause (i) and (ii) together, a “Qualifying Termination”) on July 6, 2021, in each case, immediately following the Effective Time;
that each named executive officer’s base salary rate and annual target bonus remain unchanged from those in effect as of the date of this proxy statement; and
equity awards that are outstanding as of July 6, 2021, remain outstanding through the consummation of the Merger.
The compensation summarized in the table and footnotes below is subject to a non-binding, advisory vote of our stockholders, as described in “Proposal 3: Advisory Vote on Merger-Related Named Executive Officer Compensation.” The amounts in the following table are estimates based on multiple assumptions that may not actually occur, including assumptions described in this proxy statement, and do not include amounts that the named executive officers were entitled to receive or equity awards that were vested as of July 6, 2021. In addition, these amounts do not attempt to forecast any additional awards, grants or forfeitures that may occur prior to the Effective Time or any awards that, by their terms, vest irrespective of the Merger prior to July 6, 2021. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below.
For purposes of this discussion, “single trigger” refers to benefits that arise as a result of the completion of the Merger and “double trigger” refers to benefits that require two conditions, which are the completion of the Merger and a Qualifying Termination within 24 months following the Merger.
The disclosures in the table below and the accompanying footnotes should be read in conjunction with the narrative description of the compensation arrangements set forth above.
Name
Cash
($)(1)
Equity
($)(2)
Perquisites /
Benefits
($)(3)
Total
($)
Timothy B. Page
1,281,116
1,809,584
61,585
3,152,285
Daniel J. Hallahan(4)
596,069
1,194,480
1,790,549
Camille G. Cutino
689,719
642,544
36,279
1,368,542
(1)
The amounts in this column represent aggregate cash severance payments that Messrs. Page and Hallahan and Ms. Cutino would be entitled to receive pursuant to their respective employment or service agreements upon a “double-trigger” Qualifying Termination in connection with or within 24 months following a “Change in Control” or “Change of Control,” in each case, as applicable, which consist of the following:
Name
Cash
Severance
Payments
($)
Annual
Bonus
Payment
($)
Total
($)
Timothy B. Page
1,100,000
181,116
1,281,116
Daniel J. Hallahan
424,757
171,312
596,069
Camille G. Cutino
618,000
71,719
689,719
All severance benefits are conditioned on: (i) with respect to Mr. Page and Ms. Cutino, the named executive officer signing and allowing to become effective the Company’s standard form of release of all claims on or before the 60th day following the termination date and complying with such named executive officer’s continuing obligations to the Company, or (ii) with respect to Mr. Hallahan, (a) complying with (and continuing to comply with) his obligations relating to confidentiality, intellectual property, restrictive covenants, property and resignation as set out in the Hallahan Employment Agreement; (b) the application of certain terms and conditions set forth in the Hallahan Employment Agreement; and (c) Mr. Hallahan executing such documents in a form reasonably acceptable to the Company or his New Employer (as defined in the Hallahan Employment Agreement), as applicable, as it may require to effect the termination of his employment and his resignation from any appointments in full and final settlement of all and any claims or rights of action that he has or may have against the Company and/or his New Employer whether arising out of his employment or its termination. See “—Employment Agreements and Service Agreement.”
(2)
The amounts in this column represent the aggregate applicable Merger Consideration that each named executive officer would receive with respect to Options, RSUs and PRSUs for which vesting is accelerated in connection with the Merger, calculated by (i) with respect to in-the-money Options, multiplying the number of each such Option by the Common Merger Consideration less the applicable per share exercise price of such Option and (ii) with respect to RSUs and PRSUs, multiplying the number of such RSUs or PRSUs by the Common
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Merger Consideration, as applicable. All awards under our Equity Incentive Plans (except as otherwise set forth in an employment or service agreement or applicable award agreement), including shares subject to Options and RSUs that have not vested will become fully vested and exercisable upon completion of the Merger, and therefore constitute “single trigger” arrangements. Furthermore, the Board has taken such actions as are necessary to cause (i) the performance conditions of each PRSU to be deemed satisfied at 100% of the relevant target level of achievement (notwithstanding any contrary provision in any agreement or document governing or evidencing the relevant PRSU) and (ii) each Option, PRSU and RSU to become fully vested and free of any applicable forfeiture restrictions, in each of clauses (i) and (ii), effective as of immediately prior to the Effective Time. See “—Treatment of Options, RSUs and PRSUs.” The following table quantifies the value of the payments and the number of shares to which such payments relate:
Name
Number of
Options
(#)
Aggregate
Value of
Options
($)(a)
Number of
RSUs
(#)
Aggregate
Value of
RSUs
($)(b)
Number of
PRSUs
(#)
Aggregate
Value of
PRSUs
($)(b)
Executive Officers