Item 1.01. Entry
into a Material Definitive Agreement.
On
September 22, 2017,
Versar, Inc., a Delaware corporation (the “
Company
”), entered into
an Agreement and Plan of Merger (the “
Merger Agreement
”) with
Kingswood Genesis Fund I, LLC, a Delaware limited liability company
(“
Parent
”), and KW Genesis
Merger Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent (“
Merger Sub
”). Parent and
Merger Sub are affiliates of Kingswood Capital Management, LLC.
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement.
The Offer and the Merger
Pursuant
to and subject to the terms and conditions of the Merger Agreement,
Merger Sub has agreed to commence an all-cash tender offer (the
“
Offer
”) as promptly as
reasonably practicable, and in any event not later than October 6,
2017, to acquire all of the outstanding shares of common stock, par
value $0.01 per share, of the Company (“
Company Common Stock
”) at
a purchase price of $0.15 per share (the “
Offer Price
”), without
interest thereon and subject to any applicable withholding
taxes.
The
Offer will initially expire at midnight (New York City time) on the
date that is twenty five (25) Business Days following the
commencement of the Offer. Under certain circumstances, Merger Sub
will extend the Offer on one or more occasions in accordance with
the terms set forth in the Merger Agreement and the applicable
rules and regulations of the United States Securities and Exchange
Commission (the “
SEC
”). Merger Sub will
not be required to extend the Offer beyond December 26,
2017.
The
consummation of the Offer, and the obligation of Merger Sub to
accept for payment and pay for Company Common Stock tendered
pursuant to the Offer, are subject to: (a) there being validly
tendered in the Offer and not properly withdrawn prior to the
expiration date of the Offer that number of shares of Company
Common Stock which, together with the number of shares of Company
Common Stock (if any) then owned by Parent or any of its
wholly-owned direct or indirect Subsidiaries, including Merger Sub,
represents at least a majority of the Company Common Stock then
outstanding and no less than a majority of the voting power of the
shares of capital stock of the Company then outstanding and
entitled to vote upon the adoption of the Merger Agreement and
approval of the Merger, as defined below (excluding from the number
of tendered shares of Company Common Stock, but not from the number
of outstanding shares of Company Common Stock, Company Common Stock
tendered pursuant to guaranteed delivery procedures (to the extent
such procedures are permitted by Merger Sub) that have not yet been
delivered in settlement or satisfaction of such guarantee)
(collectively, the “
Minimum Condition
”), and
(b) the satisfaction by the Company or waiver by Merger Sub (to the
extent permitted by the Merger Agreement) of certain customary
conditions and requirements, including the accuracy of the
Company’s representations and warranties, subject to certain
materiality qualifiers, the performance in all material respects of
the Company’s covenants and agreements set out in the Merger
Agreement and the absence of a Company Material Adverse Effect, as
defined in the Merger Agreement. The consummation of the Offer is
not subject to any financing condition.
Subject
to the satisfaction of (a) and (b) above, Merger Sub shall, and
Parent shall cause Merger Sub to, (i) on the expiration date of the
Offer (as such period may be extended pursuant to the Merger
Agreement), accept for payment all shares of Company Common Stock
validly tendered and not properly withdrawn pursuant to the Offer,
and (ii) no more than three (3) Business Days thereafter, pay for
all such Company Common Stock. Following consummation of the Offer,
the Merger Agreement provides for the merger of Merger Sub with and
into the Company (the “
Merger,
” and together
with the Offer and the other transactions contemplated by the
Merger Agreement, the “
Transactions
”). The
Merger will be effected pursuant to Section 251(h) of the General
Corporation Law of the State of Delaware (the “
DGCL
”), without a meeting
or vote of stockholders of the Company. Upon the filing of a
certificate of merger with the Secretary of State of the State of
Delaware with regard to the Merger (such date, the
“
Effective
Time
”), the Merger will be completed, and the Company
will become a direct, wholly owned subsidiary of
Parent.
The
Merger Agreement is the product of a strategic alternatives process
that has been overseen by the non-management members of the Board
of Directors of the Company (the “
Independent Directors
”)
with the assistance of senior management and financial and legal
advisors, which included nearly one hundred fifty (150) potential
sources of refinancing and strategic buyers for the Company being
contacted by or on behalf of the Company to request their
participation in the process.
The
Independent Directors determined that the Merger Agreement and the
Transactions are advisable, fair to and in the best interests of
the Company and its stockholders, and recommended that the Board of
Directors of the Company approve the Merger Agreement and the
Transactions on the terms and conditions set forth in the Merger
Agreement. The Board of Directors of the Company approved the
Merger Agreement and the Transactions, and, based on the
recommendation of the Independent Directors, determined to,
following the commencement of the Offer by Merger Sub, recommend
that the Company’s stockholders accept the Offer and tender
their shares of Company Common Stock to Merger Sub in the
Offer.
In the
Merger, each issued and outstanding share of Company Common Stock,
other than shares of Company Common Stock owned by Parent, Merger
Sub, or any of their respective subsidiaries, or by stockholders
who have validly exercised their appraisal rights under Section 262
of the DGCL, will be converted into the right to receive an amount
in cash equal to the Offer Price, without interest thereon and
subject to any applicable withholding taxes.
Immediately
prior to the Effective Time:
●
each unit payable
in shares of Company Common Stock or whose value is determined with
reference to the value of shares of Company Common Stock, whether
granted under a Company Plan or otherwise, that is then
outstanding, whether or not vested, will be cancelled and converted
into a vested right to receive cash in an amount equal to the Offer
Price (without interest thereon and minus any required tax
deductions or withholding);
●
each right of any
kind, contingent or accrued, to acquire or receive Company Common
Stock or benefits measured by the value of Company Common Stock,
and each Company Award (as defined in the Merger Agreement) will be
cancelled and converted into a vested right to receive (pursuant to
the applicable plan, agreement, or arrangement) an amount of cash
equal to (a) the number of shares of Company Common Stock subject
to such Company Award immediately prior to the Effective Time,
multiplied by
(b)
the Offer Price (without interest thereon and minus any required
tax deductions or withholding); and
●
the Company will
terminate the Versar, Inc. 2005 Amended and Restated Employee Stock
Purchase Plan, and each share of Company Common Stock held in a
participant’s account thereunder will be converted into an
amount of cash equal to the Offer Price (without interest thereon
and minus any required tax deductions or withholding).
As of
the Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be cancelled and
shall cease to exist, and the holders immediately prior to the
Effective Date of shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive
the Offer Price (without interest thereon and subject to any
applicable withholding taxes) upon surrender of such shares or
certificates representing such shares.
Merger Closing Conditions
In
addition to the conditions to the Offer described above, the
obligations of the parties to consummate the Merger are subject to
(a) Merger Sub having accepted for payment, or having caused to be
accepted for payment, all Company Common Stock validly tendered and
not withdrawn in the Offer (subject to certain exceptions), and (b)
the absence of any law, statute, ordinance, code, rule, regulation,
ruling, decree, judgment, injunction, or order of a governmental
authority that enjoins, restrains, prevents, or prohibits the
consummation of the Merger or makes the consummation of the Merger
illegal.
No-Shop Provisions
Pursuant
to the Merger Agreement, the Company has agreed to certain
customary “no solicitation” restrictions on its ability
to solicit, initiate, knowingly encourage or knowingly facilitate
discussions or negotiations regarding acquisition proposals from
third parties and on its ability to furnish any third party with
non-public material information in connection with an acquisition
proposal and has, subject to certain exceptions, agreed to cease
any current discussions and negotiations with third parties for the
purpose of facilitating competing acquisition proposals. These
restrictions will continue until the earlier to occur of the
termination of the Merger Agreement pursuant to its terms and the
Effective Time. The no solicitation provision is subject to a
“fiduciary out” that permits the Company, under certain
circumstances and in compliance with certain obligations, to
terminate the Merger Agreement and accept a Superior Proposal (as
defined in the Merger Agreement) upon payment to Parent of the
termination fee discussed below.
Termination; Termination Fees and Parent Expenses
Prior
to the acceptance of Company Common Stock by Purchaser in the
Offer, the Company’s Board of Directors may, among other
things, change its recommendation that the Company’s
stockholders accept the Offer and tender their Company Common Stock
in the Offer in connection with a material event or development
that was not known by the Company’s Board of Directors as of
the date of the Merger Agreement (provided such event or
development does not relate to a third-party takeover proposal) or
if known, the magnitude or material consequences of which were not
known by the Company’s Board of Directors as of the date of
the Merger Agreement, subject to complying with the procedures in
the Merger Agreement.
The
Merger Agreement also contains certain customary termination rights
for both the Company and Parent, including, among others, if the
Offer is not consummated on or before December 26, 2017 or if the
Offer is terminated or withdrawn pursuant to its terms without any
of the Company Common Stock being purchased thereunder. Upon
termination of the Merger Agreement under certain specified
circumstances, the Company has agreed to pay Parent a termination
fee of $350,000. In addition, upon termination of the Merger
Agreement under certain specified circumstances, including in the
event of a termination by the Company in order to accept a Superior
Proposal, Parent has agreed to pay to the Company a termination fee
equal to $625,000. If the Company does not file a Schedule 14D-9
within five (5) Business Days of Parent’s filing of the
documents to commence the Offer with the SEC, the Company will
reimburse Parent for its reasonable and scheduled expenses in an
amount not to exceed $250,000; however, the Company will not pay
this amount if the Company has already paid the above-referenced
termination fee.
Other Terms
The
Merger Agreement contains representations, warranties and covenants
of the parties customary for a transaction of this type, including,
without limitation, covenants regarding the conduct of the business
of the Company.
The
foregoing description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the
Merger Agreement, which is filed as Exhibit 2.1 to this Current
Report on Form 8-K and is incorporated herein by
reference.
The
representations and warranties of the Company contained in the
Merger Agreement have been made solely for the benefit of Parent
and Merger Sub. In addition, such representations and warranties
(i) have been made only for purposes of the Merger Agreement; (ii)
have been qualified by documents filed with, or furnished to, the
SEC by the Company prior to the date of the Merger Agreement (but
excluding any risk factor disclosure under the headings “Risk
Factors” or “Forward Looking Statements”); (iii)
have been qualified by confidential disclosures made to Parent and
Merger Sub in connection with the Merger Agreement; (iv) are
subject to materiality qualifications contained in the Merger
Agreement which may differ from what may be viewed as material by
investors; (v) were made only as of the date of the Merger
Agreement or such other date as is specified in the Merger
Agreement; and (vi) have been included in the Merger Agreement for
the purpose of allocating risk among the contracting parties rather
than establishing matters as facts. Accordingly, the Merger
Agreement is included with this filing only to provide investors
with information regarding the terms of the Merger Agreement, and
not to provide investors with any other factual information
regarding the Company or its business. Investors should not rely on
the representations and warranties or any descriptions thereof as
characterizations of the actual state of facts or condition of the
Company or any of its subsidiaries or affiliates. Moreover,
information concerning the subject matter of the representations
and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in
the Company’s public disclosures. The Merger Agreement should
not be read alone, but should instead be read in conjunction with
the other information regarding the Company that has been, is or
will be contained in, or incorporated by reference into, the Forms
10-K, Forms 10-Q, Forms 8-K, tender offer documents, proxy
statements, and other documents that the Company files with the SEC
from time to time.
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