Item 1.01 Entry into a Material Definitive Agreement.
On July 15, 2020, Forescout Technologies, Inc. (the "Company") entered into an
Amended and Restated Agreement and Plan of Merger (the "Amended and Restated
Merger Agreement") with Ferrari Group Holdings, L.P. ("Parent") and Ferrari
Merger Sub, Inc., a wholly owned subsidiary of Parent ("Merger Sub"). The
Amended and Restated Merger Agreement amends and restates the Agreement and Plan
of Merger (the "Original Agreement"), dated February 6, 2020, among Parent,
Merger Sub and the Company.
The Amended and Restated Merger Agreement provides that, upon the terms and
subject to the conditions of the Amended and Restated Merger Agreement, as
promptly as practicable (but in no event later than July 20, 2020), Merger Sub
will commence a tender offer (the "Offer") to purchase each issued and
outstanding share of common stock, par value $0.001 per share, of the Company
(each, a "Share") at an offer price of $29.00 per Share, net to the seller in
cash, without interest and subject to any withholding taxes (the "Offer Price").
Promptly following the completion of the Offer, upon the terms and subject to
the conditions of the Amended and Restated Merger Agreement, Merger Sub will
then be merged with and into the Company, with the Company surviving as a wholly
owned subsidiary of Parent (the "Merger"). The Amended and Restated Merger
Agreement contemplates that the Merger will be effected pursuant to Section
251(h) of the Delaware General Corporation Law (the "DGCL"), which would not
require a vote of the Company's stockholders in order to consummate the Merger.
At the effective time of the Merger (the "Effective Time"), each Share (other
than the Shares accepted for payment in the Offer and Shares held by
stockholders who validly exercise appraisal rights under Section 262 of the DGCL
or held by the Company, Parent, or their respective wholly owned subsidiaries)
will be cancelled and converted into the right to receive the Offer Price.
The Board of Directors of the Company (the "Board") unanimously determined that
the transactions contemplated by the Amended and Restated Merger Agreement are
in the best interests of the Company and its stockholders and approved the
Merger Agreement and the transactions contemplated by the Merger Agreement and
unanimously resolved to recommend that the Company's stockholders tender their
Shares in the Offer.
With respect to the Company's stock-based equity awards, at the Effective Time,
(1) unless otherwise agreed to between Parent and the applicable holder prior to
the Closing, each outstanding stock-based award, to the extent then vested, will
be cancelled and converted into and will become a right to receive an amount in
cash, without interest, equal to the product obtained by multiplying (i) the
Offer Price (less the purchase price per Share, if any, of such stock-based
award) by (ii) the total number of Shares then subject to the then-vested
portion of such stock-based award; and (2) each outstanding stock-based award,
to the extent not then vested, will be continued and will thereafter confer on
the holder of such stock-based award the right to receive an amount, without
interest, equal to the product obtained by multiplying (i) the Offer Price (less
the purchase price per Share, if any, of such stock-based award) by (ii) the
total number of Shares then subject to the then-unvested portion of such
stock-based award, which amount will be paid, at Parent's election, either in
cash or in stock of the surviving corporation of the Merger or a parent
corporation thereof (or a combination thereof), and will be payable on the same
vesting schedule, and subject to the same terms and conditions, as the unvested
portion of the stock-based award to which it relates. However, the number of
Shares subject to the unvested portion of any stock-based award with
performance-based vesting with respect to a performance period that ended prior
to the Effective Time will be continued as described in the preceding sentence
based on the portion of the then unvested portion of such stock-based award
actually earned based on performance, or as specified in the Amended and
Restated Merger Agreement.
With respect to the Company's stock options, at the Effective Time, unless
otherwise agreed to between Parent and the applicable holder prior to the
Closing, each outstanding and unexercised Company option that is not fully
vested in accordance with its terms, will fully vest and, together with all
fully-vested options, will be cancelled and converted into the right to receive
an amount in cash, without interest, equal to the product obtained by
multiplying (1) the excess, if any, of the Offer Price less the exercise price
per Share of such option, by (2) the total number of Shares then issuable upon
exercise in full of such option. Any option for which the exercise price per
Share is equal to or greater than the Offer Price will be cancelled without any
cash payment being made in respect thereof.
Under the terms of the Amended and Restated Merger Agreement, Merger Sub's
obligation to accept and pay for Shares that are tendered in the Offer is
subject to the satisfaction or waiver of certain limited conditions, including:
(1) that prior to the expiration of the Offer there have been validly tendered
and received (within the meaning of Section 251(h) of the DGCL) and not validly
withdrawn a number of Shares that, together with Shares then-owned by Parent and
any of its wholly owned subsidiaries, would represent at least one Share more
than a majority of all then outstanding Shares (other than certain specified
Shares as more specifically described in the Amended and Restated Merger
Agreement); (2) the accuracy of certain of the Company's representations and
warranties in the Amended and Restated Merger Agreement, subject to specific
materiality qualifications and thresholds; (3) compliance by the Company with
certain of its covenants in the Amended and Restated Merger Agreement in all
material respects; (4) the absence of legal restraints or orders prohibiting the
consummation of the Offer or the Merger; and (5) the absence of a termination of
the Amended and Restated Merger Agreement in accordance with its terms. There is
no condition related to the non-occurrence of a "material adverse effect." The
Company, Parent and Merger Sub have received all necessary regulatory approvals
to consummate the Offer and the Merger.
The Amended and Restated Merger Agreement contains certain customary
representations, warranties and covenants by the Company, Parent and Merger Sub,
respectively. In addition, the Company will continue to be subject to customary
"no-shop" restrictions on its ability, except as permitted by the Amended and
Restated Merger Agreement, to solicit, initiate, propose or induce the making or
knowingly encourage alternative acquisition proposals from third parties and to
provide nonpublic information to, or participate in, discussions or negotiations
with third parties regarding alternative acquisition proposals. These
restrictions are substantively identical to those contained in the Original
Agreement.
The Amended and Restated Merger Agreement contains certain termination rights
for both the Company and Parent. Upon termination of the Amended and Restated
Merger Agreement under specified circumstances, the Company will be required to
pay Parent a termination fee of $48,628,267. Specifically, if the Amended and
Restated Merger Agreement is validly terminated by (1) Parent, if the Board
changes its recommendation with respect to the Offer, or (2) the Company, if the
Board authorizes the acceptance of a superior proposal and such proposal was not
solicited in breach of the provisions in the Amended and Restated Merger
Agreement, then, in each case, the termination fee will be payable by the
Company to Parent upon termination. The termination fee will also be payable in
certain circumstances if the Amended and Restated Merger Agreement is validly
terminated because (1) the Merger is not completed by December 23, 2020, (2)
prior to such termination (but after the date of the Amended and Restated Merger
Agreement) a proposal, generally speaking, to acquire at least 50% of the
Company's stock or assets is publicly announced or disclosed by a third party
and (3) the Company subsequently consummates, or enters into a definitive
agreement providing for, a transaction involving the acquisition of at least 50%
of its stock or assets within one year of such termination.
Upon termination of the Amended and Restated Merger Agreement under other
specified circumstances, Parent will be required to pay the Company a
termination fee of $97,256,534. Specifically, if the Amended and Restated Merger
Agreement is validly terminated by the Company because (1) Merger Sub fails to
commence the Offer as required by the Amended and Restated Merger Agreement, or
(2) Parent fails to consummate the Offer as required pursuant to, and in the
circumstances specified in, the Amended and Restated Merger Agreement, then, in
each case, the termination fee will be payable by Parent to the Company upon
termination. Certain funds managed or advised by Advent International
Corporation ("Advent") have provided the Company with a limited guarantee in
favor of the Company (the "Limited Guarantee"). The Limited Guarantee
guarantees, among other things, the payment of the termination fee payable by
Parent, subject to the conditions set forth in the Limited Guarantee.
In addition to the foregoing termination rights, and subject to certain
limitations, each of the Company or Parent may terminate the Amended and
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensation Arrangements of Certain
Officers.
(c) Appointment of Chief Operating Officer
On July 14, 2020, and in connection with the entry into the Amended and Restated
Merger Agreement, the Board appointed Nicholas Noviello as the Company's Chief
Operating Officer, effective as of the first business day following the
commencement of the Offer.
Mr. Noviello, age 51, has served as a Senior Operating Partner at Crosspoint
Capital Partners L.P. ("Crosspoint") since March 2020. Prior to Crosspoint, Mr.
Noviello served as Chief Financial Officer, Executive Vice President Finance &
Operations with Symantec Corporation ("Symantec") from December 2016 to May
2019. He was Executive Vice President, Chief Integration Officer with Symantec
from August 2016 to November 2016. Prior to Symantec, Mr. Noviello served as
Chief Financial Officer, Finance & Operations with Blue Coat Systems, Inc.
("Blue Coat") from January 2016 to July 2016. Prior to Blue Coat, Mr. Noviello
served as Chief Financial Officer, Executive Vice President Finance and
Operations with NetApp, Inc. ("NetApp") from January 2012 to January 2016 and
Senior Vice President and Corporate Controller from January 2008 to December
2011. Prior to NetApp, Mr. Noviello was at Honeywell International from January
2000 to January 2008. He started his career at PricewaterhouseCoopers, and is a
CPA. Mr. Noviello also serves on the boards of BeyondTrust and Cristo Rey San
Jose Jesuit High School. Mr. Noviello holds a Masters of Science in Taxation
from Fairleigh Dickinson University and a Bachelor of Science in Business
Administration from Boston University, Questrom School of Business.
Employment Agreement
In connection with Mr. Noviello's appointment, the Board approved the entry into
an employment agreement with him similar in form generally to the employment
agreements between the Company and each of its current named executive officers.
The employment agreement for Mr. Noviello provides for a term of one year,
beginning on the first business day after the commencement of the Offer, with
automatic renewal of successive, one-year terms thereafter unless either party
provides notice of non-renewal at least 30 days prior to the renewal date,
provided that in the event of a "change in control" of the Company, as defined
in the employment agreement and that excludes the Offer and the Merger, the
employment agreement will be extended automatically through the date that is 12
months following the change in control. If a definitive agreement for a
transaction that, if consummated, would result in change in control of the
Company is entered into by the Company, any nonrenewal notice by the Company
will not be permitted (until the change in control occurs or the definitive
agreement is terminated).
Pursuant to the employment agreement, Mr. Noviello's base salary is $500,000.
Mr. Noviello is eligible to receive cash incentive compensation, with his target
bonus opportunity to be determined by the Board or its compensation committee,
as applicable, after consultation with Mr. Noviello. Any bonus will be awarded
based on the objective and/or subjective criteria established and approved by
the Board or its committee, as applicable, in its sole discretion. The
employment agreement does not provide for an initial grant of equity to Mr.
Noviello.
Mr. Noviello's employment agreement provides that, if his employment is
terminated by the Company without "cause" (and other than due to his death or
his becoming "disabled") or by him for "good reason," as such terms are defined
in his employment agreement, other than during the period beginning three months
before a change in control of the Company through 12 months after such change in
control, provided he signs and does not revoke a separation agreement described
below, he will receive:
· a lump sum cash payment equal to 100 percent of his then-current base salary;
and
· a lump sum cash payment equal to 12 months of premiums he otherwise would be
required to pay for continued post-employment group health coverage, based on
the benefits in effect on the date his employment is terminated.
Mr. Noviello's employment agreement provides that, in the event of a change in
control of the Company (which excludes the Offer and the Merger), if any of his
equity awards will not continue through assumption or substitution after the
change in control, such award will be fully vested immediately prior to the
change in control.
Mr. Noviello's employment agreement also provides that, if his employment is
terminated by the Company without cause (and other than due to his death or his
becoming disabled) or by him for good reason during the period beginning three
months before a change in control of the Company through 12 months after a
change in control of the Company, provided hesigns and does not revoke a
separation agreement described below, he will receive:
· a lump sum cash payment equal to 100 percent of the sum of (1) the greater of
his then-current base salary and the base salary in effect immediately before
the change in control; and (2) his target annual incentive opportunity;
· a lump sum cash payment equal to 12 months of premiums he otherwise would be
required to pay for continued post-employment group health coverage, based on
the benefits in effect on the date his employment is terminated; and
· 100 percent accelerated vesting of the unvested portion of all stock options
and other stock-based awards held by him, with any performance-based vesting
component deemed achieved at target.
The separation agreement would include, among other terms, a release of claims
in the Company's favor, and non-disparagement and confidentiality obligations on
the part of Mr. Norviello.
Mr. Noviello's employment agreement provides that if any payment or benefits to
him (including the payments and benefits under his employment agreement), when
calculated in a manner consistent with Section 280G of the Internal Revenue Code
and the applicable regulations thereunder, would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, then such payments and
benefits will either (1) be reduced to the largest portion of the payments and
benefits that would result in no portion of the payments and benefits being
subject to the excise tax; or (2) not be reduced, whichever, after taking into
account all applicable federal, state, and local employment taxes, income taxes
and the excise tax, results in his receipt, on an after-tax basis, of the
greater payments and benefits.
The Company also expects to enter into the Company's standard indemnification
agreement with Mr. Noviello.
Mr. Noviello was appointed as Chief Operating Officer of the Company pursuant to
the Amended and Restated Merger Agreement. Mr. Noviello does not have a family
relationship with any of the officers or directors of the Company. Mr. Noviello
is not a party to any transaction involving the Company that is required to be
disclosed pursuant to Item 404(a) of Regulation S-K.
(d) Appointment of New Director
On July 14, 2020, and in connection with the entry into the Amended and Restated
Merger Agreement, the Board appointed Greg Clark as a member of the Board and to
the position of Co-Executive Chairman of the Board, in each case effective as
the first business day following the commencement of the Offer. Theresia Gouw
will serve as the other Co-Executive Chairman of the Board. In connection with
his appointment as a director, Mr. Clark was not appointed to any committees of
the Board.
Mr. Clark will receive compensation for his Board service pursuant to the terms
of the Company's outside director compensation policy as disclosed in the
Company's proxy statement with respect to the Company's 2019 Annual Meeting of
Stockholders, as filed with the Securities and Exchange Commission on April 16,
2019. The Company also expects to enter into the Company's standard director
indemnification agreement with Mr. Clark.
Mr. Clark was appointed as a director of the Company pursuant to the Amended and
Restated Merger Agreement. Mr. Clark does not have any family relationship with
the Company's directors or executive officers or any persons nominated or chosen
by the Company to be a director or executive officer. Mr. Clark has not entered
into any other material plan, contract, arrangement or amendment in connection
with his appointment to the Board. Mr. Clark is not a party to any transaction
involving the Company that is required to be disclosed pursuant to Item 404(a)
of Regulation S-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
2.1 Amended and Restated Agreement and Plan of Merger, dated as of July
15, 2020, between Ferrari Group Holdings, L.P., Ferrari Merger Sub, Inc.
and ForeScout Technologies, Inc.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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