Item 4 is hereby amended to add the following:
On December 3,2019 (the “Effective Date”), AB Value Management entered into a cooperation agreement (the “Agreement”) with the Issuer, pertaining to, among other things, the nomination and election of two directors to the Board at the Annual Meeting. Pursuant to the Agreement, subject to conditions, AB Value Management agreed to customary standstill and voting provisions.
Pursuant to the Agreement, the Issuer agreed to take appropriate action to nominate Mr. Berger and Ms. Thompson for election to the Board at the Annual Meeting. The Nominees will have certain Board observer and information rights with respect to the Board, its committees and the Issuer, as set forth in the Agreement. As a means of accelerating the Nominees’ understanding of any and all significant nonpublic circumstances related to the Issuer, the Nominees will also have the right to a detailed session with the Chief Executive Officer of the Issuer (the “CEO”), in which the CEO will inform the Nominees of the thenpresent material circumstances of the Issuer and answer all reasonable questions posed by the Nominees. Further, as part of the Agreement, each of AB Value Management and the Issuer agreed that the Issuer may amend its organizational documents to provide stockholders proxy access, so long as such amendment does not constitute an amendment made for the purpose of disqualifying either Nominee or frustrating the purpose of the Agreement.
If the Nominees are elected to serve as directors on the Board at the Annual Meeting, the Nominees are expected to serve until the Issuer’s 2020 annual meeting of stockholders (the “2020 Annual Meeting”). The Board agreed to renominate the Nominees for election to the Board at the 2020 Annual Meeting; provided, that Mr. Berger has not previously resigned from the Board. The Issuer will use the same solicitation efforts on behalf of the Nominees as for all other nominees at the Annual Meeting and the 2020 Annual Meeting. In addition, subject to certain conditions and requirements described in the Agreement, AB Value Management will have certain replacement rights in the event Ms. Thompson resigns or either Nominee is otherwise unable to serve as a director during the Standstill Period (as defined below).
The Issuer and AB Value Management agreed to a “Standstill Period” commencing on the Effective Date and ending on the date that is the earliest of (i) the date that is 15 days prior to the beginning of the Issuer’s advance notice period for the nomination of directors at the Issuer’s 2021 annual meeting of stockholders, (ii) Mr. Berger’s resignation from the Board any time after the Annual Meeting, and (iii) a material breach by the Issuer of its obligations under the Agreement which (if capable of being cured) is not cured within 15 days after receipt by the Issuer of written notice from AB Value Management specifying the material breach.
During the Standstill Period, the Issuer and AB Value Management have agreed that they will not disparage each other and that they will not initiate any lawsuit, claim, or proceeding with respect to any claims (known by the alleging party as of the Effective Date) against the Issuer or AB Value Management, as applicable, except for any legal proceeding initiated solely to enforce the Agreement.
The Agreement will remain in effect until the date that is earliest of (i) the date that is 15 days prior to the beginning of the Issuer’s advance notice period for the nomination of directors at the Issuer’s 2021 annual meeting of stockholders, (ii) Mr. Berger’s resignation from the Board any time after the Annual Meeting, and (iii) a material breach by either party thereto of its obligations under the Agreement which (if capable of being cured) is not cured within 15 days after receipt by such breaching party of written notice from the other party specifying the material breach.
Other elements of the Agreement include, among others:
● AB Value Management’s agreement, subject to certain exceptions including exceptions related to extraordinary transactions and adverse proxy advisor recommendations, to vote its shares of common stock as recommended by the Board on any matter to be voted on at any meetings of stockholders during the Standstill Period, including with respect to the election of directors;
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● if the Nominees are elected to the Board at the Annual Meeting, immediately following the Annual Meeting, the Board’s agreement to take the necessary steps to appoint (i) each Nominee to the Audit Committee of the Board and (ii) Ms. Thompson to the Nominating Committee of the Board, in each case, subject to their qualifications to serve on such committees under Nasdaq Stock Market listing standards and the applicable Securities and Exchange Commission rules and regulations, and the Nominees will serve on such respective Board committees, and any related or created subcommittees, for so long as the Nominees serve as directors of the Board; provided, that during the Standstill Period, each of the Nominees will be considered by the Board for appointment to any Board committee established as of the Effective Date on which such respective Nominee will not be appointed pursuant to the terms of the Agreement;
● if, during the Standstill Period, the Board establishes any new committee, then each of the Nominees will be appointed to any such new committee and any related subcommittee and serve on any such new committee, so long as the Nominees serve as directors of the Board;
● following the Annual Meeting, each Nominee will have observer rights for each of the Board committee meetings on which he or she does not serve for a period of one year, and such observer rights include general access to the materials provided to and for the committees and the ability to fully cooperate in committee discussions; and
● the Issuer’s agreement not to increase the size of the Board to more than seven directors from the Effective Date until the end of the Standstill Period.
During the term of the Agreement, AB Value Management agreed, subject to certain exceptions, to comply with certain customary standstill provisions, including, among other things:
● not to, among other things, (i) make, engage in, or in any way participate in, directly or indirectly, any “solicitation” of “proxies” (as such terms are defined in Rule 14a1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or consents to vote or advise, (ii) encourage or influence any third party with respect to the voting of any shares of Voting Securities (as defined in the Agreement) for the election of individuals to the Board or to approve stockholder proposals, (iii) become a “participant” in any contested “solicitation” for the election of directors with respect to the Issuer (as such terms are defined in the Exchange Act), or (iv) make or be the proponent of any stockholder proposal;
● form, join, encourage, influence, advise or in any way participate in any “group” (as such term is defined in Section 13(d)(3) of the Exchange Act);
● at no time beneficially own 12.5% or more of the Common Stock (as defined in the Agreement) outstanding at such time;
● effect or seek to effect, offer or propose to effect, cause or participate in, or in any way assist or facilitate any other person to effect or seek, offer or propose to effect or participate in, any tender or exchange offer, merger, consolidation, acquisition, sale of all or substantially all assets or sale, spinoff, split off, or other extraordinary transaction involving the Issuer or any of its subsidiaries or joint ventures;
● take any public action, or private action involving any third party, in support of or make any public proposal, or private proposal involving any third party, or public request, or private request involving any third party, regarding certain actions related to the Issuer, subject to certain exceptions;
● make any public disclosure, announcement or statement regarding any intent, purpose, arrangement, plan or proposal with respect to the Board, the Issuer, its management, policies or affairs, any of its securities or assets or the Agreement that is inconsistent with the Agreement; or
● take any action which could cause or require the Issuer to make a public announcement regarding any of the foregoing, publicly seek or request permission to do any of the foregoing.
Notwithstanding anything to the contrary contained in the Agreement, the standstill provisions do not prohibit AB Value Management from (i) commenting publicly about any publicly disclosed third party proposal to acquire the Issuer so long as AB Value Management has shared its views privately with the Issuer prior to making such public comments or (ii) having reasonable access to and participating in the Issuer’s earnings calls, investor calls or investor meetings, in the case of each of clause (i) and (ii), so long as AB Value Management does not violate the mutual nondisparagement provisions of the Agreement.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which is filed as Exhibit 99.1 and incorporated herein by reference.
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