Item 1.01
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Entry into a Material Definitive Agreement.
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On July 24, 2016, Outerwall Inc. (the Company),
entered into an Agreement and Plan of Merger (the Merger Agreement) with Aspen Parent, Inc., a Delaware corporation (Parent), Aspen Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent
(Outerwall Merger Sub), Redwood Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (Redbox Merger Sub), and Redbox Automated Retail, LLC, a Delaware limited liability company and wholly owned
subsidiary of the Company (Redbox), providing for the acquisition of the Company by Parent in an all cash transaction, consisting of a tender offer (the Offer), followed by a subsequent back-end merger of Outerwall Merger Sub
with and into the Company (the Outerwall Merger), with the Company surviving the Outerwall Merger as a wholly owned subsidiary of Parent, and immediately followed by a merger of Redbox Merger Sub with and into Redbox (the Redbox
Merger and, together with the Outerwall Merger, the Mergers), with Redbox surviving the Redbox Merger as a wholly owned subsidiary of the Company. Parent, Outerwall Merger Sub and Redbox Merger Sub are affiliates of certain funds
(the Apollo Funds) managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, Apollo).
The Companys Board of Directors (the Board) determined that the transactions contemplated by the Merger Agreement, including the Offer and
the Mergers, are fair to and in the best interests of the Company and its stockholders, and approved the Merger Agreement and the transactions contemplated thereby, and recommended that the stockholders of the Company accept the Offer and tender
their shares of common stock, par value $0.001 per share (the Common Stock), in the Offer.
Pursuant to the Merger Agreement, and upon the
terms and subject to the conditions described therein, Parent will cause Outerwall Merger Sub to commence the Offer for all of the Companys outstanding shares of Common Stock at a purchase price of $52.00 per share, net to the seller in cash
(the Offer Price), without interest and subject to any withholding taxes.
Subject to the terms and conditions of the Merger Agreement, the
Offer will initially remain open for 20 business days from the date of commencement of the Offer. If at the scheduled expiration time of the Offer any of the conditions to the Offer have not been satisfied or waived, then Outerwall Merger Sub will
extend the Offer for one or more consecutive periods of up to 5 business days, generally until November 23, 2016, to permit the satisfaction of all Offer conditions, except that if the sole remaining unsatisfied Offer condition is the Minimum
Condition (as defined below), Outerwall Merger Sub will only be required to extend the Offer on up to four occasions of 5 business days each, unless Parent and the Company otherwise agree. If the debt financing is not available at the scheduled
expiration time of the Offer, Outerwall Merger Sub may, subject to certain conditions, extend the Offer on up to four occasions of 5 business days each.
The obligation of Outerwall Merger Sub to purchase shares of Common Stock tendered in the Offer is subject to customary closing conditions, including (1)
shares of Common Stock having been validly tendered and (not properly withdrawn) prior to the expiration of the Offer that represent, together with the shares of Common Stock then owned by Outerwall Merger Sub, at least a majority of the then
outstanding shares of Common Stock (the Minimum Condition), (2) the absence of any law, injunction, judgment or other legal restraint that prohibits the consummation of the Offer or the Mergers, (3) the expiration or early termination of
the waiting period applicable to the Offer and the Mergers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (4) the accuracy of the Companys representations and warranties contained in the Merger Agreement (generally
subject to Company Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers), (5) the Companys performance of its obligations, agreements and covenants under the Merger Agreement in all material respects, (6) the
absence, since the date of the Merger Agreement, of any fact, change, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a
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Company Material Adverse Effect, (7) other than the Companys regular quarterly cash dividend for the third quarter of the Companys 2016 fiscal year, the absence of any declaration or
payment of any dividend or distribution on shares of capital stock of the Company or any non-wholly owned Subsidiary of the Company following the date of the Merger Agreement, and (8) the absence of any authorization or making of any purchases of
capital stock of the Company or any non-wholly owned subsidiary of the Company, subject to certain exceptions.
Following the consummation of the Offer,
and subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, the Outerwall Merger will be effected pursuant to the procedure provided for by Section 251(h) of the General Corporation Law of the State
of Delaware (DGCL), without a meeting or vote of the Companys stockholders. The Outerwall Merger will be effected as soon as practicable following the acceptance of the shares validly tendered and not validly withdrawn pursuant to
the Offer (the Offer Acceptance Time). Immediately following the effective time of the Outerwall Merger (the Effective Time), the Redbox Merger will be effected in accordance with the DGCL and the Delaware Limited Liability
Company Act.
At the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares (1)
owned by the Company as treasury stock or owned by any direct or indirect wholly owned subsidiary of the Company, (2) owned by Parent or Outerwall Merger Sub, including any shares acquired by Outerwall Merger Sub in the Offer or (3) owned by any
stockholder who is entitled to demand and properly demands the appraisal of such shares in accordance with, and in compliance in all respects with, the DGCL) will be automatically cancelled and converted into the right to receive the Offer Price
(the Merger Consideration), without interest and subject to any withholding taxes.
As of the Effective Time (1) each outstanding Company
stock option, whether or not then exercisable or vested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the excess, if any, of the Merger Consideration over the per share exercise price
applicable to such Company stock option, multiplied by the total number of shares subject to such Company stock option, (2) each share of Common Stock subject to time-based restricted stock awards and restricted stock awards earned pursuant to
performance-based restricted stock awards will be vested as of immediately before the Effective Time and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product the Merger Consideration,
multiplied by the number of shares of Common Stock subject to such restricted stock award, and (3) each share of Common Stock subject to unearned performance-based restricted stock awards will be vested and all restrictions therein will lapse at the
target level for such award as of immediately before the Effective Time and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of the Merger Consideration, multiplied by the number of
shares of Common Stock subject to such restricted stock award.
The Merger Agreement contains representations and warranties and covenants of the parties
customary for a transaction of this nature, including an agreement that, subject to certain exceptions, the parties will use reasonable best efforts to cause the Offer and the Mergers to be consummated. The Company has also agreed generally (1) to
operate its business in the ordinary course of business consistent with past practice in all material respects and (2) not to solicit other proposals to acquire the Company or to participate in discussions or provide information in connection with
other proposals to acquire the Company, subject to certain exceptions.
Parent, Outerwall Merger Sub and Redbox Merger Sub have obtained equity and debt
financing commitments to finance the transactions contemplated by the Merger Agreement. The Apollo Funds have (1) committed to capitalize Parent, immediately prior to the Closing, with an aggregate equity contribution in an amount of $630 million on
the terms and subject to the conditions set forth in an equity
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funding letter dated July 24, 2016 and (2) provided the Company with a limited guarantee in favor of the Company dated July 24, 2016 guaranteeing the payment of certain monetary obligations that
may be owed by Parent pursuant to the Merger Agreement, including any reverse termination fee that may become payable by Parent. Bank of America Merrill Lynch (acting through such affiliates as it deems appropriate, BofAML), Jefferies
Finance LLC (Jefferies), Barclays Bank PLC (Barclays), Credit Suisse AG (acting through such affiliates or branches as it deems appropriate, CS) and Credit Suisse Securities (USA) LLC (CS Securities
and, together with CS and their respective affiliates, Credit Suisse) have agreed to provide committed debt financing in an aggregate amount of $745 million with respect to the post-merger Outerwall business. Jefferies, BofAML and Credit
Suisse have agreed to provide committed debt financing in an aggregate amount of $440 million with respect to the post-merger Redbox business. The obligations of the lenders to provide debt financing under the debt commitment letters are subject to
a number of customary conditions.
Prior to the Offer Acceptance Time, the Board may, among other things, (1)(a) change its recommendation that the
Companys stockholders accept the Offer and tender their shares of Common Stock in the Offer to enter into a definitive acquisition agreement providing for a Superior Proposal (as defined in the Merger Agreement) or (b) terminate the Merger
Agreement to enter into a definitive acquisition agreement providing for a Superior Proposal, or (2) change its recommendation that the Companys stockholders accept the Offer and tender their Shares in the Offer in connection with a positive
material event that materially affects the business and operations of the Company, in each case subject to complying with notice and other specified conditions.
The Merger Agreement contains certain termination rights for the Company and Parent. Upon termination of the Merger Agreement under specified circumstances,
the Company will be required to pay Parent a termination fee of $26.9 million. The Merger Agreement also provides that Parent will be required to pay the Company a reverse termination fee of $53.7 million under certain circumstances specified in the
Merger Agreement.
The representations, warranties and covenants of the Company contained in the Merger Agreement have been made solely for the benefit of
Parent, Outerwall Merger Sub and Redbox Merger Sub. In addition, such representations, warranties and covenants (1) have been made only for purposes of the Merger Agreement, (2) have been qualified by (a) matters specifically disclosed in certain
reports filed by the Company with the SEC prior to the date of the Merger Agreement (subject to certain exceptions) and (b) confidential disclosures made to Parent, Outerwall Merger Sub and Redbox Merger Sub in the disclosure schedule delivered in
connection with the Merger Agreement, (3) are subject to various materiality qualifications contained in the Merger Agreement, which may differ from what may be viewed as material by investors, (4) were made only as of the date of the Merger
Agreement or such other date as is specified in the Merger Agreement and (5) have been included in the Merger Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as fact. 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. In addition,
any such confidential disclosures contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. Investors should not rely on the representations, warranties and covenants
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 Companys 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 is or will be contained in, or incorporated by reference into, the Forms 10-K, Forms 10-Q and other documents that the Company files with the SEC, including with regard to the Offer and the Mergers.
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If the Outerwall Merger is consummated, the Companys common stock will be delisted from the Nasdaq Global
Select Market and deregistered under the Securities Exchange Act of 1934.
The foregoing description of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference.