Item 1.01 Entry into a Material Definitive Agreement.
On February 26, 2020, DocuSign, Inc. (“DocuSign”) entered into a Share Purchase Agreement (the “Purchase Agreement”) by and among DocuSign, DocuSign International, Inc., a Delaware corporation and wholly owned subsidiary of DocuSign (“Purchaser”), Seal Software Group Limited, a company registered in England and Wales (“Seal”), and Fortis Advisors LLC, as the Shareholders’ Representative.
Under the Purchase Agreement, Purchaser will acquire all of Seal’s outstanding equity securities not already owned by DocuSign in exchange for aggregate consideration of approximately $188 million in cash (excluding the value of shares currently owned by DocuSign), subject to customary purchase price adjustments as set forth in the Purchase Agreement. Following the closing of the Purchase Agreement (the “Closing”), Seal will become a wholly owned subsidiary of Purchaser (the “Acquisition”). In addition, following the Closing, certain continuing Seal employees will receive DocuSign equity in the form of performance-based restricted stock units, time-based restricted stock units and other retention incentives.
The Acquisition has been approved by the board of directors of each of DocuSign and Seal, and has been approved by the stockholders of Seal.
The Purchase Agreement contains representations, warranties and covenants of Seal and Purchaser that are customary for a transaction of this nature, including among others, covenants by Seal regarding the conduct of its business during the pendency of the transactions contemplated by the Purchase Agreement, public disclosures and other matters.
The Purchase Agreement also contains customary indemnification provisions whereby Seal’s securityholders will indemnify Purchaser for certain losses arising out of inaccuracies in, or breaches of, Seal’s representations, warranties, covenants, pre-closing taxes and certain other matters, subject to certain caps and thresholds. These indemnification obligations will be partially secured by a $10,000,000 indemnity escrow (the “Indemnity Escrow”) and by a buy-side representations and warranties insurance policy to be obtained by Purchaser prior to the Closing, under which Purchaser may seek coverage for breaches of representations and warranties (subject to certain customary exclusions and deductibles). If Purchaser is unable to obtain buy-side representations and warranties insurance coverage prior to the Closing, then the Indemnity Escrow will increase to an amount equal to 12.5% of the net proceeds payable to Seal’s securityholders.
DocuSign and Seal have agreed to use their respective reasonable best efforts, subject to certain exceptions, to consummate the transactions contemplated in the Purchaser Agreement as promptly as reasonably practicable and obtain any required regulatory approvals. Prior to the completion of the Acquisition, DocuSign and Seal will continue to operate as separate companies.
The Acquisition is expected to close in the first half of DocuSign’s fiscal year. Consummation of the Acquisition is subject to various conditions, including the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The obligation of each party to consummate the Acquisition is also conditioned on the other party’s representations and warranties being true and correct (subject to certain materiality exceptions) and the other party having performed in all material respects its obligations under the Purchase Agreement.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated by reference herein. The Purchase Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about DocuSign, Purchaser or Seal. In particular, the assertions embodied in the representations and warranties contained in the Purchase Agreement are qualified by information in a confidential disclosure letter provided by Seal to DocuSign in connection with the signing of the Purchase Agreement. This confidential disclosure letter contains information that modifies, qualifies and creates exceptions to the representations and warranties and certain covenants set forth in the Purchase Agreement. Moreover, certain representations and warranties in the Purchase Agreement were used for the purposes of allocating risk between DocuSign and Seal rather than establishing matters of fact. Accordingly, the representations and warranties in the Purchase Agreement should not be relied on as characterization of the actual state of facts about DocuSign, Purchaser or Seal.