Item 1.01 Entry into a Material Definitive Agreement
On October 31, 2019, Avid Technology, Inc. (the “Company”) entered into a support agreement (the “Agreement”) with Impactive Capital LP (“Impactive”) and Christian A. Asmar (the “Designee”).
Under the Agreement, the Company has agreed to (i) increase the size of its board of directors (the “Board”) from nine to ten directors and (ii) appoint the Designee as a director to serve for a term expiring at the Company’s 2020 annual meeting of stockholders (the “2020 Annual Meeting”). Upon his appointment as a director, the Designee will be offered the opportunity to become a member of the Nominating and Governance Committee of the Board. Subject to certain conditions, including the Designee’s good faith affirmation of his compliance with the Company’s Code of Conduct and Corporate Governance Guidelines, the Company has agreed to nominate the Designee (or a replacement designated by Impactive, subject to certain conditions, including being reasonably acceptable to the Company) for election for one additional year at the 2020 Annual Meeting.
In addition, Impactive and the Designee have agreed that the Designee will promptly tender his resignation from the Board if at any time during which he serves on the Board the number of shares of common stock of the Company beneficially owned by Impactive is less than one half of the common stock of the Company held by Impactive at the time of the Agreement.
Pursuant to the Agreement, Impactive and the Designee are subject to certain standstill restrictions, which prohibit them from, among other things, (i) engaging in any solicitation of proxies or consents or becoming a participant in any solicitation of proxies or consents other than soliciting proxies on behalf of the Company in accordance with the recommendations of the Board; (ii) forming or joining a “group” under of Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) with respect to the voting securities of the Company; (iii) making or participating, directly or indirectly, in any tender offer, exchange offer, merger, consolidation, acquisition, business combination, sale of a division, sale of substantially all assets, recapitalization, restructuring, liquidation, dissolution or extraordinary transaction involving the Company or any of its subsidiaries; (iv) seeking, alone or in concert with others, representation on the Board or the removal of any member of the Board; (v) making any stockholder proposal; or (vi) calling a special meeting of stockholders, in each case, subject to certain limited exceptions.
These standstill restrictions terminate upon the earliest to occur of (i) May 15, 2020, (ii) the date of the Company’s 2020 annual meeting of stockholders and (iii) ten business days after such date, if any, that Impactive provides written notice to the Company that the Company materially breached any of its commitments or obligations under the Agreement where the Company has not cured such breach within ten business days after such written notice (such period, the “Standstill Period”).
Pursuant to the Agreement, Impactive and the Designee are subject to certain lockup restrictions, which prohibit them from “short-selling” any of the Company’s securities or otherwise acquiring any direct or indirect beneficial ownership of, right to acquire, and/or economic exposure to, any securities of the Company or rights or options to own or acquire any securities of the Company which may increase in value from the decline of the value of any security of the Company.
These lockup provisions terminate upon the earlier of (x) the date of the 2021 annual meeting of stockholders (or such longer period as the Designee or, in certain circumstances, a replacement director selected pursuant to the Agreement, continues to serve on the Board), and (y) ten business days after such date, if any, that the Impactive provides written notice to the Company that the Company has materially breached any of its commitments or obligations under this Agreement where the Company has not cured such breach within ten business days after such written notice (such period, the “Lockup Period”).
During the Standstill Period, Impactive has also agreed to vote its shares in favor of the Company’s nominees of directors for election to the Board and in accordance with any other recommendations of the Board that the Designee has approved in his capacity as a director on the Board.
In connection with entry into the Agreement, Impactive and the Designee have also entered into a non-disclosure agreement, the form of which is attached as Exhibit B to the Agreement.
The Agreement will terminate upon the expiration of the Lockup Period.
The foregoing description is qualified in its entirety by reference to the Agreement, which is attached hereto as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.