Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
As previously announced,
on November 8, 2018, KCAP Financial, Inc., a Delaware corporation (“
KCAP
”), entered into an agreement and
plan of merger (the “
Merger Agreement
”) with Commodore Holdings, L.L.C., a Delaware limited liability company
and a direct wholly-owned subsidiary of KCAP (“
Commodore
”), Katonah Debt Advisors, L.L.C., a Delaware limited
liability company and a direct wholly-owned subsidiary of Commodore (“
Katonah
”), Trimaran Advisors, L.L.C.,
a Delaware limited liability company and a direct wholly-owned subsidiary of Commodore (“
Trimaran
”), Trimaran
Advisors Management, L.L.C., a Delaware limited liability company and a direct wholly-owned subsidiary of Commodore (“
Trimaran
Management
”, and together with Katonah, and Trimaran, the “
Acquired Companies
”), LibreMax Intermediate
Holdings, LP, a Delaware limited partnership (“
LibreMax
”), LM Rubicon Merger Sub 1, LLC, a Delaware limited
liability company (“
Merger Sub 1
”), LM Rubicon Merger Sub 2, LLC, a Delaware limited liability company
(“
Merger Sub 2
”), and LM Rubicon Merger Sub 3, LLC, a Delaware limited liability company (“
Merger
Sub 3
”, and, together with Merger Sub 1 and Merger Sub 2, the “
Merger Subs
”). At the effective time
of the transactions contemplated by the Merger Agreement, Katonah, Trimaran and Trimaran Management will be acquired by LibreMax
through mergers with Merger Sub 1, Merger Sub 2 and Merger Sub 3, respectively, with Katonah, Trimaran and Trimaran Management
surviving such mergers as wholly-owned subsidiaries of LibreMax (such mergers, the “
Mergers
”).
The Board of Directors
of KCAP has unanimously approved, and the General Partner of LibreMax has approved, the Merger Agreement and the transactions contemplated
thereby.
At the closing of the
transactions contemplated by the Merger Agreement (the “
Closing
”), LibreMax has agreed to pay KCAP an amount
in cash equal to $37.9 million, subject to customary adjustments for transaction expenses and certain accruals.
The Closing is expected
to occur in the last quarter of 2018. The consummation of the Mergers is subject to customary closing conditions, including
the absence of material changes, the receipt of certain deliverables and notifications and the receipt of relevant consents. The
Merger Agreement contains certain termination rights for both KCAP and LibreMax, including in the event that the Mergers are not
completed on or before March 31, 2019.
The Merger Agreement
contains customary representations and warranties of KCAP, the Acquired Companies, LibreMax and the Merger Subs. KCAP and the Acquired
Companies make further representations regarding business and operational matters, including as to their financial statements,
material liabilities, material contracts, employee matters and compliance with laws and regulatory requirements. The Merger Agreement
also contains customary covenants (including agreements from KCAP and the Acquired Companies that they will conduct their business
in the ordinary course prior to the Closing, that they will not engage in certain kinds of transactions during this period, and
that they will take commercially reasonable efforts to seek certain approvals) and other terms, provisions and conditions that
the parties made to each other as of specific dates. The parties provide each other with reciprocal rights of indemnification with
respect to breaches of representations, warranties and covenants upon customary terms.
The assertions embodied
in the foregoing terms were made solely for purposes of the Merger Agreement, and may be subject to qualifications and limitations
agreed to by the parties in connection with negotiating their respective terms. Moreover, they may be subject to a contractual
standard of materiality that may be different from what may be viewed as material to stockholders, or may have been used for the
purpose of allocating risk between the parties rather than establishing matters as facts. For the foregoing reasons, no person
should rely on such representations, warranties, covenants or other terms, provisions or conditions as statements of factual information
at the time that they were made or otherwise.