Item 1.01.
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Entry into a Material Definitive Agreement.
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On May 9, 2018, Alaska Communications
Systems Group, Inc., a Delaware corporation (the
Company
), entered into a Cooperation Agreement (the
Cooperation Agreement
) with TAR Holdings LLC, Karen S. Singer, Gary A. Singer, and Julian D. Singer (each an
Investor and, collectively, the
Investor Group
).
Pursuant to the Cooperation Agreement, the Company agreed to
(i) increase the size of its Board of Directors (the
Board
) from six (6) to eight (8) members; (ii) appoint Wayne Barr, Jr. and Robert M. Pons to the Board (collectively, the
New Directors
), each
with a term expiring at the 2018 Annual Meeting of Stockholders (the
2018 Annual Meeting
) and until each of their successors is duly elected and qualified; (iii) nominate each of the New Directors and the six
(6) incumbent members of the Board (the
Incumbent Slate
, and together with the New Directors, the
2018 Nominees
) for election at the 2018 Annual Meeting as a director of the Company with a term expiring at
the Companys 2019 Annual Meeting of Stockholders (the
2019 Annual Meeting
) and until each of their successors is duly elected and qualified, such that a total of eight (8) directors are to be elected at the 2018 Annual
Meeting; (iv) recommend to the Companys stockholders each of the 2018 Nominees for election as directors of the Company at the 2018 Annual Meeting with a term expiring at the 2019 Annual Meeting and until each of their respective
successors is duly elected and qualified; (v) cause the Company to support, and solicit proxies for, the election of each of the New Directors in substantially the same manner as the Company supports and solicits proxies for the election of
each of the members of the Incumbent Slate at the 2018 Annual Meeting; (vi) cause all proxies received by the Company that provide stockholders with the opportunity to vote for all of the 2018 Nominees to be voted at the 2018 Annual Meeting in
the manner specified by such proxies; (vii) appoint (a) during the Standstill Period (as defined below), each New Director to at least one (1) of the three (3) standing committees of the Board that the Company is required to maintain
in accordance with the listing standards of the Nasdaq Stock Market LLC (the
Nasdaq
), (b) at least one (1) of the New Directors to the Compensation and Personnel Committee, and (c) at least one (1) of the New
Directors to the Audit Committee;
provided, however
, that, with respect to such committee appointments, the New Director to be appointed to such committee is and continues to remain eligible to serve as a member of such committee pursuant to
applicable law and the listing standards and/or rules of the Nasdaq that are applicable to the composition of such committee; (viii) ensure that any new committee of the Board established during the Standstill Period (each, a
New
Committee
) includes at least one New Director;
provided, however
, that, with respect to such New Committee appointments, the New Director to be appointed to such New Committee is and continues to remain eligible to serve as a member
of such New Committee pursuant to applicable law and the listing standards and/or rules of the Nasdaq that are applicable to the composition of such New Committee;
provided, further
, that the Board shall not be required to appoint any New
Director to a New Committee, including, but not limited to, any special or executive committee of the Board, to the extent that such New Committee is formed for the purpose, in whole or in part, of having the members thereof deliberate and/or take
any action with respect to certain matters specified in the Cooperation Agreement such as any matter that involves any actual or potential conflicts of interest between any of the Investors or any of the New Directors or any of their respective
Affiliates or Associates, on the one hand, and the Company, on the other hand, (ix) not to increase the size of the Board beyond eight (8) members until the expiration of the Standstill Period (as defined below) without the unanimous
approval of the Board or unless the Company enters into a definitive agreement relating to a strategic
transaction that contemplates a counterparty to such transaction being able to designate one or more persons to be appointed or nominated for election to the Board; (x) grant TAR Holdings
LLC a limited,
one-time
and
non-transferrable
exemption under the Companys Section 382 Tax Benefits Preservation Plan, dated as of January 8, 2018 (the
Tax Benefits Plan
) allowing TAR Holdings LLC to acquire beneficial ownership of additional shares of Common Stock, $0.10 par value (the
Common Stock
) such that, together with its beneficial ownership of Common
Stock on the date of the Cooperation Agreement, TAR Holdings LLC would, together with all the Investors and all of their respective Affiliates and Associates (as defined below), beneficially own a maximum number of shares of Common Stock
representing no more than nine percent (9%) of the Common Stock then outstanding (the
Tax Benefits Plan Exemption
); and (xi) reimburse the Investor Group for its expenses, including legal fees and expenses, as actually
incurred in connection with the matters related to the Investor Groups involvement at the Company in an amount not to exceed, in the aggregate, $100,000.
Pursuant to the Cooperation Agreement, if the Company causes the Standstill Period to be extended pursuant to Section 3(h) of the
Cooperation Agreement such that the 2019 Annual Meeting is within the Standstill Period, then the Company shall (i) nominate each of the New Directors for election at the 2019 Annual Meeting as a director of the Company with a term expiring at
the 2020 Annual Meeting of Stockholders (the
2020 Annual Meeting
) and until each of their respective successors is duly elected and qualified; (ii) recommend to the Companys stockholders each of the New Directors for
election as directors of the Company at the 2019 Annual Meeting with a term expiring at the 2020 Annual Meeting and until each of their respective successors is duly elected and qualified; (iii) cause the Company to support, and solicit proxies
for, the election of each of the New Directors in substantially the same manner as the Company supports and solicits proxies for the election of each of its other recommended nominees for election to the Board at the 2019 Annual Meeting; and
(iv) cause all proxies received by the Company that provide stockholders with the opportunity to vote for all of the New Directors at the 2019 Annual Meeting to be voted in the manner specified by such proxies.
The Cooperation Agreement also provides that if, during the Standstill Period, either of the New Directors (or any replacement director) is
unable or unwilling to serve as a director, resigns as a director or is removed as a director of the Company (other than on account of (i) the failure of such New Director to be elected or
re-elected
by
the stockholders at an annual meeting of the Companys stockholders or a special meeting of stockholders held in lieu thereof, (ii) in accordance with the terms of the Cooperation Agreement, such New Director not being nominated to serve
as a director at an annual meeting of the Companys stockholders or a special meeting of stockholders held in lieu thereof, or (iii) such New Director ceasing to serve as a member of the Board pursuant to Section 1(f) of the
Cooperation Agreement which allows the Company to accept the irrevocable advance letter of resignation submitted by each New Director prior such New Director joining the Board), and at such time the Investor Group beneficially owns in the aggregate
at least the lesser of five percent (5.0%) of the Companys then outstanding Common Stock, and 2,639,984 shares of Common Stock, subject to adjustment, then the Company and the Investor Group will work together in good faith to identify and
propose a replacement director to be appointed to the Board who shall only be appointed to the Board after having been mutually agreed upon by both the Company and the Investor Group.
Under the terms of the Cooperation Agreement, the Investor Group has agreed to certain standstill
provisions with respect to the Investor Groups actions with regard to the Company and its Common Stock, for the duration of the Standstill Period, which is defined in the Cooperation Agreement as the period commencing on the date of the
Cooperation Agreement and ending at 11:59 p.m., Alaska Time, on the date that is the earlier of (x) ten (10) calendar days prior to the expiration of the advance notice period for the submission by stockholders of director nominations for
consideration at the 2019 Annual Meeting (as set forth in the advance-notice provisions of the Companys Amended and Restated Bylaws), and (y) one hundred (100) calendar days prior to the first anniversary of the 2018 Annual Meeting;
provided, however
, that if the Company notifies the Investor Group or the New Directors in writing within twenty (20) calendar days prior to the expiration of the Companys advance notice period for the nomination of directors at
the 2019 Annual Meeting of the Companys intention to nominate the New Directors as nominees for election to the Board at the 2019 Annual Meeting on the Companys recommended slate of director candidates, the Standstill Period shall mean
the period commencing on the date of the Cooperation Agreement and ending at 11:59 p.m., Alaska Time, on the date that is the earlier of (x) ten (10) calendar days prior to the expiration of the advance notice period for the submission by
stockholders of director nominations for consideration at the 2020 Annual Meeting (as set forth in the advance-notice provisions of the Companys Amended and Restated Bylaws), and (y) one hundred (100) calendar days prior to the first
anniversary of the 2019 Annual Meeting.
The standstill provisions of the Cooperation Agreement generally prohibit the Investor Group and
its Affiliates (as defined below) from taking specified actions during the Standstill Period with respect to the Company and its securities, including, among others: (i) soliciting or participating in any solicitation of proxies or written
consents to vote any voting securities of the Company, (ii) conducting any
non-binding
referendum with respect to any voting securities of the Company; (iii) joining any other group for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act
) or becoming party to any voting arrangement or agreement; (iv) seeking or encouraging others to submit nominations for the
election or removal of directors; (v) seeking, alone or in concert with others, representation on the Board, except as expressly permitted by the Cooperation Agreement; (vi) advising, encouraging or influencing any person with respect to
the voting of (or execution of a proxy or written consent in respect of) or disposition of any securities of the Company; (vii) making stockholder proposals at any annual or special meeting of stockholders; (viii) calling, or supporting
another stockholders call of, any meeting of stockholders; (ix) initiating, encouraging or participating in any vote no, withhold or similar campaign relating to the Company; (x) acquiring any additional
securities of the Company or any rights decoupled from the underlying securities of the Company, except pursuant to the Tax Benefits Plan Exemption; (xi) publicly announcing or otherwise publicly disclosing an intent to propose or enter into or
agree to enter into, singly or with any other person, directly or indirectly, any form of business combination or acquisition or other transaction relating to a material amount of assets or securities of the Company or any of its subsidiaries;
(xii) providing investment advice with respect to the Companys securities to any person, or providing logistical advice or assistance to any person engaged in a contested solicitation of proxies from the Companys stockholders in
connection with a meeting of stockholders of the Company or the solicitation of written consents from the Companys stockholders; (xiii) instituting, soliciting or joining, as a party, any litigation, arbitration or other proceeding
(including any derivative action) against the Company or any of its future, current or former directors or officers or employees; and (xiv) taking any action, directly or indirectly, to interfere with any employment, consulting, compensation,
indemnification, separation or other agreements, arrangements or understandings, whether written or oral, formal or informal, between the Company and any current or former director or officer of the Company, or which are intended to benefit any
current or former director or officer of the Company.
Pursuant to the Cooperation Agreement, the Investor Group irrevocably withdrew its
(i) advance notice of nomination that it delivered to the Company on February 9, 2018 and any and all amendments and supplements thereto, and (ii) the demand for stockholder records that it delivered to the Company on January 12,
2018, pursuant to Section 220 of the Delaware General Corporation Law, as amended. The Investor Group has also agreed that at each annual and special meeting of stockholders held prior to the expiration of the Standstill Period, the Investor
Group will (i) appear at such stockholders meeting or otherwise cause all shares of Common Stock beneficially owned by each Investor and their respective Affiliates and Associates (as such terms are defined in Rule
12b-2
of the Exchange Act) to be counted as present thereat for purposes of establishing a quorum; (ii) vote, or cause to be voted, all shares of Common Stock beneficially owned by each Investor and their
respective Affiliates and Associates on the Companys proxy card or voting instruction form in favor of (a) each of the directors nominated by the Board and recommended by the Board (and not in favor of any other nominees to serve on the
Board), and (b) except in connection with any Opposition Matter (as defined below) or Other Voting Recommendation (as defined below), each of the stockholder proposals listed on the Companys proxy card or voting instruction form as
identified in the Companys definitive proxy statement in accordance with the Boards recommendations, including in favor of all other matters recommended for stockholder approval by the Board, and against all matters that the Board
recommends against stockholder approval; and (iii) not execute any proxy card or voting instruction form in respect of such stockholders meeting other than the proxy card and related voting instruction form being solicited by or on behalf
of the Board. Pursuant to the Cooperation Agreement, in the event that Institutional Stockholder Services Inc. (
ISS
) issues a recommendation with respect to any matter (other than with respect to the election of nominees as
directors to the Board or the removal of directors from the Board) that is different from the recommendation of the Board, each of the Investors shall have the right to vote their shares of Common Stock on the Companys proxy card or voting
instruction form in accordance with the ISS recommendation (the
Other Voting Recommendation
). Under the Cooperation Agreement, Opposition Matter means any of the following transactions, but only to the extent submitted
by the Board to the Companys stockholders for approval: (A) the sale or transfer of a material portion of the Companys assets in one or a series of transactions; (B) the sale or transfer of a material portion of the outstanding
shares of the Companys Common Stock (through a merger, stock purchase, or otherwise); (C) any merger, consolidation, acquisition of control or other business combination; (D) any tender or exchange offer; (E) any dissolution,
liquidation, or reorganization; (F) any amendments or modifications to the Companys Amended and Restated Certificate of Incorporation or the Companys Amended and Restated Bylaws; (G) any changes in the Companys capital
structure (but, for the avoidance of doubt, excluding the ratification of the Tax Benefits Plan and any proposal relating to the adoption, amendment or continuation of any equity incentive plan which shall not be deemed Opposition Matters for
purposes of the Cooperation Agreement); or (H) any other transactions that would result in a Change of Control (as defined in the Cooperation Agreement) of the Company.
Pursuant to the Cooperation Agreement, the Investor Group agreed that the New Directors (and any replacements thereof) will resign and the
Companys obligations under Section 1 of the Cooperation Agreement shall terminate upon the Investor Group taking certain actions specified in the Cooperation Agreement, including, but not limited to actions that violate
the standstill provisions of the Cooperation Agreement, and that in furtherance of the foregoing the New Directors would enter into irrevocable advance letters of resignation. The Company agreed
that the Investor Group shall have the right to suspend its obligations under Section 3 of the Cooperation Agreement if the Company breaches in any material respect its obligations under Section 1 of the Cooperation Agreement.
Pursuant to the Cooperation Agreement, the Investor Group has also agreed that in connection with any action by written consent that is sought
to be taken by any party, other than the Company or the Board, prior to the expiration of the Standstill Period, each of the Investors will not vote and will take all necessary action, including, without limitation, the execution and completion of
any consent revocation card solicited by the Company or the Board, in accordance with the recommendation of the Board, to cause not to be voted, any of their shares of Common Stock beneficially owned by each Investor and/or their respective
Affiliates and Associates on any consent card related to or affecting the removal, replacement, or election of Board members and solicited by any party, other than the Company or the Board.
Pursuant to the Cooperation Agreement, the Investor Group has also agreed that in connection with any demand by a stockholder of the Company
that the Company call a special meeting of stockholders, made prior to the expiration of the Standstill Period, each of the Investors will not vote and will take all necessary action, including, but not limited to, the execution and completion of
any consent revocation card solicited by the Company or the Board in accordance with the recommendation of the Board, to cause not to be voted, any of their shares of Common Stock beneficially owned by each Investor and/or their respective
Affiliates and Associates for any special meeting demand proposed or sought to be made by any party.
The Company and the Investor Group
have also agreed to certain mutual
non-disparagement
and mutual release of claims provisions.
The
foregoing description of the Cooperation Agreement is qualified in its entirety by reference to the Cooperation Agreement, which is filed herewith as Exhibit 10.1 and incorporated herein by reference.