Item 1.01. |
Entry into a Material Definitive Agreement. |
Investment Agreement
On December 8, 2022, Express, Inc., a Delaware corporation (the “Company”), entered into an investment agreement (the “Investment Agreement”) with WH Borrower, LLC, a Delaware limited liability company (“WHP”), relating to the issuance and sale of shares of the Company’s common stock, par value $0.01 (the “Common Stock”), in a private placement to WHP. Pursuant to the Investment Agreement, the Company will issue and sell 5.4 million shares of Common Stock to WHP (the “Purchased Shares”) for a purchase price of $4.60 per share, or an aggregate purchase price of approximately $25.0 million (the “Stock Purchase”).
The closing of the Stock Purchase (the “Closing”) is subject to lender consent and the satisfaction or waiver of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Company will use the proceeds from the Stock Purchase to (i) repay the Company’s outstanding term loan, (ii) fund the Joint Venture’s (as defined below) first year guaranteed minimum royalty of $60.0 million pursuant to the License Agreement (as defined below), (iii) pay costs, fees and expenses incurred in connection with the Investment Agreement and other associated transactions, and (iv) for general corporate purposes, including working to increase the Company’s scale and profitability and to pursue acquisitions. The Investment Agreement contains customary representations, warranties and covenants of the Company and WHP and provides that the Company and WHP will enter into the Registration Rights Agreement (as defined below) in connection with the Closing.
WHP Director
Pursuant to the Investment Agreement, in connection with the Closing of the Stock Purchase, Mr. Yehuda Shmidman, Chairman and Chief Executive Officer of WHP Global (the “Investor Director”), will be appointed to the Company’s Board of Directors (the “Board”). Until the occurrence of the Fall-Away of Investor Board Rights (as defined in the Investment Agreement), in the event of the death, disability, resignation or removal of the Investor Director as a member of the Board, WHP may designate a replacement designee reasonably acceptable to the Board (and the Compensation and Governance Committee of the Board). Until the occurrence of the Fall-Away of Investor Board Rights, at any annual meeting of the Company’s stockholders at which the term of the Investor Director (or any subsequent replacement of the Investor Director) shall expire, WHP shall have the right to designate one director, which director shall be nominated by the Board for election at such annual meeting. Upon the occurrence of the Fall-Away of Investor Board Rights, the Investor Director shall immediately resign from the Board.
Restrictions on Transfer
Subject to certain exceptions set forth in the Investment Agreement, neither WHP nor any of its affiliates may transfer any of the Purchased Shares to any unaffiliated person until July 1, 2026, subject to certain exceptions set forth in the Investment Agreement. WHP and its affiliates are also restricted from transferring Purchased Shares to a Prohibited Transferee (as defined in the Investment Agreement) or from tendering any shares into any tender offer not approved by the Board.
Standstill
Except as otherwise expressly permitted in the Investment Agreement and subject to certain exceptions, WHP agrees that until the later of (a) the Fall-Away of Investor Board Rights and (b) the 12-month anniversary of Closing, without the prior written approval of the Board, WHP is subject to certain customary standstill restrictions, including prohibitions on (i) acquiring or proposing to acquire securities or assets of the Company or its subsidiaries, (ii) participating in any solicitation of proxies or seeking to advise or influence any person with respect to voting of Company securities, (iii) demanding a copy of the Company’s stock ledger list of stockholders, (iv) effecting a tender offer, merger or acquisition of the Company, (v) seeking to control or influence the Company, (vi) initiating or joining certain actions against the Company, (vii) increasing its beneficial ownership to more than 15%, (viii) taking any action that would require a public announcement regarding the possibility of a transaction or certain events and (ix) joining or participating in a “group” (as defined in Sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with any third party.
Registration Rights Agreement
At the Closing, in connection with the Investment Agreement, the Company and WHP will enter into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company will grant WHP certain registration rights. Under the Registration Rights Agreement, the Company is required to register the resale of the Purchased Shares by July 1, 2026.