Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement
On June 12, 2016, Symantec Corporation (the Company), S-B0616, a Delaware corporation and a wholly owned subsidiary of the
Company (Merger Sub), and Blue Coat, Inc., a Delaware corporation (Blue Coat), entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which the Company would acquire all of the outstanding
capital stock of Blue Coat through a merger of Merger Sub with and into Blue Coat, with Blue Coat surviving the merger as a wholly owned subsidiary of the Company (the Merger).
Pursuant to the Merger Agreement, and subject to the terms and conditions contained therein, at the closing of the Merger (the
Closing), the Company will pay an aggregate consideration of $4.65 billion in cash based on the estimated Blue Coat debt and cash balances at time of close and before estimated transaction expenses.
Completion of the Merger will be subject to the satisfaction or waiver of customary closing conditions, including, among others, (i) the
approval of the Merger by an affirmative vote of the holders of a majority of the outstanding capital stock of Blue Coat, which approval was effected after execution of the Merger Agreement by written consent of certain Blue Coat stockholders,
(ii) absence of a Material Adverse Effect (as defined in the Merger Agreement) with respect to Blue Coat, (iii) the accuracy of representations and warranties (subject to materiality or Company Material Adverse Effect (as defined in the
Merger Agreement) qualifiers, as applicable), (iv) the absence of any court or governmental order or other legal restraint or prohibition preventing the consummation of the Merger and (v) the expiration of the waiting period or receipt of
approvals under the Hart-Scott-Rodino Act and other applicable antitrust laws. The consummation of the Merger is not subject to a financing condition.
The Merger Agreement contains customary representations and warranties of the Company, Merger Sub and Blue Coat. The Company and Blue Coat
have agreed to various customary covenants and agreements, including, among others, an agreement by Blue Coat to conduct its business in the ordinary course in all material aspects during the period prior to the Closing and not to engage in certain
kinds of transactions during this period. The Merger Agreement provides that Blue Coats outstanding senior notes will be redeemed in accordance with the redemption provisions of the indenture governing the senior notes, and it is presently
anticipated that this redemption would be completed at or about the Closing. The Merger Agreement generally requires each party to use reasonable best efforts to consummate the Merger and related transactions and obtain the required antitrust
approvals, subject to certain limitations.
The Merger Agreement may be terminated at any time prior to the Closing by mutual written
consent of the Company and Blue Coat, and under certain other conditions, including the event that the Merger is not consummated by December 12, 2016.
The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference
to the full text of the Merger Agreement. A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and incorporated herein by reference.
The Merger Agreement and the above description have been included to provide investors and securityholders with information regarding the
terms of the Merger Agreement. They are not intended to provide any other factual information about the Company, Blue Coat, Merger Sub or their respective subsidiaries or affiliates or stockholders. The representations, warranties and covenants
contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; and may be subject to limitations agreed upon by the parties,
including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them that differ from those applicable to investors or securityholders. Investors and
securityholders should be aware that the representations, warranties and covenants or any description thereof may not reflect the actual state of facts or condition of the Company, Blue Coat, Merger Sub or any of their respective subsidiaries,
affiliates, businesses, or stockholders. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement. Accordingly, investors and securityholders should read
the representations and warranties in the Merger Agreement not in isolation but only in conjunction with the other information about the Company and its subsidiaries that the Company includes in reports, statements and other filings it makes with
the U.S. Securities and Exchange Commission (the SEC).
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Term Loan Commitment Letter
In connection with the execution of the Merger Agreement, on June 12, 2016, the Company entered into a commitment letter (the
Commitment Letter) with JPMorgan Chase Bank, N.A., Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Bank PLC, Citigroup Global Market Inc., Wells Fargo Bank, N.A. and Wells Fargo Securities,
LLC (together with its designated affiliates, Commitment Parties), pursuant to which the Commitment Parties committed to provide a term loan facility (the Term Loan Facility) in an aggregate amount of $2.8 billion, consisting
of a $1.8 billion five-year term loan, an $800 million three-year term loan and a $200 million three-year term loan. The commitments of the Commitment Parties to provide the Term Loan Facility are subject to customary conditions, including the
consummation of the Merger, absence of a Material Adverse Effect (as defined in the Merger Agreement) with respect to Blue Coat, the execution and delivery of definitive documentation, the accuracy of certain specified representations and other
customary closing conditions.
Certain of the Commitment Parties who are existing lenders of the Company have agreed to consent to amend
(the Credit Facility Amendments) the Companys existing credit agreement, dated as of May 10, 2016, by and among the Company and the existing lenders parties thereto (the Existing Credit Agreement) to, among other
things, modify certain financial covenants and permit the term loans described above, which amendments would become operative upon the Closing. In the event the Credit Facility Amendments are not approved, the Commitment Parties committed to provide
a $2.0 billion replacement credit facility.
Investment Agreement
On June 12, 2016, the Company entered into an investment agreement (the Investment Agreement) with Bain Capital Fund XI, L.P.
and Bain Capital Europe Fund IV, L.P. (collectively, Bain) and Silver Lake Partners IV Cayman (AIV II), L.P. (Silver Lake, and together with Bain and their respective designated affiliates, the Purchasers),
relating to the issuance to the Purchasers of $1.25 billion aggregate principal amount of 2.0% convertible unsecured notes due 2021 (the Notes). The transactions contemplated by the Investment Agreement (the Investment
Transactions) are expected to close concurrently with the Merger (the Investment Agreement Closing), subject to satisfaction of the conditions set forth in the Investment Agreement.
Issuance of Convertible Notes
The Notes
are expected to be governed by an indenture (the Indenture) between the Company and an institutional trustee, and will bear interest at a rate of 2.0% per annum, payable semiannually in cash. The Notes will mature in 2021 subject to
earlier conversion.
The Notes will be convertible into cash, shares of the Companys common stock (the Common Stock) or
a combination of cash and Common Stock, at the Companys option, at a conversion rate of 48.9860 per $1,000 principal amount of the Notes (which represents an initial conversion price of approximately $20.41 per share), subject to
customary anti-dilution adjustments. Notes that are converted in connection with a Make-Whole Fundamental Change (as defined in the Indenture) are, under certain circumstances, entitled to an increase in the conversion rate.
With certain exceptions, upon a change in control of the Company, the holders of the Notes may require that the Company repurchase all or part
of the principal amount of the Notes at a purchase price equal to the principal amount plus accrued and unpaid interest. The Notes are not redeemable by the Company.
The Indenture will include customary events of default, which may result in the acceleration of the maturity of the Notes under the Indenture.
Board Representation
In connection
with, and subject to, the Investment Agreement Closing, the Company will increase the size of the Companys Board of Directors (the Board) from ten to eleven members and appoint one nominee designated by Bain to the Board. The Bain
nominee will be David Humphrey, managing director of Bain.
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Bains rights to Board representation will terminate under certain circumstances, as
described in the Investment Agreement, including if Bain and its affiliates beneficially own less than 4% of all the Common Stock (on an as-converted basis) then outstanding.
For so long as Bain has rights to nominate a director to the Board, the Company has, subject to the approval of the Nominating and Governance
Committee of the Board, agreed to include such person in its slate of nominees for election to the Board at each of the Companys meetings of stockholders in which directors are to be elected and to use its reasonable efforts to cause the
election of such person.
Standstill and Voting Obligations
Pursuant to the Investment Agreement, the Purchasers have agreed, subject to certain exceptions, that until the earliest of (i) the later
of (A) the date that is six months following such time as (x) in the case of Bain, Bain or its affiliates no longer have a representative or rights to have a representative on the Board and (y) in the case of Silver Lake, Silver Lake
or its affiliates no longer have a representative or rights to have a representative on the Board and (B) the three-year anniversary of the Investment Agreement Closing, (ii) the effective date of a change in control of the Company and
(iii)(x) in the case of Bain, 90 days after Bain does not beneficially own any Notes or shares of Common Stock other than any shares issued to any Bain designee as compensation for their service on the Board and (y) in the case of Silver Lake,
90 days after Silver Lake does not beneficially own any Notes or shares of Common Stock other than any shares issued to any Silver Lake designee as compensation for their service on the Board (the Standstill Period), the Purchasers will
not, among other things: (i) acquire any securities of the Company if, immediately after such acquisition, the Purchaser would collectively own in the aggregate more than 12.5% of the then outstanding voting securities of the Company,
(ii) propose or seek to effect any tender or exchange offer, merger or other business combination involving the Company or its securities, or make any public statement with respect to such transaction, (iii) make, or in any way participate
in any proxy contest or other solicitation of proxies, (iv) sell, transfer or otherwise dispose of any voting securities of the Company to any person who is (or will become upon consummation of such sale, transfer or other
disposition) a beneficial owner of 12.5% or more of the outstanding voting securities of the Company or (v) call or seek to call any meeting of stockholders or other referendum or consent solicitation.
In addition, each Purchaser has agreed to vote any shares of Common Stock beneficially owned by it during the Standstill Period in accordance
with the recommendations of the Board at each meeting of stockholders of the Company or pursuant to any action by written consent.
Transfer and
Conversion Restrictions
The Investment Agreement restricts the Purchasers ability to transfer or convert the Notes to Common
Stock, subject to certain exceptions specified in the Investment Agreement and summarized below.
Prior to the earlier of (i) the
12-month anniversary of the Investment Agreement Closing and (ii) the effective date of a change of control of the Company, the Purchasers will be restricted from transferring or entering into an agreement that transfers the economic
consequences of ownership of the Notes or converting the Notes. These restrictions shall not apply to, among others transfers, pledges of the Notes or the satisfaction of obligations related to pledged Notes, in each case in connection with one or
more bona fide margin loans.
Registration Rights
Subject to certain limitations, the Investment Agreement provides the Purchasers with certain registration rights for the Notes, the 2.5%
convertible senior notes due 2021 issued by the Company under the indenture dated March 4, 2016 (the Other Notes), the shares of Common Stock issuable upon conversion of the Notes or the Other Notes and certain other shares of
Common Stock that may be held by the Purchasers.
The foregoing description of the Investment Agreement is qualified in its entirety by
reference to the Investment Agreement (including the form of Indenture attached as Exhibit A thereto), which is attached hereto as Exhibit 2.2 and incorporated herein by reference.
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