Proxy Statement - Merger or Acquistion (definitive) (defm14a)

Date : 12/06/2018 @ 9:10PM
Source : Edgar (US Regulatory)
Stock : Imperva, Inc. (IMPV)
Quote : 55.47  -0.05 (-0.09%) @ 1:00AM
Imperva, Inc. share price Chart

Proxy Statement - Merger or Acquistion (definitive) (defm14a)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant   ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

Imperva, Inc.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box)

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

 

  (2)  

Aggregate number of securities to which transaction applies:

 

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

  (4)  

Proposed maximum aggregate value of transaction:

 

 

  (5)  

Total fee paid:

 

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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IMPERVA, INC.

3400 Bridge Parkway

Redwood Shores, California 94065

December 6, 2018

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of Imperva, Inc. (“Imperva” or “we,” “us,” or “our”) to be held on January 8, 2019, at 10:00 a.m., Pacific Time, at our headquarters located at 3400 Bridge Parkway, Redwood Shores, California 94065.

At the special meeting, you will be asked to consider and vote upon a proposal to adopt an agreement and plan of merger (the “Merger Agreement”) by and among Imperial Purchaser, LLC (“Newco”), Imperial Merger Sub, Inc., a wholly owned subsidiary of Newco, and Imperva.

If the Merger Agreement is adopted with the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon and the merger is completed, Imperva will become a wholly owned subsidiary of Newco and each share of our common stock that you own as of the date of the merger will be converted into the right to receive $55.75 in cash, without interest and less any applicable withholding taxes (unless you have properly demanded your statutory rights of appraisal with respect to the merger), which represents a premium of: (1) approximately 21% over the average closing price of our common stock over the 30 day trading period prior to and including October 9, 2018, the last trading day before the public announcement of the merger and (2) approximately 29% over the closing price of our common stock on October 9, 2018.

Our board of directors (“Board”) carefully considered a number of factors in evaluating the terms of the Merger Agreement. Based on such consideration, our Board unanimously determined that the terms and conditions of the merger and the Merger Agreement are advisable, fair to and in the best interests of Imperva and our stockholders. Accordingly, our Board has unanimously approved the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, and unanimously recommends that you vote “FOR” the proposal to adopt of the Merger Agreement, “FOR” the compensation proposal and “FOR” the adjournment proposal.

The enclosed proxy statement provides detailed information about the special meeting, the Merger Agreement, the merger and the other proposals to be voted on at the special meeting. A copy of the Merger Agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement carefully in its entirety. The proxy statement is dated December 6, 2018, and is first being mailed to Imperva stockholders on or about December 6, 2018.

Your vote is very important, regardless of the number of shares you own. The proposal to adopt the Merger Agreement must be approved by the holders of a majority of the shares of our common stock entitled to vote at the special meeting. Only stockholders who owned shares of our common stock at the close of business on December 4, 2018, the record date for the special meeting, will be entitled to vote at the special meeting.

To vote your shares, you may submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card, return your proxy card using the postage prepaid envelope provided, or attend the special meeting and vote in person. If your shares are held in the name of a brokerage firm, bank, trust or other nominee, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy, executed in your favor, from that record holder in order to vote at the special meeting. Even if you plan to attend the special meeting, we urge you to promptly submit a proxy for your shares via the Internet or by telephone or by completing, signing, dating and returning the enclosed proxy card.

If you fail to submit your proxy via Internet or telephone, return your proxy card, attend the special meeting and vote in person, or give voting instructions to your brokerage firm, bank, trust or other nominee, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement.


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If you attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person.

Thank you for your continued support of Imperva.

 

 Sincerely,
 

/s/ Christopher Hylen

 

CHRISTOPHER S. HYLEN

Chief Executive Officer

Redwood Shores, California

December 6, 2018

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the merger, passed upon the merits or fairness of the Merger Agreement or the merger or determined if the accompanying proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated December 6, 2018 and, together with the enclosed form of proxy card, is first being mailed to Imperva stockholders on or about December 6, 2018.


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IMPERVA, INC.

3400 Bridge Parkway

Redwood Shores, California 94065

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of Imperva, Inc.:

Imperva, Inc., a Delaware corporation (“Imperva” or “we,” “us,” or “our”), will hold a special meeting of stockholders at our headquarters located at 3400 Bridge Parkway, Redwood Shores, California 94065, at 10:00 a.m., Pacific Time, on January 8, 2019, to consider and vote upon the following proposals:

 

  1.

To adopt the Agreement and Plan of Merger, dated as of October 10, 2018, by and among Imperial Purchaser, LLC, a Delaware limited liability company (“Newco”), Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Newco (“Merger Sub”), and Imperva, as such agreement may be amended from time to time (the “Merger Agreement”);

 

  2.

To approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Imperva’s named executive officers that is based on or otherwise relates to the merger (“compensation proposal”); and

 

  3.

To approve the adjournment of the special meeting to a later date, if our board of directors (“Board”) determines that it is necessary or appropriate and is permitted by the Merger Agreement, to solicit additional proxies if there is not a quorum present or represented by proxy at the time of the special meeting, or to give holders of our common stock additional time to evaluate new material information or disclosure (“adjournment proposal”).

Only record holders of our common stock at the close of business on December 4, 2018 are entitled to receive notice of, and will be entitled to vote at, the special meeting, including any adjournments or postponements of the special meeting. Your vote is important, regardless of the number of shares of our common stock you own.

The votes required to approve each proposal are as follows:

 

  1.

The Merger Agreement must be approved by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote.

 

  2.

The compensation and adjournment proposals must be approved by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote that are present in person or represented by proxy at the special meeting and voted for or against the proposal.

In the event that a quorum is not present in person or represented by proxy at the special meeting, it is expected that our Board will recommend adjournment of the special meeting to solicit additional proxies if permitted by the Merger Agreement. If there is not a quorum of stockholders at the special meeting and the vote with respect to the adjournment proposal fails, our Board, if permitted by the Merger Agreement, may set a new record date and meeting date for a special meeting to consider the Merger Agreement, compensation proposal and adjournment proposal.

If the merger is completed, Imperva stockholders who (1) submit a written demand for an appraisal of their shares prior to the stockholder vote on the adoption of the Merger Agreement, (2) do not vote in favor of the adoption of the Merger Agreement, (3) take certain actions and meet certain conditions under Delaware law and (4) do not thereafter withdraw their demand for appraisal of their shares of our common stock or otherwise lose their appraisal rights, in each case in accordance with Delaware law, will have the right to have such shares appraised by the Delaware Court of Chancery and to receive payment of the fair value of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of


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interest, if any, as determined by the court. For a more detailed discussion of your appraisal rights, see the section of this proxy statement captioned “The Merger—Appraisal Rights” and Annex C to this proxy statement.

You are cordially invited to attend the special meeting in person. Whether or not you expect to attend the special meeting, please submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card or return your proxy card using the postage prepaid envelope provided as promptly as possible in order to ensure your representation at the special meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the special meeting. Please note, however, that if your shares are held in the name of your brokerage firm, bank, trust or other nominee and you wish to vote at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy issued in your name from that record holder.

If you sign, date and return your proxy card or submit a proxy via the Internet or by telephone without indicating how you wish to vote, your proxy will be voted “FOR” the proposal to adopt the Merger Agreement, “FOR” the compensation proposal and “FOR” the adjournment proposal. If you do attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person. You may revoke your proxy in the manner described in the enclosed proxy statement at any time before it has been voted at the special meeting.

Our Board unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the compensation proposal and “FOR” the adjournment proposal.

The merger is described in the accompanying proxy statement, which we urge you to read carefully. A copy of the Merger Agreement is attached as Annex A to the proxy statement. If you have any questions or need assistance in voting your shares of our common stock, please contact our proxy solicitor, D.F. King & Co., Inc., via telephone toll-free at (877) 283-0324 or via email at impv@dfking.com.

 

 By Order of the Board of Directors,
 

/s/ Shulamite White

 

SHULAMITE WHITE

General Counsel and Assistant Secretary

Redwood Shores, California

December 6, 2018


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YOUR VOTE IS IMPORTANT

Your vote is very important, regardless of the number of shares you own. The proposal to adopt the Merger Agreement must be approved by the holders of a majority of the shares of our common stock entitled to vote at the special meeting. To vote your shares, you can submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on the proxy card, return your proxy card using the postage prepaid return envelope provided, or attend the special meeting and vote in person. We urge you to promptly submit a proxy for your shares via the Internet or by telephone or by completing, signing, dating and returning the enclosed proxy card.

If you fail to submit your proxy via Internet or telephone, return your proxy card, attend the special meeting and vote in person, or give voting instructions to your brokerage firm, bank, trust or other nominee, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement.

If your shares are held in the name of a brokerage firm, bank, trust or other nominee, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy, executed in your favor, from that record holder in order to vote at the special meeting.

REFERENCES FOR ADDITIONAL INFORMATION

If you have any questions about this proxy statement, the special meeting, the merger or need assistance with voting procedures, you should contact:

D.F. King & Co., Inc.

48 Wall Street

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

Stockholders (All Others) Call: (877) 283-0324

Email: impv@dfking.com


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IMPERVA, INC.

PROXY STATEMENT

TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     1  

FORWARD-LOOKING INFORMATION

     9  

SUMMARY

     10  

Parties Involved in the Merger

     10  

The Merger

     11  

Treatment of Options and Restricted Stock Units

     11  

Treatment of Purchase Rights under the Employee Stock Purchase Plan

     12  

Financing of the Merger

     13  

Limited Guaranty

     13  

Conditions to the Closing of the Merger

     13  

Regulatory Approvals Required for the Merger

     14  

Recommendation of the Board of Directors

     14  

Fairness Opinion of Qatalyst Partners LP

     14  

Interests of Imperva’s Directors and Executive Officers in the Merger

     15  

The Voting Agreements

     15  

Appraisal Rights

     16  

Material U.S. Federal Income Tax Consequences of the Merger

     16  

Go-Shop Period

     17  

Alternative Acquisition Proposals

     17  

Termination of the Merger Agreement

     18  

Termination Fees and Expense Reimbursement

     19  

Market Prices and Dividend Data

     20  

Effect on Imperva if the Merger is Not Completed

     20  

The Special Meeting

     20  

THE SPECIAL MEETING

     22  

Date, Time and Place

     22  

Purpose of the Special Meeting

     22  

Record Date; Shares Entitled to Vote; Quorum

     22  

Vote Required

     22  

Voting by Imperva Directors and Executive Officers

     23  

Voting of Proxies

     23  

Revocability of Proxies

     23  

Board’s Recommendations

     24  

Effect of Abstentions and Broker Non-Votes

     24  

Solicitation of Proxies

     24  

Stockholder List

     25  

THE MERGER

     26  

Parties Involved in the Merger

     26  

Effect of the Merger

     26  

Effect on Imperva if the Merger is Not Completed

     27  

Merger Consideration

     27  

Background of the Merger

     28  

Recommendation of the Board of Directors and Reasons for the Merger

     36  

Fairness Opinion of Qatalyst Partners LP

     42  

Management Projections

     50  

Interests of Imperva’s Directors and Executive Officers in the Merger

     52  

Litigation Relating to the Merger

     60  

The Voting Agreements

     61  


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     Page  

Financing of the Merger

     62  

Limited Guaranty

     63  

Closing and Effective Time

     64  

Appraisal Rights

     64  

Accounting Treatment

     69  

Material U.S. Federal Income Tax Consequences of the Merger

     69  

Regulatory Approvals Required for the Merger

     72  

THE MERGER AGREEMENT

     74  

Explanatory Note Regarding the Merger Agreement

     74  

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

     74  

Closing and Effective Time

     75  

Marketing Period

     75  

Merger Consideration

     75  

Treatment of Purchase Rights under the 2011 Employee Stock Purchase Plan

     76  

Exchange and Payment Procedures

     77  

Representations and Warranties

     77  

Conduct of Business Pending the Merger

     80  

Alternative Acquisition Proposals

     82  

The Board of Directors’ Recommendation; Company Board Recommendation Change

     84  

Employee Benefits

     86  

Efforts to Close the Merger

     87  

Indemnification and Insurance

     88  

Other Covenants

     88  

Conditions to the Closing of the Merger

     89  

Termination of the Merger Agreement

     90  

Termination Fees and Expense Reimbursement

     92  

Specific Performance

     93  

Fees and Expenses

     94  

Amendment

     94  

Governing Law

     94  

MARKET PRICES AND DIVIDEND DATA

     95  

Dividends

     95  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     96  
ADVISORY VOTE REGARDING MERGER-RELATED COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS      98  

Compensation Paid to Named Executive Officers in Connection with the Merger

     98  

Effect of Advisory Vote

     98  

Vote Required and Board Recommendation

     98  

ADJOURNMENT OF THE SPECIAL MEETING

     99  

Adjournment of the Special Meeting

     99  

Vote Required and Board Recommendation

     99  

OTHER MATTERS

     100  

FUTURE STOCKHOLDER PROPOSALS

     100  

WHERE YOU CAN FIND MORE INFORMATION

     101  

INCORPORATION BY REFERENCE

     101  

MISCELLANEOUS

     102  


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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following Q&A is intended to address some commonly asked questions about the special meeting of stockholders and the merger. These questions and answers may not address all questions that may be important to you as an Imperva stockholder. We urge you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement.

Except as otherwise specifically noted in this proxy statement, “we,” “our,” “us” and similar words in this proxy statement refer to Imperva, Inc. In addition, throughout this proxy statement, we refer to Imperva, Inc., as “Imperva,” to Imperial Merger Sub, Inc. as “Merger Sub,” to Imperial Purchaser, LLC as “Newco,” and to Thomas Bravo, LLC as “Thoma Bravo.”

 

Q:

Why am I receiving this proxy statement?

 

A:

You are receiving this proxy statement because you were an Imperva stockholder as of December 4, 2018, the record date for the special meeting. To complete the merger, Imperva’s stockholders holding a majority of the shares of our common stock outstanding as of December 4, 2018, the record date for the special meeting, must vote to adopt the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to this proxy statement.

You are being solicited to vote in favor of the proposal to adopt the Merger Agreement and to approve the compensation and adjournment proposals to be voted on at the special meeting.

 

Q:

What will happen to my Imperva common stock as a result of the merger?

 

A:

If the merger is completed, each share of our common stock that you hold at the effective time of the merger will be converted into the right to receive $55.75 in cash, without interest, less any withholding taxes required by applicable law. This does not apply to shares of our common stock held by any Imperva stockholders who have properly demanded their appraisal rights under Delaware law. See the section of this proxy statement captioned “The Merger—Appraisal Rights”.

 

Q:

What will happen to Imperva generally as a result of the merger?

 

A:

If the merger is completed, Imperva will cease to be a stand-alone public company and will become a wholly owned subsidiary of Newco, which is a Delaware corporation formed by an affiliate of Thoma Bravo. As a result, you will no longer have any ownership interest in Imperva. Upon completion of the merger, shares of our common stock will no longer be listed on any stock exchange or quotation system, including The Nasdaq Global Market. In addition, following the completion of the merger, the registration of our common stock and our reporting obligations under the Securities Exchange Act of 1934, as amended (“Exchange Act”), will be terminated.

 

Q:

What are the U.S. federal income tax consequences of the merger to me?

 

A:

The receipt of cash in exchange for shares of our common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. Generally, you will recognize gain or loss equal to the difference between the amount of cash you receive and the adjusted tax basis of your shares of our common stock. If you are a U.S. holder, you generally will be subject to U.S. federal income tax on any gain recognized in connection with the merger. If you are a non-U.S. holder, you generally will not be subject to U.S. federal income tax on any gain recognized in connection with the merger unless you have certain connections to the United States. The tax consequences of the merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the merger will affect you.

 

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  For a more detailed summary of the U.S. federal income tax consequences of the merger, see the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”.

 

Q:

Am I entitled to appraisal rights in connection with the merger?

 

A:

Statutory appraisal rights under Delaware law in connection with the merger will be available to stockholders who (1) submit a written demand for an appraisal of their shares prior to the stockholder vote on the adoption of the Merger Agreement, (2) do not vote in favor of the adoption of the Merger Agreement, (3) take certain actions and meet certain conditions under Delaware law and (4) do not thereafter withdraw their demand for appraisal of their shares of our common stock or otherwise lose their appraisal rights, in each case in accordance with Delaware law. For a more detailed discussion of your appraisal rights, see the section of this proxy statement captioned “The Merger—Appraisal Rights”.

A copy of the full text of Section 262 of the Delaware General Corporation Law (“DGCL”) is included as Annex C to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights.

 

Q:

When do you expect the merger to be completed?

 

A:

We are working toward completing the merger as quickly as possible; however, the merger is subject to various closing conditions, including Imperva stockholder approval and obtaining approval by foreign investment authorities in Australia. We cannot assure you that all conditions to the merger will be satisfied or, if satisfied, the date by which they will be satisfied.

 

Q:

When will I receive the Merger Consideration for my shares of Imperva common stock?

 

A:

After the merger is completed, you will receive written instructions, including a letter of transmittal that explain how to exchange your shares for the Merger Consideration payable in the merger. When you properly return and complete the required documentation described in the written instructions, you will receive from the payment agent a payment of the cash consideration for your shares.

The Special Meeting

 

Q:

When and where will the special meeting of stockholders be held?

 

A:

The special meeting of Imperva stockholders will be held at our headquarters located at 3400 Bridge Parkway, Redwood Shores, California 94065, at 10:00 a.m., Pacific Time, on January 8, 2019.

 

Q:

What are the proposals that will be voted on at the special meeting?

 

A:

You will be asked to consider and vote on (1) a proposal to adopt the Merger Agreement; (2) a proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the merger (“compensation proposal”); and (3) a proposal to adjourn the special meeting to a later date or time, if our Board determines that it is necessary or appropriate and is permitted by the Merger Agreement, to solicit additional proxies if there is not a quorum present or represented by proxy at the time of the special meeting, or to give holders of our common stock additional time to evaluate new material information or disclosure (“adjournment proposal”).

 

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Q:

How does our Board recommend that I vote on the proposals?

 

A:

Our Board unanimously approved the Merger Agreement and determined that the merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Imperva and our stockholders and unanimously recommends that you vote:

 

   

FOR ” the proposal to adopt the Merger Agreement;

 

   

FOR ” the compensation proposal; and

 

   

FOR ” the adjournment proposal.

 

Q:

Who is entitled to attend and vote at the special meeting?

 

A:

The record date for the special meeting is December 4, 2018. If you own shares of our common stock as of the close of business on the record date, you are entitled to notice of, and to vote at, the special meeting or any adjournment of the special meeting. As of the record date, there were approximately 35,436,746 shares of our common stock issued and outstanding held collectively by approximately 17 stockholders of record.

 

Q:

How many votes are required to adopt the Merger Agreement?

 

A:

Under Delaware law, adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote on the Merger Agreement.

If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote “ AGAINST ” the proposal to adopt the Merger Agreement .

 

Q:

How many votes are required to approve the compensation proposal?

 

A:

In accordance with the rules of the Securities and Exchange Commission (“SEC”), stockholders have the opportunity to cast a non-binding, advisory vote with respect to compensation that may be paid or become payable to our named executive officers based upon or otherwise relating to the merger, as reported in the “golden parachute compensation” table on page 58 of this proxy statement and the accompanying footnotes and narrative disclosure. The vote to approve the compensation proposal is advisory and therefore will not be binding on Imperva or Newco, nor will it overrule any prior decision or require our Board (or any committee of our Board) to take any action, regardless of whether the merger is completed. The compensation that may be paid in connection with the proposed merger is contractual with respect to Imperva’s named executive officers. Accordingly, if Imperva’s stockholders adopt the Merger Agreement and the merger is completed, the compensation based on or otherwise relating to the merger will be paid to Imperva’s named executive officers in accordance with the terms of their compensation agreements and arrangements, regardless of whether Imperva’s stockholders approve the compensation proposal.

Advisory approval of the compensation proposal requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote that are present in person or represented by proxy at the special meeting and voted for or against the proposal.

If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the compensation proposal.

 

Q:

How many votes are required to adopt the adjournment proposal?

 

A:

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote that are present in person or represented by proxy at the special meeting and voted for or against the proposal.

 

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If you abstain from voting, fail to cast your vote in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the adjournment proposal.

 

Q:

Why is my vote important? How are votes counted? What happens if I abstain?

 

A:

If you do not submit a proxy or voting instructions or vote in person at the special meeting, it will be more difficult for us to obtain the necessary quorum to hold the special meeting.

Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “FOR” and “AGAINST” votes and abstentions.

If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote against the proposal to adopt the Merger Agreement but will have no effect on the compensation proposal or the adjournment proposal.

 

Q:

Do any Imperva directors or executive officers have interests in the merger that may differ from those of Imperva stockholders?

 

A:

In considering the recommendation of our Board with respect to the Merger Agreement, you should be aware that our directors and executive officers have interests in the merger that may be different from, or in addition to, those of our stockholders generally. These interests may create potential conflicts of interest. Our Board was aware that these interests existed and considered them, among other matters, when it approved the Merger Agreement and made its recommendation that our stockholders adopt the Merger Agreement. You should read the section of this proxy statement captioned “The Merger—Interests of Imperva’s Directors and Executive Officers in the Merger” for more information.

 

Q:

What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement, including the annexes and the other documents referred to in this proxy statement, please vote your shares in one of the manners described below. You have one vote for each share of our common stock you own as of the record date.

 

Q:

How do I vote if I am a stockholder of record?

 

A:

You may vote:

 

   

by following the Internet voting instructions printed on your proxy card;

 

   

by following the telephone voting instructions printed on your proxy card;

 

   

by completing, signing and dating each proxy card you receive and returning it in the enclosed postage-paid envelope; or

 

   

by appearing and casting your vote in person at the special meeting.

If you are voting via the Internet or by telephone, your voting instructions must be received by the date and time indicated on the applicable proxy card(s).

Voting via the Internet, by telephone or by mailing in your proxy card will not prevent you from voting in person at the special meeting. You are encouraged to submit a proxy via the Internet, by telephone or by mail even if you plan to attend the special meeting in person, to ensure that your shares of our common stock are present in person or represented at the special meeting.

 

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If your shares are held by a brokerage firm, bank, trust or other nominee, you may direct your brokerage firm, bank, trust or other nominee to submit a proxy card by following the instructions that the brokerage firm, bank, trust or other nominee provides to you with these materials. If you hold shares through a brokerage firm, bank, trust or other nominee and wish to vote your shares in person at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee on how to vote yours shares or obtain a proxy from your brokerage firm, bank, trust or other nominee and present it to the inspector of elections with your ballot when you vote at the special meeting.

If you return a properly signed and dated proxy card but do not mark the box showing how you wish to vote, your shares will be voted “ FOR ” the proposal to adopt the Merger Agreement, “ FOR ” the compensation proposal and “ FOR ” the adjournment proposal.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares are registered directly in your name with our transfer agent, Computershare, Inc., you are considered, with respect to those shares, to be the “stockholder of record.” If you are a stockholder of record, this proxy statement and your proxy card have been sent directly to you by or on behalf of Imperva.

If your shares are held through a brokerage firm, bank, broker or other nominee, you are considered the “beneficial owner” of shares of common stock held in “street name.” If you are a beneficial owner of shares of common stock held in “street name,” this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your brokerage firm, bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares in person by ballot at the special meeting unless you obtain a “legal proxy” from your brokerage firm, bank, broker or other nominee giving you the right to vote your shares at the special meeting.

 

Q:

How do I vote if my shares are held by my brokerage firm, bank, trust or other nominee?

 

A:

If your shares are held in a brokerage account or by another nominee, such as a bank or trust, then the brokerage firm, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you still are considered to be the beneficial owner of those shares, with your shares being held in “street name.” “Street name” holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank, trust or other nominee how to vote their shares. Your brokerage firm, bank, trust or other nominee will only be permitted to vote your shares for you at the special meeting if you instruct it how to vote. Therefore, it is important that you promptly follow the directions provided by your brokerage firm, bank, trust or other nominee regarding how to instruct them to vote your shares. If you wish to vote in person at the special meeting, you must bring a proxy from your brokerage firm, bank, trust or other nominee authorizing you to vote at the special meeting.

In addition, because any shares you may hold in “street name” will be deemed to be held by a different stockholder than any shares you hold of record, shares held in “street name” will not be combined for voting purposes with shares you hold of record. To be sure your shares are voted, you should instruct your brokerage firm, bank, trust or other nominee to vote your shares that you hold in “street name.” Shares held by a corporation or business entity must be voted by an authorized officer of the entity.

 

Q:

May I change my vote after I have delivered my proxy?

 

A:

Yes. If you are the stockholder of record of our common stock, you have the right to change or revoke your proxy at any time before the vote being taken at the special meeting:

 

   

by delivering to our General Counsel a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

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by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy, so you must vote in person at the meeting to revoke your proxy);

 

   

by signing and delivering a new proxy, relating to the same shares of our common stock and bearing a later date; or

 

   

by submitting another proxy by telephone or via the Internet after the date of your prior proxy and by the date and time indicated on the applicable proxy card(s).

If you are a “street name” holder of our common stock, you should contact your brokerage firm, bank, trust or other nominee to obtain instructions as to how to change or revoke your proxy.

 

Q:

What is the deadline for voting my shares?

 

A:

If you are a stockholder of record, your proxy must be received via the Internet or by telephone by 1:00 a.m. Eastern time on January 8, 2019, in order for your shares to be voted at the special meeting. However, if you are a stockholder of record, you may instead mark, sign, date and return the enclosed proxy card, which must be received before the polls close at the special meeting, in order for your shares to be voted at the special meeting. If you are a beneficial owner, please read the voting instructions provided by your bank, broker, trust or other nominee for information on the deadline for voting your shares.

 

Q:

Should I send in my stock certificates now?

 

A:

NO. PLEASE DO NOT SEND IN YOUR CERTIFICATES NOW. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of our common stock for the Merger Consideration. If your shares are held in “street name” by your brokerage firm, bank, trust or other nominee, you will receive instructions from your brokerage firm, bank, trust or other nominee as to how to effect the surrender of your “street name” shares in exchange for the Merger Consideration.

 

Q:

What happens if I sell my shares of Imperva common stock after the record date but before the special meeting?

 

A:

The record date for stockholders entitled to vote at the special meeting is earlier than the date of the special meeting and the expected closing date of the merger. If you transfer your shares of our common stock after the record date but before the special meeting, you will, unless special arrangements are made, retain your right to vote at the special meeting but will transfer the right to receive the Merger Consideration to the person to whom you transfer your shares.

In addition, if you sell your shares prior to the special meeting or prior to the effective time of the merger, you will not be eligible to exercise your appraisal rights in respect of the merger. For a more detailed discussion of your appraisal rights and the requirements for properly demanding your appraisal rights, see the section of this proxy statement captioned “The Merger—Appraisal Rights” and Annex C to this proxy statement.

 

Q:

What happens if the proposal to adopt the Merger Agreement is not approved by our stockholders or if the merger is not completed for any other reason?

 

A:

If the proposal to adopt the Merger Agreement is not approved by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares in connection with the merger. Instead, we will remain a stand-alone public company and our common stock will continue to be listed and traded on The Nasdaq Global Market. Under specified circumstances, we may be required to pay to Newco a termination fee and to reimburse Newco for certain transaction expenses, as described

 

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  below under the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Expense Reimbursement”. Upon termination of the Merger Agreement under certain other specified circumstances, Newco may be required to pay Imperva a termination fee, as described below under the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Expense Reimbursement”.

 

Q:

How do our directors and executive officers intend to vote their shares of common stock in respect of the merger proposal?

 

A:

Our directors, executive officers and certain other officers have executed voting agreements obligating them to vote all of their shares of common stock for the approval of each of the merger proposal, the compensation proposal and the adjournment proposal. We currently expect that our directors, executive officers and such other officers will vote their shares of common stock in compliance with their obligations under the voting agreements. At the close of business on the record date for the special meeting, directors, executive officers and such other officers of Imperva and their affiliates were entitled to vote 280,248 shares of common stock at the special meeting, or approximately 0.8% of the shares of common stock outstanding on such date.

 

Q:

What happens if I return my proxy card but I do not indicate how to vote?

 

A:

If you properly execute and return your proxy card but do not include instructions on how to vote, your shares of common stock will be voted “FOR” the proposal to adopt the Merger Agreement, “FOR” the approval of the compensation proposal and “FOR” the approval of the adjournment proposal. We do not currently intend to present any other proposals for consideration at the special meeting.

 

Q:

Do I need to attend the special meeting?

 

A:

No. While our stockholders of record may exercise their right to vote their shares in person at the special meeting, it is not necessary for you to attend the special meeting in order to vote your shares of common stock.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards, if your shares are registered differently or are held in more than one account. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please sign, date and return (or grant your proxy electronically over the Internet or by telephone for) each proxy card and voting instruction form that you receive to ensure that all of your shares are voted.

 

Q:

Where can I find the voting results of the special meeting?

 

A:

If available, Imperva may announce preliminary voting results at the conclusion of the special meeting. Imperva intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that Imperva files with the SEC are publicly available when filed. For more information, see the section of this proxy statement captioned “Where You Can Find More Information.”

 

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Q:

Who can answer further questions?

 

A:

For additional questions about the merger, assistance in submitting proxies or voting shares of our common stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact our proxy solicitor at:

D.F. King & Co., Inc.

48 Wall Street

New York, NY 10005

Banks and Brokers Call: 212-269-5550

Stockholders (All Others) Call: (877) 283-0324

Email: impv@dfking.com

If your brokerage firm, bank, trust or other nominee holds your shares in “street name,” you should also call your brokerage firm, bank, trust or other nominee for additional information.

 

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FORWARD-LOOKING INFORMATION

This proxy statement contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, that are based on our current expectations, assumptions, beliefs, estimates and projections about the proposed merger, Imperva and our industry. The forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “project,” “should,” “could” and similar expressions. Factors that may affect those forward-looking statements include, among other things:

 

   

the parties’ inability to consummate the merger due to failure to satisfy conditions to the completion of the transaction, including the receipt of stockholder approval or the regulatory approvals required for the transaction, which may not be obtained on the terms expected, on the anticipated schedule or at all;

 

   

the failure to recruit or retain Imperva employees;

 

   

the risk that the Merger Agreement may be terminated in circumstances that require us to pay Newco a termination fee of up to $60 million in connection therewith;

 

   

the costs, fees, expenses and charges we incur related to the merger;

 

   

risks arising from the merger’s diversion of management’s attention from our ongoing business operations;

 

   

the outcome of lawsuits that may be brought by certain purported stockholders seeking to rescind the Merger Agreement or enjoin the consummation of the merger;

 

   

the effect of the announcement or pendency of the merger on our business relationships, operating results and business generally;

 

   

adverse effects on the market price of our common stock and on our operating results because of a failure to complete the merger;

 

   

the risk that our financial results differ from those set forth in the projections described in this proxy statement; and

 

   

other risks detailed in Imperva’s filings with the SEC, including Imperva’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which discuss these and other important risk factors concerning our operations.

We caution you that reliance on any forward-looking statement involves risks and uncertainties and that, although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to revise any of these forward-looking statements to reflect future events or circumstances.

 

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SUMMARY

This summary highlights selected information from this proxy statement related to the merger of Imperial Merger Sub, Inc. with and into Imperva, Inc., which we refer to as the “Merger,” and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should read carefully this entire proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. See “Where You Can Find More Information”. The Merger Agreement is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement, which is the legal document governing the merger. Each item in this summary references another section of this proxy statement with more detailed disclosure about that item. Throughout this proxy statement, all references to “Imperva,” “we,” “our,” “us” and similar words refer to Imperva, Inc. and its subsidiaries, unless otherwise indicated or the context otherwise requires. In addition, throughout this proxy statement, we refer to Imperial Purchaser, LLC as “Newco,” to Thoma Bravo, LLC as “Thoma Bravo” and to Imperial Merger Sub, Inc. as “Merger Sub.” Capitalized terms used in this section but not defined in this proxy statement have the meaning ascribed to them in the Merger Agreement.

Parties Involved in the Merger

Imperva, Inc.

Imperva is a leading cybersecurity company incorporated in Delaware that delivers best-in-class solutions to protect data and applications – wherever they reside – on-premises, in the cloud, and across hybrid environments. The company’s Incapsula, SecureSphere, and CounterBreach product lines help organizations protect websites, applications, APIs, and databases from cyberattacks while ensuring compliance. Imperva innovates using data, analytics, and insights from our experts and our community to deliver simple, effective and enduring solutions that protect our customers from cybercriminals.

Newco, LLC

Newco is a Delaware limited liability company formed by an affiliate of private equity investment firm Thoma Bravo, LLC.

Merger Sub

Merger Sub is a Delaware corporation and wholly owned subsidiary of Newco that was organized solely for the purpose of entering into the Merger Agreement and completing the merger and the other transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement. Upon consummation of the merger, Merger Sub will cease to exist as a separate corporation and Imperva will continue as the surviving corporation.

Newco and Merger Sub are each affiliated with Thoma Bravo Fund XIII, L.P. In connection with the transactions contemplated by the Merger Agreement, (1) Thoma Bravo Fund XIII, L.P. has provided to Newco equity commitments of up to approximately $813 million; and (2) Newco has obtained debt financing commitments from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Banks USA, Citigroup Global Markets Inc. and Jefferies Finance LLC, and certain of their respective affiliates for an aggregate amount of $1.15 billion, which will be available to fund a portion of the payments contemplated by the Merger Agreement (in each case, pursuant to the terms and conditions as described further under the section of this proxy statement captioned “The Merger—Financing of the Merger”). Newco, Merger Sub and Thoma Bravo Fund XIII, L.P. are affiliated with Thoma Bravo. Thoma Bravo is a leading private equity investment firm building on a 30-year history of providing equity and strategic support to experienced management teams and growing companies.

 

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The Merger

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Imperva, and Imperva will continue as the surviving corporation and as a wholly owned subsidiary of Newco (the “Surviving Corporation”). As a result of the Merger, Imperva will cease to be a publicly traded company, all outstanding shares of Imperva stock will be cancelled and converted into the right to receive the $55.75 per share in cash, without interest and less any applicable withholding taxes (the “Per Share Merger Consideration”) (except for any shares owned by stockholders who are entitled to and who properly exercise appraisal rights under the DGCL), and you will no longer own any shares of the capital stock of the Surviving Corporation.

After the Merger is completed, you will have the right to receive the Per Share Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by Delaware law, as described below under the section of this proxy statement captioned “The Merger—Appraisal Rights”).

Treatment of Options and Restricted Stock Units

As a result of the Merger, the treatment of Imperva’s options to purchase shares of common stock (each, a “Company Option”) and restricted stock units (each, an “RSU”), including RSUs that are subject to performance-based vesting conditions (each, a “PRSU”) that are outstanding immediately prior to the time at which the Merger will become effective (the “Effective Time”) will be as follows:

Options

To the extent not exercised prior to the Effective Time, each outstanding vested Company Option (including any Company Option that vests in connection with the Merger) will be cancelled at the Effective Time and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product of (1) the excess, if any, of $55.75 per share over the exercise price per share of each such vested Company Option, multiplied by (2) the number of shares of our common stock issuable upon the exercise of such vested Company Option (the “Option Consideration”), to be paid as soon as practicable (and in no event more than 10 business days) following the Closing.

Each unvested Company Option outstanding as of immediately prior to the Effective Time (and that will not vest in connection with the Merger) will be cancelled at the Effective Time and converted into the contingent right to receive an amount in cash (without interest and subject to deduction for any required withholding tax), equal to the product of: (1) the excess, if any, of $55.75 per share over the exercise price per share of each such unvested Company Option; and (2) the number of shares of our common stock issuable upon the exercise of such unvested Company Option (the “Contingent Option Consideration”). The Contingent Option Consideration will be subject to the holder remaining continuously employed with the Surviving Corporation and satisfaction of the Original Vesting Conditions. The Contingent Option Consideration will be paid in cash without interest and less any required withholding taxes as soon as practicable (and in no event more than the later of (x) 10 business days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the Original Vesting Conditions.

Each outstanding Company Option (whether vested or unvested) with an exercise price per share equal to or greater than $55.75 per share will be cancelled without consideration upon the Effective Time.

Restricted Stock Units and Performance-Based Restricted Stock Units

Each vested RSU (including each vested PRSU) outstanding as of immediately prior to the Effective Time (including any RSU that becomes a vested RSU in connection with the Merger) will be cancelled at the Effective

 

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Time and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product of (1) $55.75 per share and (2) the number of shares of our common stock subject to such vested RSU (the “RSU Consideration”), to be paid as soon as practicable (and in no event more than 10 business days) following the Closing; provided that any payment in respect of any vested RSU shall be made in compliance with Section 409A.

Each unvested RSU (including each PRSU for which performance has been achieved and which remains subject to time-based vesting) that is outstanding immediately prior to the Effective Time (and that will not vest in connection with the Merger), will be cancelled at the Effective Time and converted into the contingent right to receive an amount in cash (without interest and subject to deduction for any required withholding) equal to the product of (1) $55.75 per share, and (2) the number of shares of our common stock subject to such unvested RSU (the “Contingent RSU Consideration”). The Contingent RSU Consideration will be subject to the holder remaining continuously employed with the Surviving Corporation and satisfaction of the Original Vesting Conditions; provided that any payment in respect of any unvested RSU shall be made in compliance with Section 409A. As soon as practicable (and in no event more than the later of (x) 10 business days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the Original Vesting Conditions, the Contingent RSU Consideration will be paid without interest and less any required withholding taxes.

For PRSUs where the performance period has not yet been completed, the level of achievement of the applicable performance metrics will be determined by our Board or a committee thereof in accordance with our equity incentive plan and the applicable PRSU agreement (provided, however, that such level of achievement shall not exceed the greater of (1) target performance and (2) the actual achievement of the performance goals attributable to such PRSUs) as of immediately prior to the Effective Time and, upon such determination, the resulting earned and vested PRSUs, if any, will be treated as vested RSUs and the resulting earned PRSUs that remain subject to time-based vesting conditions will be treated as unvested RSUs pursuant to the paragraphs above. Additional information about the PRSUs can be found in the section of this proxy statement captioned “The Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva—Treatment of PRSUs.”

Section 102 Securities

The Option Consideration payable with respect to Company Options granted and subject to tax pursuant to Section 102(b)(2) of the Israeli Income Tax Ordinance [New Version] 1961 (the “Ordinance”) (“Section 102 Options”), the RSU Consideration payable with respect to RSUs granted and subject to tax pursuant to Section 102(b)(2) of the Ordinance (“Section 102 RSUs”) and the consideration payable with respect to shares of common stock of Imperva issued upon exercise of Section 102 Options or upon settlement of Section 102 RSUs (“Section 102 Shares”) (collectively, the “102 Amounts”) shall be paid (either directly or indirectly) to Imperva’s Section 102 Trustee for the benefit of the beneficial owners thereof, who shall pay out the 102 Amounts, as applicable, and withhold the applicable tax either directly or through Imperva’s applicable Israeli Subsidiary.

Treatment of Purchase Rights under the Employee Stock Purchase Plan

With respect to Imperva’s employee stock purchase plan, or “ESPP,” after the date of the Merger Agreement and pursuant to the requirements set forth in the Merger Agreement, the compensation committee of our Board adopted resolutions and took other actions to (1) restrict participants in the ESPP from increasing their respective rates of deductions and purchases (including non-payroll contributions); (2) provide that no individual who is not participating in the ESPP as of the date of the Merger Agreement may commence participation in the ESPP; (3) provide that no offering period under the ESPP will be commenced after the date of the Merger Agreement; (4) provide that the offering period under the ESPP that is in effect as of the date of the Merger Agreement will end on the earlier of immediately prior to the Effective Time and the last day of such offering period and all outstanding purchase rights under the offering period in effect as of the date of the Merger

 

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Agreement shall automatically be exercised in accordance with the terms of the ESPP; and (5) terminate the ESPP, effective as of the date immediately prior to the date of the Effective Time. The final offering period under the ESPP ended on November 15, 2018.

Financing of the Merger

We anticipate that the total amount of funds necessary to complete the Merger and the related transactions will be approximately $2.1 billion, which will be funded via equity financing and debt financing as described below, as well as cash on our balance sheet. This amount includes funds needed to (1) pay stockholders the amounts due under the Merger Agreement; and (2) make payments in respect of our outstanding equity-based awards pursuant to the Merger Agreement.

In connection with the Merger, Newco has entered into an equity commitment letter, dated as of October 10, 2018, with Thoma Bravo Fund XIII, L.P. for an equity commitment of approximately $813 million. For more information, see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

In connection with the Merger, Newco has obtained debt financing commitments from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Banks USA, Citigroup Global Markets Inc. and Jefferies Finance LLC and certain of their respective affiliates, pursuant to which they have committed to provide Newco with (1) a $760 million senior secured first lien term loan facility, (2) a $100 million senior secured first lien revolving credit facility and (3) a $290 million senior secured second lien credit facility, which will be available to fund a portion of the payments contemplated by the Merger Agreement. For more information, see the section of this proxy statement captioned “The Merger—Financing of the Merger.” Although the obligation of Newco and Merger Sub to consummate the Merger is not subject to any financing condition, the Merger Agreement provides that, without Newco’s agreement, the closing of the Merger will not occur earlier than the first business day after the expiration of the marketing period, which is the first period of 15 consecutive business days after the expiration of the go-shop period and beginning on the date Newco has received certain required historical financial information from Imperva required to syndicate any debt financing and ending prior to the closing date (provided that certain days that are specifically identified in the Merger Agreement will not count as business days and that the marketing period may be delayed, suspended or restarted in the event that the financial statements constituting required information are restated or audit opinions with respect thereof are revoked). For more information, see the section of this proxy statement captioned “The Merger Agreement—Marketing Period.”

Limited Guaranty

Pursuant to the terms of the Merger Agreement, an affiliate of Thoma Bravo has expressly, absolutely, irrevocably and unconditionally guaranteed the due and punctual observance, performance and discharge of payment of (1) the Newco Termination Fee, (2) Imperva’s out-of-pocket costs and expenses incurred in connection with legal proceedings enforcing the payment of such termination fee and (3) the reimbursement or indemnification obligations of Newco and Merger Sub in connection with any costs and expenses incurred by Imperva in connection with its cooperation with the arrangement of the debt financing pursuant to the Merger Agreement.

Conditions to the Closing of the Merger

The obligations of Imperva, Newco and Merger Sub, as applicable, to consummate the Merger are subject to the satisfaction or waiver of certain conditions, including (among other conditions), the following:

 

   

adoption of the Merger Agreement by the requisite affirmative vote of the stockholders;

 

   

the (1) expiration or termination of the applicable waiting period under the HSR Act and (2) approval or clearance of the Merger by relevant antitrust authorities in Austria and Australia and foreign investment authorities in Australia;

 

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the consummation of the merger not being made illegal or otherwise prohibited by any law or order of any governmental authority of competent jurisdiction;

 

   

the accuracy of the representations and warranties of Imperva, Newco and Merger Sub in the Merger Agreement, subject to materiality qualifiers (generally other than as would not constitute a material adverse effect on Imperva and, in the case of the capitalization representations and warranties of Imperva, other than as would not increase the aggregate Merger Consideration by more than $6,500,000), as of the date of the Merger Agreement and as of the closing date, or, as applicable, the date in respect of which such representation or warranty was specifically made; and

 

   

since the date of the Merger Agreement, there not having occurred or arisen any Company Material Adverse effect on Imperva.

The Merger is not conditioned on Newco’s ability to obtain or successfully syndicate debt financing.

Regulatory Approvals Required for the Merger

Under the Merger Agreement, the Merger cannot be completed until (1) the applicable waiting period under the HSR Act has expired or been terminated; (2) the applicable waiting period under the Austrian Federal Competition Authority has expired or been terminated and (3) all competition and foreign investment consents of the Australian Competition and Consumer Commission and the Australian Foreign Investment Review Board have been received.

Recommendation of the Board of Directors

Our Board of Directors (“Board”), after considering various factors described under the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors and Reasons for the Merger” has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of Imperva and its stockholders and (2) adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. Our Board unanimously recommends that you vote (1) “ FOR ” the proposal to adopt the Merger Agreement, (2) “ FOR ” the compensation proposal and (3) “ FOR ” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there is not a quorum present or represented by proxy at the time of the special meeting, or to give holders of our common stock additional time to evaluate new material information or disclosure.

Fairness Opinion of Qatalyst Partners LP

Imperva engaged Qatalyst Partners LP (“Qatalyst Partners”) to provide financial advice in connection with the Merger based on Qatalyst Partners’ qualifications, expertise, reputation and knowledge of Imperva’s business and the industry in which Imperva operates. At the meeting of our Board on October 9, 2018, Qatalyst Partners rendered to our Board its oral opinion, subsequently confirmed in writing, to the effect that, as of October 9, 2018 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the Merger Agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), was fair, from a financial point of view, to such holders.

The full text of the opinion of Qatalyst Partners, dated as of October 9, 2018, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. You should read the opinion carefully in its entirety.

 

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Qatalyst Partners’ opinion was provided to our Board and addressed only, as of the date of the opinion, the fairness, from a financial point of view, of the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the Merger Agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), to such holders. It does not address any other aspect of the Merger. It does not constitute a recommendation to any stockholder of Imperva as to how to vote with respect to the Merger or any other matter and does not in any manner address the price at which the shares of our common stock will trade at any time.

For a description of the opinion that our Board received from Qatalyst Partners, see the section of this proxy statement captioned “The Merger—Fairness Opinion of Qatalyst Partners LP”.

Interests of Imperva’s Directors and Executive Officers in the Merger

When considering the recommendation of our Board that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a stockholder. In (1) evaluating and negotiating the Merger Agreement; (2) approving the Merger Agreement and the Merger; and (3) recommending that the Merger Agreement be adopted by stockholders, our Board was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests include the following:

 

   

the eligibility of each executive officer to receive certain payments and benefits and accelerated vesting of equity-based awards if such executive officer is terminated other than for “cause” or resigns for “good reason” within the period commencing three months prior to and ending 12 months following the merger pursuant to the Company’s change in control plan;

 

   

the cash-out of vested Company Options and RSUs;

 

   

the contingent payment right for unvested Company Options and RSUs;

 

   

the eligibility of each executive officer to potentially receive early payment of the fourth quarter 2018 bonus (along with all other employees of Imperva who participate in Imperva’s bonus programs for 2018);

 

   

the accelerated vesting of equity-based awards held by non-employee members of our Board pursuant to the 2011 Stock Option and Incentive Plan (the “2011 Plan”); and

 

   

the continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.

If the proposal to adopt the Merger Agreement is approved, the shares of common stock held by our directors and executive officers will be treated in the same manner as outstanding shares of common stock held by all other stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of Imperva’s Directors and Executive Officers in the Merger.”

The Voting Agreements

In connection with the execution of the Merger Agreement, each of the Company’s directors, executive officers and certain other officers have agreed to vote the shares of our common stock over which he or she exercises voting control for the adoption of the Merger Agreement and the other proposals set forth in this proxy statement. At the close of business on December 4, 2018, the record date of the special meeting, the Company’s directors, executive officers and certain other officers who are party to the voting agreements collectively owned or controlled 280,248 shares of common stock, which represented 0.8% of all outstanding shares of common stock on the record date. The voting agreements terminate on the earlier of the termination of the Merger Agreement in accordance with its terms and the Effective Time. For more information, see the section of this proxy statement

 

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captioned “The Merger–The Voting Agreement.” The form of voting agreement is attached as Annex D to this proxy statement. We encourage you to read the form of voting agreement, which is the legal document that governs the obligations of the Company’s directors, executive officers and certain other officers, carefully and in its entirety.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares may be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that stockholders may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the Per Share Merger Consideration.

To exercise your appraisal rights, you must (1) deliver a written demand for appraisal to Imperva before the vote is taken on the proposal to adopt the Merger Agreement; (2) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; and (3) continue to hold your shares of common stock through the Effective Time. Additionally, certain other conditions, described further herein, must be met. Your failure to follow exactly the procedures specified under the DGCL may result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy statement. If you hold your shares of common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee.

Material U.S. Federal Income Tax Consequences of the Merger

For U.S. federal income tax purposes, the receipt of cash by a U.S. Holder (as defined under the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) in exchange for such U.S. Holder’s shares of common stock in the Merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of common stock surrendered in the Merger.

A Non-U.S. Holder (as defined under the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of common stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States.

For more information, see the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” Stockholders should consult their own tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction.

 

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Go-Shop Period

Under the Merger Agreement, for a period of 45 days following October 10, 2018 (the “Go-Shop Period”), Imperva and its representatives and subsidiaries are permitted to; (1) solicit, initiate, encourage and facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal (as defined under the section of this proxy statement captioned “The Merger Agreement—Alternate Acquisition Proposals”); (2) grant a waiver under or terminate any “standstill” or similar obligation of any third party with respect to Imperva or any of its subsidiaries solely to allow such third party to submit an acquisition proposal in accordance with the Merger Agreement; and (3) engage in discussions and negotiations with, and furnish non-public information relating to Imperva and its subsidiaries, and afford access to the books and records of Imperva and its subsidiaries to any third party in connection with an Acquisition Proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to an Acquisition Proposal, so long as prior to furnishing such non-public information or affording such access, Imperva has entered into a permitted confidentiality agreement with such third party and has previously provided or made available (or provides or makes available within one business day) all such information, and affords such access, to Newco.

Upon the expiration of the Go-Shop Period, Imperva has agreed to, and to cause its subsidiaries and its and their respective directors, officers, employees, consultants, agents, representatives and advisors, whom we collectively refer to as “representatives,” to immediately cease and cause to be terminated, and will not authorize or knowingly permit any of its representatives to continue, any and all existing activities, discussions or negotiations with any third party conducted prior to the expiration of the Go-Shop Period with respect to any Acquisition Proposal or Acquisition Transaction (as defined under the section of this proxy statement captioned “The Merger Agreement—Alternate Acquisition Proposals”) (other than with respect to each Excluded Party (as defined under the section of this proxy statement captioned “The Merger Agreement—Alternate Acquisition Proposals”) only for so long as such person is and remains an Excluded Party) to any physical or electronic dataroom (other than as otherwise permitted by the Merger Agreement).

In the event Imperva terminates the Merger Agreement to enter into an agreement for a superior proposal during the Go-Shop Period, the termination fee payable to Newco will be $25,000,000. For more information, see the section of this proxy statement captioned “The Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”

The Go-Shop Period expired at 11:59 p.m. EST on November 24, 2018. As of the expiration of the Go-Shop Period, there were no pending Acquisition Proposals and no Excluded Parties.

Alternative Acquisition Proposals

Under the Merger Agreement, from and after the expiration of the Go-Shop Period until the Effective Time, Imperva has agreed not to, and to cause its subsidiaries and its and their representatives not to, among other things: (1) solicit, initiate, knowingly encourage, knowingly facilitate or knowingly induce the making, submission or announcement of any inquiry, offer or proposal that would be reasonably likely to lead to an Acquisition Proposal or Acquisition Transaction; or (2) participate or engage in discussions or negotiations regarding, or provide any non-public information to, any person relating to, or that would be likely to lead to, an acquisition proposal or acquisition transaction, in each case other than with respect to an Excluded Party.

Notwithstanding these restrictions, under certain circumstances, prior to the adoption of the Merger Agreement by stockholders, Imperva may provide information to, and engage or participate in negotiations or substantive discussions with, (a) an Excluded Party (only for so long as such person is and remains an Excluded Party) and (b) any third party regarding an acquisition proposal if our Board determines in good faith after consultation with its financial advisor and its outside legal counsel that such proposal is a superior proposal or would reasonably be likely to lead to a superior proposal and to not do so would be inconsistent with its fiduciary duties. For more information, see the section of this proxy statement captioned “The Merger Agreement—Alternative Acquisition Proposals.”

 

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Imperva is not entitled to terminate the Merger Agreement to enter into an agreement for a superior proposal unless it complies with certain procedures in the Merger Agreement, including negotiating with Newco in good faith over a four business day period so that any superior proposal no longer constitutes a superior proposal. The termination of the Merger Agreement by Imperva in order to accept a superior proposal will result in the payment by Imperva of a $60,000,000 termination fee to Newco; provided that if the termination fee to Newco becomes payable during the Go-Shop Period in connection with the termination of the Merger Agreement in order to accept a superior proposal, the termination fee to Newco shall be $25,000,000. For more information, see the section of this proxy statement captioned “The Merger Agreement—The Board of Directors’ Recommendation; Company Board Recommendation Change.”

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the adoption of the Merger Agreement by stockholders, in the following ways:

 

   

by mutual written agreement of Imperva and Newco;

 

   

by either Imperva or Newco if:

 

   

the Effective Time shall not have occurred on or before March 9, 2019, which we refer to as the “termination date” (except that the right to terminate the Merger Agreement as a result of the occurrence of the termination date will not be available to any party whose material breach of the Merger Agreement has been the principal cause of the failure of the closing of the Merger to have occurred on or before such date);

 

   

Imperva’s stockholders fail to adopt the Merger Agreement at the special meeting or any adjournment or postponement thereof; or

 

   

any governmental authority in the U.S., Austria or Australia shall have (1) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger any applicable law that is in effect and has the effect of making the consummation of any of the Merger permanently illegal in such jurisdictions, or which has the effect of permanently prohibiting the consummation of the Merger in such jurisdictions, or (2) issued or granted any order that has the effect of making the Merger illegal permanently in such jurisdictions or which has the effect of permanently prohibiting the consummation of the Merger in such jurisdictions and such order has become final and nonappealable;

 

   

by Imperva if:

 

   

Newco or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the termination date or the date that is 30 calendar days following Imperva’s delivery of written notice of such breach (provided that Imperva may terminate before the end of such 30 calendar day period if Newco or Merger Sub cease or fail to exercise and continue not to exercise commercially reasonable efforts to cure such breach or inaccuracy); provided that the right to terminate the Merger Agreement as described in this bullet point shall not be available to Imperva if it is in material breach of any covenant contained in the Merger Agreement;

 

   

in the event that all of the conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing), but Newco and Merger Sub have failed to consummate the Merger at the time the Merger should have occurred pursuant to the Merger Agreement, and Imperva has irrevocably notified Newco in writing that all of the conditions to closing have been satisfied and continue to be satisfied (other than those conditions that by their terms are to be satisfied at the closing, each

 

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of which is capable of being satisfied at the closing) or that it is willing to waive any unsatisfied conditions, and Newco and Merger Sub fail to consummate the Merger on the later of (1) the expiration of three business days after the receipt of such notice or (2) a date set forth in such notice; or

 

   

prior to the adoption of the Merger Agreement by stockholders and so long as Imperva is not then in material breach of its obligations related to acquisition proposals and superior proposals (provided that the superior proposal was not solicited in violation of the Merger Agreement), in order to enter into a definitive agreement with respect to a superior proposal in accordance with the terms of the Merger Agreement, subject to Imperva paying to Newco a termination fee of $60,000,000 (provided that such termination fee will be $25,000,000 if Imperva terminates the Merger Agreement during the Go-Shop Period pursuant to the termination right set forth in this bullet point relating to a Superior Proposal from a third party); and

 

   

by Newco if:

 

   

Imperva has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the termination date or the date that is 30 calendar days following Newco’s delivery of written notice of such breach (provided that Newco may terminate before the end of such 30 calendar day period if Imperva ceases or fails to exercise and continues not to exercise commercially reasonable efforts to cure such breach or inaccuracy); provided, however, that the right to terminate the Merger Agreement as described in this bullet point shall not be available to Newco if it is in material breach of any covenant contained in the Merger Agreement; or

 

   

prior to the adoption of the Merger Agreement by the stockholders, our Board effects a company board recommendation change or fails to publicly reaffirm the company board recommendation within four business days after Newco requests in writing following any public statement by a stockholder of the Company or a member of our Board expressing opposition to the Merger or the Merger Consideration (provided that our Board shall have no obligation to reaffirm the company board recommendation on more than two occasions).

Termination Fees and Expense Reimbursement

Except in specified circumstances, whether or not the Merger is completed, Imperva, on the one hand, and Newco and Merger Sub, on the other hand, are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement.

Imperva will be required to pay to Newco a termination fee of up to $60,000,000 if the Merger Agreement is terminated under specified circumstances; provided that if the termination fee to Newco becomes payable during the Go-Shop Period in connection with the termination of the Merger Agreement during the Go-Shop Period in order to accept a superior proposal, the termination fee to Newco will instead be $25,000,000. In certain cases where such termination fee is not then payable or the Merger Agreement is terminated by Newco due to Imperva’s breach or failure to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement, Newco will be due up to $4,000,000 from Imperva as reimbursement for expenses related to the transactions contemplated by the Merger Agreement. In no case will Newco be due both its termination fee and expense reimbursement. If Newco has collected any money for expense reimbursements, such amounts will be deducted from the termination fee when the termination fee is paid.

Newco will be required to pay to Imperva a termination fee of $140,000,000 if the Merger Agreement is terminated under different specified circumstances.

 

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For more information on these termination fees, see the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Expense Reimbursement.”

Market Prices and Dividend Data

Our common stock is listed on The Nasdaq Global Market under the symbol “IMPV.” On October 9, 2018, the last full trading day before the public announcement of the merger, the closing price for our common stock was $43.06 per share, and on December 4, 2018, the latest practicable trading day before the printing of this proxy statement, the closing price for our common stock was $55.51 per share.

We have never paid cash dividends on our common stock.

Effect on Imperva if the Merger is Not Completed

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of common stock. Instead, Imperva will remain a stand-alone public company, our common stock will continue to be listed and traded on the Nasdaq Global Market and registered under the Exchange Act, and we will continue to file periodic reports with the SEC. Under specified circumstances, Imperva will be required to pay Newco a termination fee upon the termination of the Merger Agreement. In certain cases where such termination fee is not payable or the Merger Agreement is terminated by Newco due to Imperva’s breach or failure to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement, Imperva will be required to reimburse Newco up to $4,000,000 for expenses related to the transactions contemplated by the Merger Agreement. In no case will Newco be due both its termination fee and expense reimbursement. If Newco has collected any money for expense reimbursements, such amounts will be deducted from the termination fee when the termination fee is paid. Under different specified circumstances, Newco will be required to pay Imperva a termination fee upon the termination of the Merger Agreement. For more details, see the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Expense Reimbursement.”

In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Imperva operates and risks related to adverse economic conditions.

The Special Meeting

Date, Time and Place

A special meeting of stockholders of Imperva will be held on January 8, 2019, at 10:00 a.m., Pacific time, at 3400 Bridge Parkway, Redwood Shores, California 94065.

Record Date; Shares Entitled to Vote

You are entitled to vote at the special meeting if you owned shares of common stock at the close of business on December 4, 2018 (the “Record Date”). You will have one vote at the special meeting for each share of common stock that you owned at the close of business on the Record Date.

Purpose

At the special meeting, we will ask stockholders to vote on proposals to (1) adopt the Merger Agreement, (2) approve the compensation proposal and (3) approve the adjournment proposal.

 

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Quorum

As of the Record Date, there were 35,436,746 shares of common stock outstanding and entitled to vote at the special meeting. The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, will constitute a quorum at the special meeting.

Required Vote

The votes required to approve each proposal are as follows:

 

  1.

The Merger Agreement must be approved by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote.

 

  2.

The compensation and adjournment proposals must be approved by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote that are present in person or represented by proxy at the special meeting and voted for or against the proposal.

Share Ownership of Our Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 280,248 shares of common stock, representing approximately 0.8% of the shares of common stock outstanding on the Record Date. Our directors, executive officers and certain other officers have executed voting agreements obligating them to vote all of their shares of common stock (1) “ FOR ” the proposal to adopt the Merger Agreement, (2) “ FOR ” the compensation proposal and (3) “ FOR ” the adjournment proposal.

Voting and Proxies

Any stockholder of record entitled to vote may submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card, return your proxy card using the postage prepaid envelope provided, or may vote in person by appearing at the special meeting. If you are a beneficial owner and hold your shares of common stock in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how you wish to vote your shares of common stock using the instructions provided by your bank, broker or other nominee. Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote on routine matters. The proposals to be considered at the special meeting are non-routine matters, and banks, brokers and other nominees cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your bank, broker or nominee on how you wish to vote your shares.

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by (1) signing another proxy card with a later date and returning it prior to the special meeting, (2) submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy, (3) delivering a written notice of revocation to our General Counsel and Assistant Secretary or (4) attending the special meeting and voting in person by ballot.

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of our Board for use at the special meeting of stockholders or at any adjournment or postponement thereof.

Date, Time and Place

We will hold the special meeting at our headquarters located at 3400 Bridge Parkway, Redwood Shores, California 94065, at 10:00 a.m., Pacific Time, on January 8, 2019.

Purpose of the Special Meeting

At the special meeting, we will ask the holders of our common stock to (1) adopt the Agreement and Plan of Merger, dated as of October 10, 2018, by and among Newco, Merger Sub, and Imperva, as such agreement may be amended from time to time (the “Merger Agreement”); (2) approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Imperva’s named executive officers based on or otherwise relating to the merger (“compensation proposal”); and (3) approve the adjournment of the special meeting to a later date, if our Board determines that it is necessary or appropriate and is permitted by the Merger Agreement, to solicit additional proxies if there is not a quorum present or represented by proxy at the time of the special meeting, or to give holders of our common stock additional time to evaluate new material information or disclosure (“adjournment proposal”).

Record Date; Shares Entitled to Vote; Quorum

Only holders of record of our common stock at the close of business on December 4, 2018, the record date, are entitled to notice of, and to vote at, the special meeting. On the record date, shares of our common stock were issued and outstanding and held by approximately 17 holders of record. Holders of record of our common stock on the record date are entitled to one vote per share at the special meeting on each of the proposals.

A majority of the outstanding shares of common stock must be present or represented at the special meeting in order to have a quorum for the conduct of business. Votes cast at the special meeting, by proxy or in person, will be tabulated by the inspector of elections appointed for the special meeting. If shares are present at the special meeting in person or by proxy, but are not voted, those shares will count toward determining whether or not a quorum is present for the conduct of business at the special meeting, as will all shares voted “for,” “against” or “abstain” on a proposal.

In the event that a quorum is not present in person or represented by proxy at the special meeting, it is expected that our Board will recommend adjournment of the special meeting to solicit additional proxies if permitted by the Merger Agreement. If there is not a quorum of stockholders at the special meeting and the vote with respect to the adjournment proposal fails, our Board, if permitted by the Merger Agreement, may set a new record date and meeting date for a special meeting to consider the Merger Agreement, compensation proposal and adjournment proposal.

Vote Required

The votes required to approve each proposal are as follows:

 

  1.

The Merger Agreement must be approved by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote. Adoption of the Merger Agreement is a condition to the closing of the merger.

 

  2.

The compensation and adjournment proposals must be approved by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote that are present in person or represented by proxy at the special meeting and voted for or against the proposal.

 

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Voting by Imperva Directors and Executive Officers

At the close of business on the record date, our directors and executive officers and their affiliates owned and were entitled to vote 280,248 shares of our common stock, which represented approximately 0.8% of the shares of our outstanding common stock on that date. Our directors, executive officers and certain other officers have executed voting agreements obligating them to vote all of their shares of common stock “FOR” the proposal to adopt the Merger Agreement, “FOR” the compensation proposal and “FOR” the adjournment proposal.

Certain members of our management and our Board have interests in the merger that are in addition to those of stockholders generally and may be different from, or in conflict with, your interests as an Imperva stockholder. See the section of this proxy statement captioned “The Merger—Interests of Imperva’s Directors and Executive Officers in the Merger”.

Voting of Proxies

If your shares are registered in your name, you may cause your shares to be voted at the special meeting by returning a signed proxy card or voting in person at the meeting. Additionally, you may submit a proxy authorizing the voting of your shares via the Internet or by telephone by following the instructions printed on the proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy via the Internet or by telephone.

If your shares are registered in your name and you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. If your shares are registered in your name, you are encouraged to submit a proxy card even if you plan to attend the special meeting in person.

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted “FOR” the proposal to adopt the Merger Agreement, “FOR” the approval of the compensation proposal and “FOR” the approval of the adjournment proposal; provided, however, that no proxy that is specifically marked “AGAINST” the proposal to adopt the Merger Agreement will be voted “FOR” the compensation proposal or “FOR” the adjournment proposal unless it is specifically marked “FOR” the compensation proposal or “FOR” the adjournment proposal, respectively.

If your shares are held in “street name” through a brokerage firm, bank, trust or other nominee, you may provide voting instructions by completing and returning the voting form provided by your brokerage firm, bank, trust or other nominee or via the Internet or by telephone through your brokerage firm, bank, trust or other nominee, if such a service is provided. To provide voting instructions via the Internet or telephone, you should follow the instructions on the voting form provided by your brokerage firm, bank, trust or other nominee. If you plan to attend the special meeting, you will need a proxy from your brokerage firm, bank, trust or other nominee in order to be given a ballot to vote the shares. If you do not return your brokerage firm, bank, trust or other nominee’s voting form, provide voting instructions via the Internet or by telephone through your brokerage firm, bank, trust or other nominee or attend the special meeting and vote in person with a proxy from your brokerage firm, bank, trust or other nominee, it will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement, and will have no effect on the compensation proposal or the adjournment proposal.

Revocability of Proxies

Any proxy you give pursuant to this solicitation may be revoked by you at any time before it is voted. Proxies may be revoked as follows:

If you have sent a proxy directly to Imperva, you may revoke it by:

 

   

delivering a written revocation of the proxy or a later dated, signed proxy card, to our General Counsel and Assistant Secretary at 3400 Bridge Parkway, Redwood Shores, California 94065, on or before the business day prior to the special meeting;

 

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delivering a new, later dated proxy via the Internet or by telephone until the date set forth in the instructions for voting via the Internet or by telephone;

 

   

delivering a written revocation or a later dated, signed proxy card to us at the special meeting prior to the taking of the vote on the matters to be considered at the special meeting; or

 

   

attending the special meeting and voting in person.

If you have instructed brokerage firm, bank, trust or other nominee to vote your shares , you may revoke your proxy only by following the directions received from your brokerage firm, bank, trust or other nominee to change those instructions.

Your attendance at the special meeting does not alone automatically revoke your proxy. If you have instructed your brokerage firm, bank, trust or other nominee how to vote your shares, the above-described options for revoking your proxy do not apply. Instead, you must follow the directions provided by your brokerage firm, bank, trust or other nominee to change your vote.

Board’s Recommendations

Our Board has unanimously approved the Merger Agreement and determined that the Merger Agreement and the merger are advisable, fair to and in the best interests of Imperva and its stockholders. Our Board unanimously recommends that Imperva stockholders (1)  vote “FOR” the proposal to adopt the Merger Agreement, (2)  vote “FOR” the compensation proposal and (3)  vote “FOR” the adjournment proposal. See the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors and Reasons for the Merger”. Imperva stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger. In addition, Imperva stockholders are directed to the Merger Agreement, which is attached as Annex A to this proxy statement.

Effect of Abstentions and Broker Non-Votes

Abstentions and shares not in attendance at the special meeting and not voted by proxy will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the compensation proposal or the adjournment proposal. If you abstain from voting on any matter, the shares represented by such proxy will be considered present at the special meeting for purposes of determining a quorum and for purposes of calculating the vote, but will not be considered to have been voted for or against the compensation proposal and the adjournment proposal. As such, an abstention will have no effect on the vote for the compensation proposal and adjournment proposal. Because brokerage firms, banks, trusts or other nominees holding shares of our common stock in “street name” may not vote your shares of our common stock on the adoption of the Merger Agreement, the compensation proposal or the adjournment proposal unless you provide instructions on how to vote, your failure to provide instructions will result in your shares not being present at the meeting and not being voted on those proposals. It is very important that all of our stockholders vote their shares, so please promptly complete and return the enclosed proxy card.

Solicitation of Proxies

This proxy solicitation is being made by Imperva on behalf of our Board and will be paid for by Imperva. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. We have also retained D.F. King & Co., Inc., a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $15,000 plus the reimbursement of out-of-pocket expenses incurred by it on behalf of Imperva. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. You should not

 

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send your stock certificates with your proxy card. A letter of transmittal with instructions for the surrender of your stock certificates, if any, will be mailed to our stockholders as soon as practicable after completion of the merger.

Stockholder List

A list of our stockholders entitled to vote at the special meeting will be available for examination by any Imperva stockholder at the special meeting. For 10 days prior to the special meeting, this stockholder list will be available for inspection by any stockholder for any purpose germane to the special meeting during ordinary business hours at our corporate offices located at 3400 Bridge Parkway, Redwood Shores, California 94065.

 

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THE MERGER

The following discussion describes material aspects of the merger. While we believe that the following description covers the material terms of the merger, the description may not contain all of the information that may be important to you. The discussion of the merger in this proxy statement is qualified in its entirety by reference to the Merger Agreement, which is attached as Annex A to this proxy statement and incorporated by reference into this proxy statement. We encourage you to read carefully this entire proxy statement, including the Merger Agreement, for a more complete understanding of the merger.

Parties Involved in the Merger

Imperva, Inc.

3400 Bridge Parkway

Redwood Shores, California 94065

Telephone: (650) 345-9000

Imperva is a leading cybersecurity company incorporated in Delaware that delivers best-in-class solutions to protect data and applications – wherever they reside—on-premises, in the cloud, and across hybrid environments. The company’s Incapsula, SecureSphere, and CounterBreach product lines help organizations protect websites, applications, APIs, and databases from cyberattacks while ensuring compliance. Imperva innovates using data, analytics, and insights from our experts and our community to deliver simple, effective and enduring solutions that protect our customers from cybercriminals.

Imperial Purchaser, LLC

c/o Thoma Bravo, LLC

600 Montgomery Street, 20th Floor

San Francisco, CA 94111

Newco is a Delaware limited liability company and an indirectly controlled affiliate of Thoma Bravo. Newco was organized solely for the purpose of entering into the Merger Agreement and completing the Merger and the other transactions contemplated by the Merger Agreement. Newco has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.

Imperial Merger Sub, Inc.

c/o Thoma Bravo, LLC

600 Montgomery Street, 20th Floor

San Francisco, CA 94111

Merger Sub is a Delaware corporation and wholly owned subsidiary of Newco that was organized solely for the purpose of entering into the Merger Agreement and completing the Merger and the other transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement. Upon consummation of the Merger, Merger Sub will cease to exist as a separate corporation and Imperva will continue as the surviving corporation.

Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Imperva, and Imperva will continue as the Surviving Corporation and as a wholly owned subsidiary of Newco. As a result of the Merger, Imperva will become a wholly owned subsidiary of Newco, and our common stock will no longer be publicly traded and will be delisted from The Nasdaq Global Market. In addition, our common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

 

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The Effective Time will occur upon the filing of a Certificate of Merger with the Secretary of State of the State of Delaware (or at such later time as Imperva and Newco may agree and specify in the Certificate of Merger).

Effect on Imperva if the Merger is Not Completed

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of common stock. Instead, Imperva will remain a stand-alone public company, our common stock will continue to be listed and traded on The Nasdaq Global Market and registered under the Exchange Act and we will continue to file periodic reports with the SEC. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Imperva operates and risks related to adverse economic conditions.

Furthermore, if the Merger is not completed, and depending on the circumstances that caused the Merger not to be completed, the price of our common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades as of the date of this proxy statement.

Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of common stock. If the Merger is not completed, our Board will continue to evaluate and review Imperva’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to our Board will be offered or that Imperva’s business, prospects or results of operation will not be adversely impacted.

In addition, Imperva will be required to pay to Newco a termination fee of up to $60,000,000 if the Merger Agreement is terminated under specified circumstances. In certain cases where such termination fee is not payable or the Merger Agreement is terminated by Newco due to Imperva’s breach or failure to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement, Imperva will be required to reimburse Newco up to $4,000,000 for expenses related to the transactions contemplated by the Merger Agreement. In no case will Newco be due both its termination fee and expense reimbursement. If Newco has collected any money for expense reimbursements, such amounts will be deducted from the termination fee when such termination fee is paid. For more information, please see the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Expense Reimbursement.”

Merger Consideration

In the Merger, each outstanding share of common stock (other than shares owned by (1) Newco, Merger Sub or Imperva, or by any direct or indirect wholly owned subsidiary of Newco, Merger Sub or Imperva; and (2) stockholders who are entitled to and who properly exercise appraisal rights under the DGCL) will be converted into the right to receive the Per Share Merger Consideration.

After the Merger is completed, you will have the right to receive the Per Share Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding before the Delaware Court of Chancery as contemplated by Delaware law, as described below under the section of this proxy statement captioned “The Merger—Appraisal Rights”).

 

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Background of the Merger

The following is a summary of events, meetings and discussions that are relevant to the decision of our Board to approve the Merger Agreement and recommend that our stockholders adopt the Merger Agreement.

Our Board, together with our management, has from time to time reviewed and considered various strategic and other opportunities available to Imperva to enhance and maximize stockholder value. Our Board conducted these deliberations with assistance from Imperva’s advisors, including Qatalyst Partners, a financial advisor originally engaged by our Board in 2014. These reviews have included discussions as to whether continued execution of Imperva’s strategy as a stand-alone company or a possible sale of Imperva (or one or more of Imperva’s business lines) to a third party offered the best avenue to maximize stockholder value, and the potential benefits and risks of any such course of action. From time to time, our Board and our management also held discussions with and received input from our stockholders about our business, operations, financial performance and potential strategic initiatives to maximize stockholder value.

In the summer of 2016, after we announced preliminary financial results for the second quarter of 2016 that were below our guidance (anticipated revenues of $57.5 million to $58.0 million compared to prior guidance of $65.5 million to $66.5 million, and non-GAAP operating loss of $(6.0) million to $(6.5) million compared to $(0.3) million to $(1.3) million), received input from stockholders and held lengthy discussions and presentations by five other potential financial advisors, our Board approved a comprehensive review of strategic alternatives and authorized senior management to work with Qatalyst Partners as financial advisor based on Qatalyst Partners’ qualifications, expertise, reputation and knowledge of Imperva’s business and the industry in which Imperva operates and Fenwick & West LLP (“Fenwick”) as outside legal counsel in connection with such review (and certain stockholder relations matters).

At our Board meeting on August 2, 2016, representatives of Qatalyst Partners reviewed with our Board and our management a list of strategic entities and financial sponsors identified on the basis of potential interest and financial resources required to complete a transaction.

On August 4, 2016, in connection with our earnings release for the second quarter of fiscal year 2016, we announced that our Board had initiated a comprehensive review of strategic alternatives to enhance stockholder value, which announcement garnered considerable media coverage.

Consistent with our Board’s discussion on August 2, 2016 and at our Board’s direction, from August through October 2016, representatives of Qatalyst Partners reached out to 20 strategic entities (including strategic entities referred to as Strategic Party A, Strategic Party B and Strategic Party C) and 15 financial sponsors (including Thoma Bravo and the financial sponsors referred to as Sponsor A and Sponsor B) regarding a potential acquisition of Imperva. Of the parties contacted, 13 of the strategic entities and eight of the financial sponsors declined to participate in the process or receive access to additional due diligence materials. During this period, Imperva negotiated confidentiality agreements with potential acquirers and ultimately entered into confidentiality agreements with seven strategic parties and nine financial sponsors, including Thoma Bravo, Strategic Party A, Strategic Party B, Strategic Party C, Sponsor A and Sponsor B, although two of the financial sponsors declined to participate further in the process after signing such confidentiality agreements. Each of the confidentiality agreements contained customary confidentiality provisions and all but one contained a standstill provision. The standstill restrictions in each of these agreements permitted bidders to make private proposals to our Board and provided for automatic termination upon Imperva’s announcement of entry into a definitive written agreement for an acquisition. During September 2016, 14 parties that entered into confidentiality agreements attended Imperva management presentations and received access to additional due diligence materials. Following the management meetings and ensuing discussions and due diligence review, each of the 14 parties declined to submit a proposal for a strategic transaction. At a Board meeting on October 7, 2016, our Board discussed the strategic alternatives review process with representatives of Qatalyst Partners and reviewed feedback from the parties who had declined to submit a proposal, including that the strategic parties generally

 

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were not interested in acquiring all of Imperva’s business lines, while the financial parties generally cited valuation, transaction size and insufficient cash flows to sustain sufficient leverage ratios as their primary reasons for not pursuing a transaction. Our Board then discussed its fiduciary duties with Fenwick and, following such discussion, determined that continuing to execute Imperva’s strategy as a stand-alone company represented the best means of enhancing stockholder value, and that it would be in the best interest of Imperva’s stockholders to discontinue the active efforts toward a potential sale of the company associated with the strategic alternatives review process. On November 3, 2016, in connection with our earnings release for the third quarter of fiscal year 2016, we announced that we had concluded the strategic alternatives review process and also announced the implementation of a restructuring initiative to enhance Imperva’s profitability and competitiveness as a stand-alone company.

Periodically in 2017, Imperva received unsolicited preliminary inquiries and held initial discussions regarding a potential strategic transaction with potential partners, including financial sponsors and strategic parties. These inquiries were promptly disseminated to our Board, which met periodically to review and discuss potential strategic transactions and obtain advice from Fenwick regarding its fiduciary duties with respect to a potential sale. In connection with an unsolicited inquiry and with the authorization of our Board, Imperva provided certain due diligence materials to Sponsor B in November and December 2017 and engaged in confidential discussions about a potential strategic transaction. Representatives of Fenwick reviewed with our Board the potential use of a go-shop in connection with a potential sale transaction involving Sponsor B. However, none of the discussions with Sponsor B or other potential parties resulted in a proposal for a strategic transaction.

In November 2017, Thoma Bravo reengaged in discussions with Imperva regarding a potential strategic transaction, and on December 12, 2017, Imperva and Thoma Bravo agreed to extend the term of the confidentiality agreement previously executed during the 2016 strategic review process. Members of our management team met with representatives of Thoma Bravo in December 2017 to discuss Imperva’s business and long-term financial plans and provided other confidential information in response to due diligence requests.

On February 23, 2018, representatives of Thoma Bravo contacted Christopher Hylen, Imperva’s chief executive officer, to indicate Thoma Bravo’s continued interest in a strategic transaction and to discuss Imperva’s 2018 strategic priorities. However, Thoma Bravo did not submit a specific proposal for a strategic transaction in connection with these discussions.

On April 28, 2018, Imperva received a written proposal from Thoma Bravo in which Thoma Bravo stated its interest in acquiring Imperva for $54.50 per share in cash, subject to various assumptions, including that Imperva be on track to achieve the 2018 revenue and profitability guidance provided on its Q1 2018 earnings call on April 26, 2018, as well as confirmatory due diligence and other customary conditions (the “April 28 Proposal”). The April 28 Proposal stated that the offer was not subject to any financing contingency. The April 28 Proposal also included a proposed form of merger agreement providing, among other things, for a company termination fee equal to 4% of Imperva’s equity value, and containing customary “no-shop” provisions prohibiting Imperva from soliciting a competing proposal after the execution of the merger agreement. The April 28 Proposal also indicated that Thoma Bravo was prepared to negotiate a transaction within a three-week period and requested that Imperva agree to negotiate exclusively with Thoma Bravo during this period. The April 28 Proposal represented a premium of 20% over the April 27, 2018 closing price of our common stock of $45.35 per share. The April 28 Proposal was promptly sent to our Chairman and disseminated to the remaining members of our Board on May 3, 2018.

Our Board met on May 11, 2018 with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting. Mr. Hylen updated our Board regarding the terms of the April 28 Proposal, and representatives of Qatalyst Partners reviewed with our Board a preliminary analysis of certain financial aspects of the April 28 Proposal. Representatives of Fenwick reviewed with our Board its fiduciary duties in the context of a potential strategic

 

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transaction, such as the transaction contemplated by the April 28 Proposal. Our Board discussed various issues pertinent to the April 28 Proposal, including the extent of Thoma Bravo’s previous due diligence efforts, such preliminary financial analysis, potential alternative strategic partners and next steps. Our Board determined that the April 28 Proposal represented insufficient value, and that Imperva should reject the request for exclusive negotiations, but that Imperva should continue to engage with Thoma Bravo to determine whether it would be willing to pay a higher price. Our Board further determined that Imperva should explore potential interest with Strategic Party B and Strategic Party C, the two potential strategic acquirers considered to have the most potential interest, but should not initiate broader outreach to potential acquirers due to the risk of unauthorized disclosure of a possible strategic transaction, including potential disruption to Imperva’s business from such disclosure. Our Board also determined to renew Imperva’s engagement of Qatalyst Partners as its financial advisor, which had previously been terminated in January 2018, and directed Qatalyst Partners to continue discussions with Thoma Bravo and management to provide additional due diligence materials to Thoma Bravo.

Representatives of Qatalyst Partners discussed the terms of a potential strategic transaction with representatives of Thoma Bravo in a telephone conversation later on May 11, 2018. Representatives of Qatalyst Partners and our management team further discussed the terms of a potential strategic transaction with, and provided business and financial due diligence to, representatives of Thoma Bravo on May 16, 2018 and June 8, 2018. On May 14, 2018, Thoma Bravo and Imperva entered into an amended and restated confidentiality agreement to extend the term of the confidentiality agreement to May 14, 2020.

Consistent with our Board’s direction, representatives of Qatalyst Partners contacted Strategic Party B on May 14, 2018 and Strategic Party C on May 16, 2018, separately, regarding a potential strategic transaction.

Our Board met on May 21, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting, to discuss the status of the April 28 Proposal and discussions with other potential acquirers. Representatives of Fenwick and our chief legal officer reviewed with our Board its fiduciary duties in the context of a potential sale. Representatives of Qatalyst Partners updated our Board on the status of discussions and due diligence efforts with Thoma Bravo and other potential acquirers.

During the course of May and June 2018, members of Imperva’s management had meetings with each of Thoma Bravo, Strategic Party B and Strategic Party C. On June 6, 2018, Strategic Party C indicated that it would not be interested in pursuing an acquisition of Imperva at such time due to the size of the transaction. Representatives of Qatalyst Partners invited Thoma Bravo and Strategic Party B to submit a formal written proposal (or an updated proposal) detailing, among other things, price, funding, material terms and conditions, due diligence requirements and an anticipated timeline to consummate such an acquisition. Our Board was provided with regular updates on the discussions with these parties.

In early July 2018, at our Board’s direction, our management provided representatives of Thoma Bravo and Strategic Party B with materials summarizing Imperva’s preliminary financial results for the quarter ended on June 30, 2018, and had discussions regarding such materials, with representatives of Qatalyst Partners in attendance.

On July 9, 2018, Imperva received a revised written proposal from Thoma Bravo, providing for a purchase price of $59.00 per share in cash (the “July 9 Proposal”), which represented a premium of 19% over the July 9, 2018 closing price of our common stock of $49.60 per share, and was subject to various assumptions, including that Imperva be on track to achieve the 2018 revenue and profitability guidance provided on its Q1 2018 earnings call on April 26, 2018. The July 9 Proposal was promptly disseminated to our Board. Also on that day, Strategic Party B informed representatives of Qatalyst Partners that its board of directors had determined not to proceed with a proposal to pursue a strategic transaction with Imperva because it was not interested in acquiring all of Imperva’s business lines, and because of uncertainty and volatility associated with Imperva’s transition to a subscription-based revenue model.

 

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Our Board met on July 11, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting, to discuss the July 9 Proposal and the assumptions to which it was subject. Representatives of Qatalyst Partners reviewed with our Board a preliminary analysis of certain financial aspects of the July 9 Proposal, updated to reflect Imperva’s most recent operating statistics. Representatives of Fenwick reviewed with our Board its fiduciary duties in the context of a potential strategic transaction, such as the transaction contemplated by the July 9 Proposal. Our Board discussed the July 9 Proposal, including the extent of Thoma Bravo’s previous due diligence efforts, such preliminary financial analysis, potential alternative strategic partners and next steps. Our Board reviewed the July 9 Proposal in light of the assumptions to which it was subject, and determined that Imperva should continue to engage with Thoma Bravo.

On July 20, 2018, our management and representatives of Qatalyst Partners met with representatives of Thoma Bravo to discuss further due diligence inquiries.

Our Board met on July 24, 2018, with members of our management and representatives of Fenwick in attendance, to discuss operational, financial and strategic matters, including the acquisition of Prevoty, Inc. and Imperva’s strategic alternatives. During the meeting, the independent members of our Board met in executive session and discussed the terms of Thoma Bravo’s most recent proposal with representatives of Fenwick.

On July 26, 2018, Imperva announced its earnings for the quarter ended on June 30, 2018. While earnings were higher than Imperva’s guidance, revenue was below guidance. Imperva also announced a $20 million downward adjustment to the midpoint of its revenue guidance for fiscal year 2018. In addition, on July 26, 2018, Imperva announced that it had entered into a definitive agreement to acquire Prevoty, Inc., for aggregate consideration of approximately $140 million in cash, subject to potential working capital and other adjustments. On the day following these announcements, our common stock closed at $47.85 per share, representing a decrease of approximately 16% from the closing price of $56.70 per share on July 26, 2018.

Our Board met on August 1, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting, to discuss updates regarding prior communications with various parties considering a strategic transaction with Imperva, including the July 9 Proposal, in light of Imperva’s earnings for the quarter ended June 30, 2018 and outlook for the remainder of 2018. Representatives of Qatalyst Partners reviewed and discussed with our Board a summary of the previous review of the July 9 Proposal and potential responses. Representatives of Fenwick reviewed with our Board its fiduciary duties in the context of a potential strategic transaction, such as the transaction contemplated by the July 9 Proposal. Our Board determined that Imperva should continue to engage with Thoma Bravo and furnish due diligence materials with a view to obtaining a firm proposal.

On August 2, 2018, representatives of Qatalyst Partners discussed the July 9 Proposal with representatives of Thoma Bravo and, consistent with our Board’s direction, agreed to continued business due diligence efforts for a limited time period, so that Thoma Bravo could prepare a firm proposal. During the following three-week period, members of our management team and representatives of Qatalyst Partners responded to supplemental due diligence requests and furnished access to additional business diligence materials.

Our Board met on August 24, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting. Mr. Hylen updated our Board on the status of discussions with Thoma Bravo and the progress of business and financial diligence efforts. Our Board reviewed and discussed Imperva’s long-term financial plan, including a review of our management’s draft financial model and projections and underlying assumptions. Our management finalized these projections on August 29, 2018 (other than with respect to projections for calendar year 2022, which our management finalized on October 6, 2018). We refer to such finalized projections as the “Management Projections,” as discussed further in the section of this proxy statement captioned “The Merger—Projections.”

 

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On August 27, 2018, members of our management team and Qatalyst Partners met in person with representatives of Thoma Bravo and gave a presentation regarding Imperva’s operations, business strategy and draft long-term financial model (as discussed further in the section of this proxy statement captioned “The Merger—Projections”). Our management and representatives of Qatalyst Partners discussed related business and financial due diligence questions with representatives of Thoma Bravo in follow-up telephone conversations on August 30 and August 31, 2018.

On September 7, 2018, we received an updated written proposal from Thoma Bravo, providing for a purchase price of $55.50 per share in cash and terms and conditions similar to those previously proposed, subject to various assumptions, including that Imperva be on track to achieve the 2018 billings, revenue and operating margin targets in the financial model provided on August 29, 2018 (the “September 7 Proposal”). The September 7 Proposal, which represented a premium of 21% over the September 7, 2018 closing price of our common stock of $46.00 per share, included a request that Imperva negotiate exclusively with Thoma Bravo. The September 7 Proposal was promptly disseminated to our Board.

Our Board met on September 10, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting, to discuss the September 7 Proposal. Representatives of Qatalyst Partners reviewed with our Board a preliminary analysis of certain financial aspects of the September 7 Proposal. Representatives of Fenwick reviewed with our Board its fiduciary duties in the context of a potential sale transaction, including the terms and significance of a potential go-shop provision. Our Board, together with its advisors, discussed the decline in Imperva’s stock price from $56.70 per share on July 26, 2018, the day before the earnings release for the second fiscal quarter of 2018, to $46.00 per share on September 7, 2018, the last full trading day prior to the meeting. Our Board also discussed with management our business prospects for fiscal year 2018 and beyond, including the Management Projections. Our Board also considered whether there were other potential acquirers for Imperva that would be interested in making a proposal at a higher price. Following discussion, our Board authorized Qatalyst Partners to engage with Thoma Bravo on the basis of the September 7 Proposal and negotiate for a higher price as a precondition to agreeing to engage on an exclusive basis with Thoma Bravo. Our Board also directed Qatalyst Partners to seek from Thoma Bravo a 60-day go-shop period following the execution of a definitive agreement.

On September 12, 2018, consistent with our Board’s direction, our management and representatives of Qatalyst Partners discussed the September 7 Proposal with representatives of Thoma Bravo in a number of telephone conversations and informed Thoma Bravo that our Board was seeking a higher price in order to agree to engage on an exclusive basis with Thoma Bravo. In these discussions, our management discussed potential cost savings that Thoma Bravo could realize from an acquisition of Imperva.

On September 14, 2018, we received an updated written proposal from Thoma Bravo, providing for a purchase price of $56.00 per share in cash; a 45-day “closed” go-shop (in which a reduced termination fee would apply only if the merger agreement were terminated during the go-shop period in favor of a superior proposal); a 1.5% termination fee within the go-shop period; a 3% termination fee outside the go-shop period; and a 6% reverse termination fee (the “September 14 Proposal”). The September 14 Proposal also provided that upon the closing, any then-unvested dilutive securities (for example, options and RSUs) would be converted into the right to receive cash consideration, paid in increments according to the holder’s existing vesting schedule subject to such holder’s continued service at each vesting date. The September 14 Proposal further stated that Thoma Bravo required Imperva to agree to a 14-day exclusivity period as a condition to negotiating a definitive agreement. The September 14 Proposal represented a premium of 18% over the September 14, 2018 closing price of our common stock of $47.45 per share. The September 14 Proposal was promptly disseminated to our Board.

Our Board met on September 16, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting, to discuss the September 14 Proposal. Representatives of Qatalyst Partners reviewed with our Board a preliminary analysis of certain financial aspects of the September 14 Proposal. Representatives of Qatalyst Partners also reviewed

 

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with our Board other potential acquirers that Imperva considered to date as potential counterparties to a strategic transaction, including Strategic Party A, Sponsor A and Sponsor B. Representatives of Fenwick discussed the terms of the September 14 Proposal with our Board, including Imperva’s ability under the proposed go-shop provision to conduct a market check after the public announcement of an acquisition by Thoma Bravo. Following discussion, our Board authorized Qatalyst Partners to make a counterproposal to Thoma Bravo, providing for a purchase price of $57.50 per share, among other revised terms, in order to agree to engage on an exclusive basis with Thoma Bravo (the “September 17 Counterproposal”).

On September 17, 2018, consistent with our Board’s authorization and discussions with our management, representatives of Qatalyst Partners delivered the September 17 Counterproposal to Thoma Bravo, including a 45-day “open” go-shop (in which a reduced termination fee would apply if the merger agreement were terminated in favor of a superior proposal with a competing bidder as long as that competing bidder submitted an acquisition proposal during the go-shop period, regardless of whether the termination occurred during or after the go-shop period); a 1.25% termination fee within the go-shop period; a 3% termination fee outside the go-shop period; and a 7% reverse termination fee.

On September 19, 2018, we received an updated written proposal from Thoma Bravo, providing for an increased purchase price of $56.50 per share, but maintaining a 45-day “closed” go-shop (the “September 19 Proposal”). The September 19 Proposal was subject to various assumptions, including that Imperva be on track to achieve the 2018 billings, revenue and operating margin targets in the financial model provided on August 29, 2018. The September 19 Proposal also accepted the lower 1.25% termination fee within the go-shop period and the higher 7% reverse termination fee, consistent with the September 17 Counterproposal. The September 19 Proposal further stated that Thoma Bravo required Imperva to agree to a 14-day exclusivity period as a condition to negotiating a definitive agreement. The September 19 Proposal represented a premium of 21% over the September 19, 2018 closing price of our common stock of $46.60 per share.

Our Board met on September 20, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting, to discuss the September 19 Proposal. Representatives of Qatalyst Partners also reviewed with our management and Board a list of potential acquirers that Imperva could contact regarding a strategic transaction as part of the proposed go-shop process, including Strategic Party A, Sponsor A and Sponsor B. Following discussion, our Board authorized our management, Qatalyst Partners and Fenwick to negotiate a definitive agreement on the basis of the September 19 Proposal, and to enter into an exclusivity agreement providing for a 14-day exclusivity period. The parties entered into such an exclusivity agreement on September 20, 2018.

On September 22, 2018, Kirkland & Ellis LLP (“Kirkland”), counsel for Thoma Bravo, provided Fenwick an updated draft merger agreement, which modified the draft merger agreement previously delivered on April 28, 2018 to include debt financing provisions and the go-shop, termination fees and reverse termination fee provisions as stated in the September 20 Proposal. In addition, on September 24, 2018, Imperva provided representatives of Thoma Bravo and Kirkland, as well as other advisors for Thoma Bravo, with access to a full electronic dataroom of due diligence materials.

During the following week, Thoma Bravo and Imperva engaged in discussions to complete confirmatory due diligence and their respective counsel exchanged drafts of the merger agreement and other ancillary agreements, including a draft equity commitment letter from a Thoma Bravo fund to fund a portion of the merger consideration upon the satisfaction of the closing conditions in the Merger Agreement; and a draft limited guaranty from the Thoma Bravo sponsor fund, guaranteeing payment of the reverse termination fee, among other things, in the event that the Merger was terminated under certain circumstances described in the Merger Agreement. The parties also negotiated a voting agreement to be entered into by Imperva’s directors and senior officers, concurrently with (but subject to) the execution of the merger agreement.

Our management provided preliminary financial results for the third quarter of 2018 to our Board on October 1, 2018, and to representatives of Thoma Bravo on October 2, 2018. The preliminary results indicated

 

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that Imperva’s earnings and revenue for the third quarter of 2018 were expected to beat guidance, but that bookings would miss management’s estimates, particularly with respect to subscription bookings.

On October 4, 2018, Thoma Bravo and Imperva executed a letter agreement extending the exclusivity period to 11:59 p.m. Pacific time on October 10, 2018 to permit sufficient time to complete due diligence efforts and negotiations between the parties.

On October 5, 2018, representatives of Fenwick and Kirkland held telephonic discussions to negotiate open items in the merger agreement, including, among other things, the treatment of employee equity, the scope of Imperva’s representations and warranties, covenants restricting Imperva from taking certain actions during the period between signing and closing, the terms under which Imperva could respond to unsolicited proposals after the go-shop period, covenants relating to the parties’ efforts to secure antitrust and other regulatory approvals, the circumstances under which Imperva would be required to reimburse Thoma Bravo’s transaction expenses and the maximum amount of such reimbursement.

From October 6, 2018 through the announcement of the execution of the merger agreement on October 10, 2018, representatives of Fenwick and Kirkland held multiple telephonic discussions to finalize the merger agreement and related agreements.

On October 7, 2018, our Board met, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting. Representatives of Qatalyst Partners reviewed with our Board a preliminary analysis of certain financial aspects of the September 19 Proposal. Representatives of Qatalyst Partners indicated that, absent material developments relevant to their analysis and subject to obtaining the approval of the fairness opinion committee of Qatalyst Partners, Qatalyst Partners would be prepared to deliver an opinion as to the fairness, from a financial point of view, of the $56.50 per share in cash to be received by the holders of common stock of Imperva (other than Newco or any affiliates of Newco), should the Board decide to proceed with a transaction on the current terms. Representatives of Fenwick reviewed the fiduciary duties of our Board in connection with a potential sale of the company and provided our Board with a summary of the terms of the proposed merger agreement and related agreements with Thoma Bravo.

On October 8, 2018, representatives of Thoma Bravo informed representatives of Qatalyst Partners that Thoma Bravo proposed to reduce the purchase price to $55.00 per share in cash in light of the company’s bookings performance during the third quarter ended September 30, 2018 and their perspective of the risk to the company’s outlook for 2018 and prospects in future periods (the “October 8 Proposal”), which proposal was promptly disseminated to our management and our Board. The October 8 Proposal represented a premium of 28% over the October 8, 2018 closing price of our common stock of $43.06 per share. Kirkland also delivered a draft of the debt commitment letter that Thoma Bravo had negotiated with its commitment banks.

Our Board met later on October 8, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting. Representatives of Qatalyst Partners indicated that, absent material developments relevant to their analysis and subject to obtaining the approval of the fairness opinion committee of Qatalyst Partners, Qatalyst Partners would be prepared to deliver an opinion as to the fairness, from a financial point of view, of the $55.00 per share in cash to be received by the holders of common stock of Imperva (other than Newco or any affiliates of Newco), should the Board decide to proceed with a transaction on the current terms. Representatives of Fenwick reviewed the fiduciary duties of our Board in connection with the proposal and discussed other open provisions of the merger agreement relating to closing certainty and flexibility in responding to competing offers. Following discussion, our Board authorized Qatalyst Partners and Fenwick to make a counterproposal to Thoma Bravo, providing for a purchase price of $56.00 per share, a shorter duration for Thoma Bravo’s right to match a competing offer, and a narrowed set of non-U.S. antitrust and regulatory approvals required for closing (the “October 8 Counterproposal”). The October 8 Counterproposal represented a premium of 30% over the October 8, 2018

 

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closing price of our common stock of $43.06 per share. Following the meeting, representatives of Qatalyst Partners conveyed the October 8 Counterproposal to representatives of Thoma Bravo, and Fenwick provided Kirkland with comments on the debt commitment letter as well as a revised draft of the merger agreement reflecting the October 8 Counterproposal.

On October 9, 2018, representatives of Thoma Bravo informed Qatalyst Partners that Thoma Bravo proposed a purchase price of $55.75 per share in cash (the “October 9 Proposal”), which proposal was promptly disseminated to our management and our Board. The October 9 Proposal represented a premium of 29% over the October 8, 2018 closing price of our common stock of $43.06 per share. Kirkland then delivered an updated draft merger agreement, which accepted Imperva’s proposed terms regarding notice and matching rights but proposed antitrust and foreign investment approval in Australia as a condition to closing.

Our Board met on October 9, 2018, with members of our management and representatives of Fenwick in attendance, and with representatives of Qatalyst Partners also in attendance for portions in the meeting. Representatives of Fenwick presented to our Board regarding changes in the draft merger agreement since the meeting on October 7. Following a discussion, our Board directed Fenwick to analyze and resolve the requested addition by Thoma Bravo of antitrust and foreign investment approval in Australia as a condition to closing. Representatives of Qatalyst Partners reviewed with our Board Qatalyst Partners’ financial analysis of the merger consideration of $55.75 per share in cash and rendered to our Board its oral opinion, subsequently confirmed in writing, to the effect that, as of October 9, 2018 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the draft merger agreement as of such date by the holders of shares of common stock of Imperva (other than Newco or any affiliates of Newco), was fair, from a financial point of view, to such holders, as more fully described below in the section captioned “The Merger—Fairness Opinion of Qatalyst Partners LP.” After further discussing the advantages and risks of the proposed transaction and the risks faced by Imperva in remaining as a standalone company, in each case that are described in the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors and Reasons for the Merger,” our Board unanimously approved and declared the advisability of the merger agreement, and further declared that the merger agreement was in the best interests of the Company and its stockholders, and recommended that the Company’s stockholders adopt the Merger Agreement.

After further discussion with representatives of Kirkland and Thoma Bravo regarding relevant attributes of the applicable Thoma Bravo investment fund, Imperva agreed to the addition of antitrust and foreign investment approval in Australia as a condition to closing, provided Thoma Bravo used its best efforts to secure the relevant approvals and agreed not to take any action that would (or would reasonably be expected to) prevent such approvals or delay them for more than 90 days after the date of the merger agreement. Imperva and Thoma Bravo also agreed to extend the proposed “outside” date (past which either party could terminate the merger agreement upon notice to the other) to 150 days after the date of the merger agreement.

On October 10, 2018, before the stock market opened, the parties finalized and executed the Merger Agreement and received executed final copies of the equity commitment letter, debt commitment letter and voting agreements. Later on October 10, 2018, before the stock market opened, Imperva and Thoma Bravo issued a joint press release announcing the execution of the merger agreement.

Promptly following the execution of the Merger Agreement, consistent with discussions with our Board and our management and in accordance with the go-shop provisions of the Merger Agreement, Qatalyst Partners contacted 23 strategic entities (including Strategic Party A, Strategic Party B and Strategic Party C) and 26 financial sponsors (including Sponsor A, Sponsor B, a financial sponsor we refer to as Sponsor C, a financial sponsor we refer to as Sponsor D and a financial sponsor we refer to as Sponsor E) to solicit their interest in a potential acquisition proposal. Imperva entered into confidentiality agreements with and furnished access to the electronic due diligence dataroom to six parties, including Strategic Party A, Sponsor A, Sponsor B, Sponsor C, Sponsor D and Sponsor E. None of the confidentiality agreements executed during the go-shop period included standstill restrictions.

 

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On October 13, 2018, Sponsor A submitted a non-binding written proposal to purchase all of Imperva’s outstanding stock at a purchase price of $56.25 per share in cash, subject to confirmatory due diligence and other customary conditions. The proposal was promptly disseminated to our Board. Representatives of Sponsor A met with members of our management team and representatives of Qatalyst Partners on October 15, 2018 to discuss business and financial due diligence, and Imperva’s business strategy and long-term financial plan. Members of our management team held a follow-up telephonic meeting on October 16, 2018 with representatives of Sponsor A to discuss additional business and financial due diligence questions.

On October 27, 2018, representatives of Sponsor A verbally informed Qatalyst Partners that Sponsor A no longer intended to pursue an acquisition transaction and had withdrawn its proposal. Imperva promptly terminated access to the electronic due diligence dataroom for Sponsor A and its representatives.

On November 4, 2018, representatives of Sponsor C verbally informed Qatalyst Partners that Sponsor C no longer intended to pursue an acquisition transaction and was suspending its due diligence efforts. Imperva promptly terminated access to the electronic due diligence dataroom for Sponsor C and its representatives.

On November 7, 2018, representatives of Sponsor D and representatives of Sponsor E verbally informed Qatalyst Partners that Sponsor D and Sponsor E no longer intended to pursue an acquisition transaction and were suspending their due diligence efforts. Imperva promptly terminated access to the electronic due diligence dataroom for Sponsor D, Sponsor E and their respective representatives.

On November 8, 2018, representatives of Sponsor B verbally informed Qatalyst Partners that Sponsor B no longer intended to pursue an acquisition transaction and was suspending its due diligence efforts. Imperva promptly terminated access to the electronic due diligence dataroom for Sponsor B and its representatives.

The Go-Shop Period expired on November 24, 2018 at 11:59 p.m. Eastern time. Imperva terminated access to the electronic due diligence room for Strategic Party A and its representatives promptly following the expiration of the Go-Shop Period. As of the expiration of the Go-Shop Period, there were no pending Acquisition Proposals and no Excluded Parties.

Recommendation of the Board of Directors and Reasons for the Merger

Recommendation of the Board of Directors

Our Board has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of Imperva and its stockholders; and (2) adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

Our Board unanimously recommends that you vote (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR” the compensation proposal and (3) “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there is not a quorum present or represented by proxy at the time of the special meeting, or to give holders of our common stock additional time to evaluate new material information or disclosure.

Reasons for the Merger

At a meeting of our Board on October 9, 2018, our Board unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair, advisable to and in the best interest of Imperva and our stockholders, (2) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, and (3) resolved to recommend that our stockholders approve the adoption of the Merger Agreement.

 

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In evaluating the Merger Agreement and the transactions contemplated thereby, our Board consulted with Imperva’s outside legal counsel, financial advisor and senior management. In recommending that our stockholders vote in favor of adoption of the Merger Agreement, our Board considered numerous positive factors relating to the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the following material factors (which factors are not necessarily presented in order of relative importance):

General Business Considerations . Our Board considered Imperva’s background, recent operating history and current position in the marketplace in its deliberations concerning the Merger and the other transactions contemplated by the Merger Agreement, including the following:

 

   

Imperva’s Business and Financial Condition . Our Board considered Imperva’s business and industry, financial condition, historical and projected financial performance, competitive position and assets and prospects, as well as current industry, economic and market conditions and trends in the market in which Imperva competes.

 

   

Management Projections. Our Board considered certain forecasts and operating data of Imperva reasonably prepared by our senior management on bases reflecting the best currently available estimates and judgements of our senior management of our future financial performance and other matters covered thereby, which projections (which we refer to in this proxy statement as the Management Projections) were also made available to representatives of Qatalyst Partners for purposes of rendering its fairness opinion to our Board and performing its related financial analyses, as more fully described under the section of this proxy statement captioned “The Merger–Management Projections.” Our Board also considered that the Management Projections were based on various assumptions made by our senior management, that there are inherent risks and uncertainty in forecasts and related assumptions and that, as a result, our actual financial results in future periods could differ materially from management’s forecasted results, as more fully described under the section of this proxy statement captioned “The Merger–Management Projections.”

 

   

Financial Analyses and Fairness Opinion of Qatalyst Partners . Our Board considered the oral opinion of Qatalyst Partners (subsequently confirmed in writing) to the effect that, as of October 9, 2018 and based upon and subject to the assumptions, qualifications, limitations and other matters set forth in such written opinion, the $55.75 in cash per share to be received pursuant to, and in accordance with, the terms of the Merger Agreement by holders of our common stock, other than Newco or any affiliate of Newco, was fair, from a financial point of view, to such holders, and the financial analyses with respect to discounted cash flow, selected companies and selected transactions that were performed by Qatalyst Partners in connection with such opinion, as more fully described below under the section of this proxy statement captioned “The Merger–Fairness Opinion of Qatalyst Partners LP.”

 

   

Subscription Model Transition . Our Board considered our transition from primarily a perpetual license-based revenue model to a primarily a subscription-based revenue model and the risks associated with such transition and the potential impact of the transition and risks on our stockholders while we are a public company.

 

   

Per Share Merger Consideration . Our Board considered the current and historical market prices of our Common Stock, including the performance of our Common Stock relative to other participants in our industry, including:

 

   

the fact that Thoma Bravo’s offer consists solely of cash, providing certainty, near-term value and liquidity to our stockholders;

 

   

the current and historical market price of our Common Stock, including the fact that the $55.75 price to be paid for each share represents a premium of approximately 29% over the unaffected closing price of $43.06 per share, and a premium of approximately 35% over the unaffected enterprise value, on October 9, 2018, the last trading day prior to the public announcement of the execution of the Merger Agreement;

 

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the fact that the Merger Consideration represents a 2% discount to the unaffected closing price of $56.70 per share on July 26, 2018, the day Imperva announced financial results for the second quarter ended 2018;

 

   

the fact that the Merger Consideration represents a 26% premium over the 10-day volume-weighted average trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 22% premium over the 30-day volume-weighted average trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 17% premium over the 60-day volume-weighted average trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 15% premium over the 90-day volume-weighted average trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 22% premium over the twelve-month volume-weighted average trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 2% discount to the twelve-month high trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 40% premium over the twelve-month low trading price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a 22% premium over the twelve-month average closing price of our Common Stock for the period ended October 9, 2018;

 

   

the fact that the Merger Consideration represents a multiple of 5.4 times our revenue for the twelve-month period ended June 30, 2018 and a multiple of 5.1 times our revenue for the twelve-month period ended June 30, 2019 (based on consensus analyst estimates as of October 9, 2018), and the fact that these revenue multiples compare favorably to revenue multiples in selected transactions;

 

   

the risk that if Imperva did not accept Thoma Bravo’s last offer, which was the result of vigorous negotiation, there may not have been another opportunity to do so; and

 

   

our Board’s consideration of the risks related to our ability to sustain profitable growth and our current and future competitive position in our industry.

 

   

Strategic Alternatives . In recent years, Imperva has explored various strategic alternatives, involving both strategic and financial acquirors, including the sale of our entire business, portions of our business or the possibility of continuing to operate Imperva as an independent entity pursuing our strategic plan. No other sale efforts have resulted in an agreement.

Terms of the Merger Agreement . Our Board considered a number of positive factors in its deliberations concerning the Merger and the other transactions contemplated by the Merger Agreement, including the following:

 

   

Likelihood of Completion; Certainty of Payment. Absent a Superior Proposal, the Merger represents a transaction that would likely be consummated based on, among other factors:

 

   

the absence of any financing condition to the consummation of the Merger;

 

   

the reputation and financial condition of Thoma Bravo and its affiliated investment funds and their proven ability to complete acquisition transactions; and

 

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our ability to request that the Delaware Court of Chancery (or, if the Delaware Court of Chancery declines to accept or does not have jurisdiction over a particular matter, any state other federal court within the State of Delaware) specifically enforce the Merger Agreement, including the consummation of the Merger, under certain circumstances described in the section of this proxy statement captioned “The Merger Agreement–Specific Performance.”

 

   

Certainty of Consideration . Our Board considered the all-cash nature of the consideration to be paid in the Merger, which allows our stockholders to realize immediate value, in cash, for their investment in Imperva, while enabling our stockholders to avoid further risk of holding our Common Stock. Our Board further noted that the Equity Commitment Letter and the Debt Commitment Letter (along with Imperva’s right to seek specific performance of the Merger Agreement in certain circumstances) provided substantial assurance of a successful closing.

 

   

Other Positive Terms of the Merger Agreement . Our Board considered the terms of the Merger Agreement, which are more fully described under the section of this proxy statement captioned “The Merger Agreement.” Certain provisions of the Merger Agreement that our Board considered significant include:

 

   

the scope of the representations, warranties and covenants being made by Newco and Merger Sub;

 

   

the conditions to the consummation of the Merger, including the requirement that the Merger Agreement be approved by a majority of our stockholders;

 

   

the fact that we may solicit alternative Acquisition Proposals during a 45-day “go-shop” period after the signing of the Merger Agreement, and that Imperva is eligible to pay a reduced termination fee of $25,000,000 in the event Imperva terminates the Merger Agreement to enter into a Superior Proposal during this period;

 

   

the fact that we may continue negotiations after the go-shop period with certain qualifying parties (or “Excluded Parties”) that submitted an Acquisition Proposal during the go-shop period, if our Board determines such negotiations are reasonably likely to lead to a Superior Proposal;

 

   

the fact that after the go-shop period, Imperva may terminate the Merger Agreement to enter into a Superior Proposal, whether as a result of an unsolicited Acquisition Proposal or negotiations with an Excluded Party, subject in each case to payment of a termination fee of $60,000,000 (the “Company Termination Fee”) prior to such termination;

 

   

our Board’s belief that, if triggered, the Company Termination Fee payable to Newco is consistent with fees payable in comparable transactions and would be unlikely to preclude another party from making a competing proposal;

 

   

Newco’s obligation to pay Imperva a termination fee, of $140,000,000 (the “Newco Termination Fee”), if the Merger Agreement is terminated by (1) Imperva, due to the inaccuracy of representations or breach of covenants made by Newco or Merger Sub that causes a closing condition not to be met, following notice and an opportunity to cure, (2) Imperva, in circumstances in which all other closing conditions have been met, Imperva is otherwise prepared to close and Newco or Merger Sub fails to close when required to do so under the Merger Agreement or (3) Imperva or Newco because the termination date has passed in circumstances in which Imperva could have terminated the Merger Agreement pursuant to the preceding two triggers.

 

   

Newco’s commitments in the Merger Agreement to use its reasonable best efforts to consummate the Merger (subject to the terms and conditions of the Merger Agreement); and

 

   

the following “deal protection” terms of the Merger and the Merger Agreement;

 

   

the lack of a financing contingency to Newco’s obligations to close the Merger;

 

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the requirement that Newco secure and deliver executed documents evidencing the ability to finance the Merger contemporaneously with the signing of the Merger Agreement, including the fact that Imperva is a specified third-party beneficiary in the equity commitment letter;

 

   

the guaranty by an affiliate of Newco of certain of Newco’s and Merger Sub’s obligations under the Merger Agreement, including payment of the Newco Termination Fee;

 

   

the fact that certain items, subject to certain conditions, will not be considered a Company Material Adverse Effect, including (1) changes to the general economic or political conditions in the U.S. or any other country or region in the world, (2) changes to the conditions in our industries; (3) changes in law or GAAP, (4) acts of war, terrorism or sabotage, (5) natural disasters and other force majeure events in the U.S. or any other country or region in the world, (6) the public announcement or pendency of the Merger Agreement, the Merger or the transactions contemplated thereby, including any loss of, or adverse change in, our relationship of with our employees, customers, distributors, partners or suppliers to the extent related thereto, (7) our failure (in and of itself) to achieve projections, (8) any decline in the market price or change in the trading volume of our Common Stock, (9) any action taken pursuant to the Merger Agreement or failure to take any action prohibited by the Merger Agreement, (10) any action taken at the request of, or with the prior consent of, Newco, (11) the availability of financing to Newco or the Surviving Corporation, (12) stockholder litigation, and (13) items disclosed in the Company Disclosure Letter; and

 

   

the holders of Dissenting Shares will be entitled to payment of the appraisal value of such Dissenting Shares if demand is made and pursued in accordance with Section 262 of the General Corporation Law of the State of Delaware.

Other Terms of the Merger Agreement . Our Board also considered a number of risks, uncertainties and potentially negative factors in its deliberations concerning the Merger and the other transaction contemplated by the Merger Agreement, including the following:

 

   

No Participation in Imperva’s Future . Our Board considered that if the Merger is consummated, our stockholders will receive the Per Share Merger Consideration in cash and will no longer have the opportunity to participate in Imperva’s future earnings or growth or benefit from any potential future appreciation in value of our Common Stock, including any value that could be achieved if Imperva engages in future strategic or other transactions. Moreover, upon the closing of the Merger, our stockholders not voting in favor of the Merger will be required to surrender their shares (other than Dissenting Shares) in exchange for a price determined by our Board and approved by a majority of our stockholders.

 

   

No -Shop Period; Termination Fee . Our Board considered that, following the Go-Shop Period, Imperva cannot solicit other Acquisition Proposals (other than continued negotiations with Excluded Parties, as described above) and must pay Newco the Company Termination Fee if, thereafter, Imperva exercises its right to enter into a transaction that constitutes a Superior Proposal subject to the terms and conditions of the Merger Agreement, which may deter others from proposing an alternative transaction that may be more advantageous to our stockholders.

 

   

Risks the Merger May Not Be Completed . Our Board considered the risk that the conditions to the Merger may not be satisfied and that, therefore, the Merger would not be consummated. Our Board also considered the risks and costs to us if the Merger is not consummated, including:

 

   

the possible effects of the pendency of the Merger or termination of the Merger Agreement on our business, operating results, prospects, management, employees, customers, distributors and suppliers, including diversion from day-to-day operations, which effects may be exacerbated the longer the time period between the signing and termination of the Merger Agreement;

 

   

the potential effect on the trading price of our Common Stock;

 

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that Newco requires substantial third party debt financing for the transaction and that in the event that the lenders do not provide the debt financing under the debt commitment letter, Imperva will not be able to specifically enforce Newco’s obligations to consummate the transaction (and would instead in certain circumstances be entitled to payment of the Newco Termination Fee as provided under the Merger Agreement);

 

   

if Newco fails to complete the Merger as a result of a breach of the Merger Agreement, depending upon the reason for not closing, remedies may be limited to the Newco Termination Fee payable by Newco, which may be inadequate to compensate Imperva for the damage caused (and such Newco Termination Fee is itself limited in certain situations), and if available, other rights and remedies may be expensive and difficult to enforce, and the success of any such action may be uncertain; and

 

   

the fact that Imperva is subject to various remedies available to Newco should Imperva fail to complete the Merger or breach the Merger Agreement.

 

   

Company Expenses . Our Board considered that if the Merger is not consummated, Imperva will be required to pay its own expenses associated with the Merger Agreement, and the fact that the resulting public announcement of termination of the Merger Agreement could affect the trading price of our Common Stock.

 

   

Newco Expenses . Our Board considered that it would be required to reimburse Newco for certain of its reasonable and documented out-of-pocket costs and expenses up to $4,000,000 if the Merger Agreement is terminated because the requisite vote of our stockholders was not obtained.

 

   

Interim Operating Covenants . Our Board considered that the Merger Agreement imposes restrictions on the conduct of our business prior to the consummation of the Merger, requiring Imperva and its subsidiaries to conduct their business in all material respects in the usual, regular and ordinary course in substantially the same manner as conducted prior to signing and to use commercially reasonable efforts, consistent with past practices and policies to preserve intact our business and operations in all material respects, keep available the services of its directors, officers and employees and preserve its current relationship with material customers, suppliers, distributors, licensors, licensees and governmental agencies, and may limit Imperva and its subsidiaries from takings specified actions, which may delay or prevent us from undertaking business opportunities that may arising pending completion of the Merger.

Timing . Our Board also considered the anticipated timing of the consummation of the transactions contemplated by the Merger Agreement (subject to the go-shop process) as well as the business reputation of Thoma Bravo, its management and the lenders which our Board believed supported the conclusion that the acquisition by Thoma Bravo could be completed relatively quickly and in an orderly manner.

The foregoing discussion of the information and factors considered by our Board is not intended to be exhaustive, but includes the material factors considered by our Board. In view of a variety of factors considered in connection with its evaluation of the Merger, our Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. Our Board did not undertake to make specific determinations as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Our Board based its recommendation on the totality of the information presented.

In considering the recommendation of our Board with respect to the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, yours. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the terms of the Merger, and in recommending that the Merger Agreement be adopted by our stockholders. See the section of this proxy statement captioned “The Merger–Interests of Imperva’s Directors and Executive Officers in the Merger.”

 

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Portions of this explanation of the reasons for the Merger and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the section titled “Forward-Looking Statements.”

Our Board concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the Merger were outweighed by the potential benefits of the Merger to the holders of our Common Stock.

Fairness Opinion of Qatalyst Partners LP

Imperva retained Qatalyst Partners to act as financial advisor to our Board in connection with a potential transaction such as the Merger and to evaluate whether the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), was fair, from a financial point of view, to such holders. Imperva selected Qatalyst Partners to act as Imperva’s financial advisor based on Qatalyst Partners’ qualifications, expertise, reputation, its knowledge of Imperva’s business and the industry in which Imperva operates. Qatalyst Partners has provided its written consent to the reproduction of its opinion in this proxy statement. At the meeting of our Board on October 9, 2018, Qatalyst Partners rendered to our Board its oral opinion, subsequently confirmed in writing, to the effect that, as of October 9, 2018 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), was fair, from a financial point of view, to such holders. Following the meeting, Qatalyst Partners delivered its written opinion, dated October 9, 2018, to our Board.

The full text of the opinion of Qatalyst Partners , dated as of October  9, 2018, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. You should read the opinion carefully in its entirety. Qatalyst Partner s opinion was provided to our Board and addresses only, as of the date of the opinion, the fairness , from a financial point of view , of the merger consideration of $ 55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), to such holders, and it does not address any other aspect of the Merger . It does not constitute a recommendation to any Imperva stockholder as to how to vote with respect to the Merger or any other matter and does not in any manner address the price at which our common stock will trade at any time. The summary of Qatalyst Partner s opinion set forth herein is qualified in its entirety by reference to the full text of the opinion , which is attached to this proxy statement as Annex B .

For purposes of the opinion set forth therein, Qatalyst Partners reviewed a draft, dated as of October 9, 2018, of the merger agreement (the “Draft Merger Agreement”), certain related documents and certain publicly available financial statements and other business and financial information of Imperva. Qatalyst Partners also reviewed certain forward-looking information relating to Imperva prepared by senior management of Imperva, including the Management Projections. Additionally, Qatalyst Partners discussed the past and current operations and financial condition and the prospects of Imperva with senior management of Imperva. Qatalyst Partners also reviewed the historical market prices and trading activity for our common stock and compared the financial performance of Imperva and the prices and trading activity of our common stock with that of certain other selected publicly-traded companies and their securities. In addition, Qatalyst Partners reviewed the financial terms, to the extent publicly available, of selected acquisition transactions and performed such other analyses, reviewed such other information and considered such other factors as it deemed appropriate.

In arriving at its opinion, Qatalyst Partners assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to, or discussed with, Qatalyst Partners by Imperva. With respect to the Management Projections,

 

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Qatalyst Partners was advised by Imperva’s management, and Qatalyst Partners assumed, that the Management Projections had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Imperva of the future financial performance of Imperva and other matters covered thereby. Qatalyst Partners assumed that the Merger will be consummated in accordance with the terms set forth in the Draft Merger Agreement, without any modification, waiver or delay. Qatalyst Partners also assumed that the final executed merger agreement will not differ in any material respect from the Draft Merger Agreement reviewed by Qatalyst Partners. In addition, Qatalyst Partners assumed that in connection with the receipt of all the necessary approvals of the proposed Merger, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on Imperva or the contemplated benefits expected to be derived in the proposed Merger. Qatalyst Partners did not make any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Imperva or its affiliates, nor was Qatalyst Partners furnished with any such evaluation or appraisal. In addition, Qatalyst Partners relied, without independent verification, upon the assessment of the management of Imperva as to the existing and future technology and products of Imperva and the risks associated with such technology and products. Qatalyst Partners’ opinion has been approved by Qatalyst Partners’ opinion committee in accordance with its customary practice. Qatalyst Partners’ opinion does not constitute a recommendation as to how to vote with respect to the Merger or any other matter and does not in any manner address the price at which our common stock will trade at any time.

Qatalyst Partners’ opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the date of the opinion may affect Qatalyst Partners’ opinion and the assumptions used in preparing it, and Qatalyst Partners did not assume any obligation to update, revise or reaffirm its opinion. Qatalyst Partners’ opinion did not address the underlying business decision of Imperva to engage in the Merger, or the relative merits of the Merger as compared to any strategic alternatives that may be available to Imperva. Qatalyst Partners’ opinion is limited to the fairness, from a financial point of view, of the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), and Qatalyst Partners expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of the officers, directors or employees of Imperva or any of its affiliates, or any class of such persons, relative to such consideration at any time.

The following is a brief summary of the material analyses performed by Qatalyst Partners in connection with its opinion dated October 9, 2018. The analyses and factors described below must be considered as a whole; considering any portion of such analyses or factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Qatalyst Partners’ opinion. For purposes of its analyses, Qatalyst Partners utilized both the consensus of third-party research analysts’ projections (“Analyst Projections”) and the Management Projections. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Qatalyst Partners, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Qatalyst Partners’ financial analyses.

Discounted Cash Flow Analysis

Qatalyst Partners performed an illustrative discounted cash flow analysis, which is designed to imply a potential, present value of per share values for our common stock as of September 30, 2018 by:

 

   

adding:

 

  (a)

the implied net present value of the estimated future unlevered free cash flows of Imperva, based on the Management Projections, for the fourth quarter of calendar year 2018 through calendar year 2021 (which implied present value was calculated by using a range of discount rates of 10.5% to 14.5%, based on an estimated weighted average cost of capital for Imperva); and

 

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  (b)

the implied net present value of a corresponding terminal value of Imperva, calculated by multiplying the estimated unlevered free cash flow in calendar year 2022 based on the Management Projections (assuming long-term cash tax rate of 25%, as provided by Imperva management, and which tax rate excludes the effect of Imperva’s estimated remaining tax attributes for 2022, as such tax attributes were separately valued, as described in item (c) below), by a range of multiples of enterprise value to next-twelve-months estimated unlevered free cash flow of 15.0x to 25.0x selected by Qatalyst Partners based on its professional judgement, and discounted to present value using the same range of discount rates used in item (a) above;

 

  (c)

the implied net present value of Imperva’s forecasted tax attributes outstanding as of December 31, 2021 based on the Management Projections (which implied present value was calculated by using the same range of discount rates used in item (a) above and the statutory tax rate applicable to Imperva, as provided by Imperva’s management); and

 

  (d)

the net cash of Imperva as of September 30, 2018, as provided by Imperva’s management; and

 

  (e)

dividing the resulting amount by the number of fully-diluted shares of our common stock (calculated utilizing the treasury stock method), adjusted for restricted stock units, performance stock units, and stock options, outstanding as of October 5, 2018, all of which amounts were provided by Imperva’s management (the “Fully Diluted Shares”), and applying a dilution factor of approximately 19%, as projected by Imperva management, to reflect the dilution to current stockholders over the projected period due to the effect of future equity compensation grants.

Based on the calculations set forth above, this analysis implied a range of per share values for our common stock of approximately $43.04 to $70.17.

 

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Selected Companies Analysis

Qatalyst Partners compared selected financial information and public market multiples for Imperva with publicly available information and public market multiples for selected companies. The companies used in this comparison are listed below, and were selected by Qatalyst Partners in its professional judgment, based on factors including, among other things, that they are publicly traded companies in similar lines of business to Imperva, having a similar business model, having similar financial performance, or having other relevant or similar characteristics.

 

Selected Companies    CY19E
Revenue
Multiples
     CY19E
Levered
FCF
Multiples
 

Selected Security Vendors

     

Palo Alto Networks, Inc.

     6.7x        18.7x  

Check Point Software Technologies Ltd.

     7.3x        17.3x  

Fortinet, Inc.

     6.7x        23.9x  

Symantec Corporation

     3.5x        10.2x  

Trend Micro Incorporated

     4.5x        24.5x  

Okta, Inc.

     16.0x        —    

Proofpoint, Inc.

     6.2x        27.1x  

FireEye, Inc.

     4.1x        —    

Qualys, Inc.

     8.9x        29.3x  

Sophos Group plc

     3.9x        16.3x  

CyberArk Software Ltd.

     6.1x        23.7x  

Sailpoint Technologies Holdings, Inc.

     8.8x        —    

Varonis Systems, Inc.

     6.2x        —    

Rapid7, Inc.

     7.0x        —    

ForeScout Technologies, Inc.

     4.4x        —    

Diversified Technology

     

Akamai Technologies, Inc.

     3.8x        20.7x  

F5 Networks, Inc.

     4.3x        14.7x  

Note: “In-the-money” convertible debt is assumed to be net share settled. Multiples greater than 50x or negative were considered not meaningful and noted as dashes.

Based upon research analyst consensus estimates for calendar year 2019, and using the closing prices as of October 8, 2018 for shares of the selected companies, Qatalyst Partners calculated, among other things, the implied fully-diluted enterprise value divided by the estimated consensus revenue for calendar year 2019 (the “CY2019E Revenue Multiples”) for each of the selected companies.

The CY2019E Revenue Multiple for Imperva was 3.5x based on the Analyst Projections, and the fully-diluted enterprise value of Imperva was calculated using the closing price of Imperva as of October 8, 2018.

Based on an analysis of the CY2019E Revenue Multiples for each of the selected companies, Qatalyst Partners selected a representative range of 3.5x to 5.0x and applied this range to Imperva’s estimated calendar year 2019 revenue based on each of the Analyst Projections and the Management Projections. Based on the Fully Diluted Shares, this analysis implied a range of per share values for our common stock of approximately $42.91 to $58.30 based on the Analyst Projections and approximately $44.00 to $59.85 based on the Management Projections.

Based upon research analyst consensus estimates for calendar year 2019, and using the closing prices as of October 8, 2018 for shares of the selected companies, Qatalyst Partners calculated, among other things, the

 

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implied fully-diluted equity value divided by the estimated consensus levered free cash flow for calendar year 2019 (the “CY2019E Levered FCF Multiples”) for each of the selected companies.

The CY2019E Levered FCF Multiple for Imperva was 17.7x based on the Analyst Projections, and the fully-diluted equity value of Imperva was calculated using the closing price of Imperva as of October 8, 2018.

Based on an analysis of the CY2019E Levered FCF Multiples for each of the selected companies, Qatalyst Partners selected a representative range of 17.5x to 25.0x and applied this range to Imperva’s estimated calendar year 2019 levered free cash flow based on each of the Analyst Projections and the Management Projections. Based on the Fully Diluted Shares, this analysis implied a range of per share values for our common stock of approximately $42.42 to $60.45 based on the Analyst Projections and approximately $37.57 to $53.57 based on the Management Projections.

No company included in the selected companies analysis is identical to Imperva. In evaluating the selected companies, Qatalyst Partners made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of Imperva, such as the impact of competition on Imperva’s business and the industry in general, industry growth and the absence of any material adverse change in Imperva’s financial condition and prospects or the industry or in the financial markets in general. Individual multiples or mathematical analysis, such as determining the arithmetic mean, median, or the high or low, is not in itself a meaningful method of using selected company data.

Selected Transactions Analysis

Qatalyst Partners compared 34 selected public software transactions announced between January 2010 and October 2018, which were selected by Qatalyst Partners in its professional judgment based on factors including, among other things, the industry in which the parties operate, business model and size of transaction. These transactions are listed below:

 

Announcement Date

  

Target

  

Acquiror

  

LTM

Revenue Multiple

  

NTM

Revenue Multiple

07/11/18

   CA, Inc.    Broadcom Inc.    4.3x    4.3x

11/27/17

   Barracuda Networks, Inc.    Thoma Bravo    3.8x    3.6x

10/23/17

   BroadSoft, Inc.    Cisco Systems, Inc.    5.3x    4.6x

11/20/16

   LifeLock, Inc.    Symantec Corporation    3.6x    3.3x

09/19/16

   Infoblox Inc.    Vista Equity Partners    3.8x    3.7x

08/31/16

   Interactive Intelligence Group, Inc.    Genesys Telecommunications Laboratories, Inc.    3.4x    3.2x

07/07/16

   AVG Technologies N.V.    Avast Holding B.V.    3.4x    3.2x

05/18/16

   inContact, Inc.    NICE LTD.    4.2x    3.6x

 

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Announcement Date

  

Target

  

Acquiror

  

LTM

Revenue Multiple

  

NTM

Revenue Multiple

11/02/15

   Medassets, Inc.    Pamplona Capital    3.5x    3.6x

10/21/15

   SolarWinds, Inc.    Silver Lake and Thoma Bravo    9.1x    7.0x

09/13/15

   Solera Holdings, Inc.    Vista Equity Partners    5.7x    5.2x

04/07/15

   Informatica Corporation    Permira Funds & Canada Pension Plan Investment Board    4.7x    4.3x

02/02/15

   Advent Software, Inc.    SS&C Technologies Holdings, Inc.    6.8x    6.4x

12/15/14

   Riverbed Technology, Inc.    Thoma Bravo    3.3x    3.2x

11/25/14

   Advanced Computer Software Group    Vista Equity Partners    3.6x    3.5x

09/29/14

   TIBCO Software Inc.*    Vista Equity Partners    3.9x    3.9x

09/02/14

   Compuware Corporation    Thoma Bravo    3.1x    3.1x

11/18/13

   UNIT4    Advent International    2.6x    2.4x

09/30/13

   Active Network, Inc.    Vista Equity Partners    2.1x    2.0x

07/23/13

   Sourcefire, Inc.    Cisco Systems, Inc.    10.0x    8.0x

05/06/13

   BMC Software, Inc.    Bain, Golden Gate, GIC and IVP    3.2x    3.1x

11/01/12

   JDA Software Group, Inc.    RedPrairie (New Mountain Capital)    2.7x    2.5x

10/29/12

   OPNET Technologies, Inc.    Riverbed Technology, Inc.    5.1x    4.4x

08/27/12

   Deltek, Inc.    Thoma Bravo    3.0x    2.6x

 

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Announcement Date

  

Target

  

Acquiror

  

LTM

Revenue Multiple

  

NTM

Revenue Multiple

07/02/12

   Quest Software, Inc.    Dell Inc.    2.7x    2.5x

03/19/12

   Misys    Vista Equity Partners    3.4x    3.1x

12/09/11

   Blue Coat Systems, Inc.    Thoma Bravo    2.0x    2.0x

08/18/11

   Autonomy Corporation plc    Hewlett-Packard Company    11.8x    9.6x

04/26/11

   Lawson Software, Inc.    Golden Gate Capital    2.5x    2.4x

09/20/10

   Netezza Corporation    International Business Machines Corporation    7.9x    6.7x

09/13/10

   ArcSight, Inc.    Hewlett-Packard Company    7.4x    5.9x

08/19/10

   McAfee, Inc.    Intel Corporation    3.4x    3.1x

05/12/10

   Sybase, Inc.    SAP AG    4.8x    4.5x

03/31/10

   Skillsoft Public Limited Company    Berkshire Partners, Advent International Corporation and Bain Capital Partners    3.6x    3.7x

 

*

LTM revenue pro forma for three acquisitions.

For each of the transactions listed above, Qatalyst Partners reviewed, among other things, the implied fully-diluted enterprise value of the target company as a multiple of (a) the revenue of the target company for the last twelve-month period (“LTM Revenue Multiple”), and (b) the revenue of the target company for the next-twelve month period (“NTM Revenue Multiple”), as reflected in certain publicly available financial statements, research analyst reports and press releases.

Based on an analysis of the LTM Revenue Multiple for each of the selected transactions, and the application of its professional judgment, Qatalyst Partners selected a representative range of 3.3x to 5.0x and applied that range to Imperva’s revenue for the last twelve-month period ended on June 30, 2018. Based on the Fully Diluted Shares, this analysis implied a range of per share values for our common stock of approximately $36.22 to $51.94.

Based on an analysis of the NTM Revenue Multiple for each of the selected transactions, and the application of its professional judgment, Qatalyst Partners selected a representative range of 3.1x to 4.5x and applied that range to Imperva’s estimated revenue for the next twelve-month period ending on June 30, 2019 reflected in the

 

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Analyst Projections as of October 8, 2018. Based on the Fully Diluted Shares, this analysis implied a range of per share values for our common stock of approximately $36.72 to $49.98.

No company or transaction utilized in the selected transactions analysis is identical to Imperva or the Merger. In evaluating the selected transactions, Qatalyst Partners made judgments and assumptions with regard to general business, market and financial conditions and other matters, many of which are beyond Imperva’s control, such as the impact of competition on Imperva’s business or the industry generally, industry growth and the absence of any material adverse change in Imperva’s financial condition and prospects or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared. Individual multiples or mathematical analysis, such as determining the arithmetic mean, median, or the high or low, is not in itself a meaningful method of using selected company data. Because of the unique circumstances of each of these transactions and the Merger, Qatalyst Partners cautioned against placing undue reliance on this information.

Miscellaneous

In connection with the review of the Merger by our Board, Qatalyst Partners performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily amenable to a partial analysis or summary description. In arriving at its opinion, Qatalyst Partners considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Qatalyst Partners believes that selecting any portion of its analyses, without considering all analyses as a whole, could create a misleading or incomplete view of the process underlying its analyses and opinion. In addition, Qatalyst Partners may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Qatalyst Partners’ view of the actual value of Imperva. In performing its analyses, Qatalyst Partners made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Imperva’s control. Any estimates contained in Qatalyst Partners’ analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Qatalyst Partners conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco), to such holders. This analysis does not purport to be an appraisal or to reflect the price at which the common stock might actually trade at any time.

Qatalyst Partners’ opinion and its presentation to our Board was one of many factors considered by our Board in deciding to approve the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of our Board with respect to the merger consideration of $55.75 per share in cash to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of our common stock (other than Newco or any affiliates of Newco) or of whether our Board would have been willing to agree to different consideration. The Merger Consideration of $55.75 per share in cash payable in the Merger was determined through arm’s-length negotiations between Imperva and Newco and was unanimously approved by our Board. Qatalyst Partners provided advice to Imperva during these negotiations. Qatalyst Partners did not, however, recommend any specific consideration to Imperva or that any specific consideration constituted the only appropriate consideration for the Merger.

Qatalyst Partners provides investment banking and other services to a wide range of entities and individuals, domestically and offshore, from which conflicting interests or duties may arise. In the ordinary course of these activities, affiliates of Qatalyst Partners may at any time hold long or short positions, and may trade or otherwise effect transactions in debt or equity securities or loans of Imperva, Newco or certain of their respective affiliates.

 

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Other than as set forth below, during the two-year period prior to the date of Qatalyst Partners’ opinion, no material relationship existed between Qatalyst Partners or any of its affiliates and Imperva or Newco pursuant to which compensation was received by Qatalyst Partners or its affiliates; however, Qatalyst Partners and/or its affiliates may in the future provide investment banking and other financial services to Imperva or Newco and their respective affiliates for which Qatalyst Partners would expect to receive compensation.

Pursuant to a letter agreement, dated as of March 18, 2014, as amended by a letter agreement, dated as of July 8, 2016, Qatalyst Partners provided Imperva with financial advisory services and in connection therewith earned and received $350,000 for such financial advisory services during the past two-year period. In addition, pursuant to a letter agreement, dated as of November 27, 2017, and reaffirmed on May 14, 2018. Qatalyst Partners provided Imperva with financial advisory services in connection with the proposed Merger for which it will be paid approximately $32 million, $4,000,000 of which was payable upon the delivery of its opinion (regardless of the conclusion reached in the opinion), and the remaining portion of which will be paid upon, and subject to, the consummation of the Merger. Imperva has also agreed to reimburse Qatalyst Partners for its reasonable expenses incurred in performing its services. Imperva has also agreed to indemnify Qatalyst Partners and its affiliates, their respective members, directors, officers, partners, agents and employees and any person controlling Qatalyst Partners or any of its affiliates against certain liabilities, including liabilities under federal securities law, and certain expenses related to or arising out of Qatalyst Partners’ engagement.

Management Projections

Imperva does not, as a matter of course, publicly disclose projections as to its future financial performance beyond the current fiscal year and generally does not make public projections for extended periods due to, among other things, the inherent difficulty of predicting financial performance for future periods. However, in connection with our Board’s review of strategic alternatives and specifically the Merger, management prepared and provided to our Board certain forecasts and operating data of Imperva for the remainder of fiscal year 2018 and fiscal years 2019 through 2022, reasonably prepared by our management on bases reflecting the best currently available estimates and judgements of our management of our future financial performance and other matters covered thereby, which projections were also made available to representatives of Qatalyst Partners for purposes of rendering its fairness opinion to our Board and performing its related financial analyses (the “Management Projections”). The Management Projections were the only financial forecasts with respect to Imperva provided by Imperva for use by Qatalyst Partners in performing its financial analyses during our Board’s review of the Merger and delivering its opinion described in the section of this proxy statement captioned “The Merger—Opinion of Imperva’s Financial Advisor”. The Management Projections (other than for fiscal year 2022) were also made available to Thoma Bravo and other strategic and financial participants in the strategic alternatives review process in connection with their due diligence review.

The Management Projections were not prepared with a view to public disclosure and are included in this proxy statement only because the Management Projections were made available to Thoma Bravo and other participants in the strategic review process in connection with their due diligence review of Imperva, and made available to Qatalyst Partners for use in connection with its financial analyses as described in this proxy statement. The Management Projections were not prepared with a view to compliance with (1) GAAP, (2) the published guidelines of the SEC regarding projections and forward-looking statements; or (3) the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, Ernst & Young LLP, our independent registered public accountant, has not examined, reviewed, compiled or otherwise applied procedures to the Management Projections and, accordingly, assumes no responsibility for, and expresses no opinion on, them. The Management Projections included in this proxy statement have been prepared by, and are the responsibility of, Imperva management.

The Management Projections were developed by our management on a standalone basis of Imperva without giving effect to the Merger and the other transactions contemplated by the Merger Agreement, and therefore the

 

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Management Projections do not give effect to the Merger and the other transactions contemplated by the Merger Agreement or any changes to our operations or strategy that may be implemented after the consummation of the Merger, including any costs incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. Although a summary of the Management Projections is presented with numerical specificity, they reflect numerous assumptions and estimates as to future events made by Imperva management that they believed were reasonable at the time the Management Projections were prepared, taking into account the relevant information available to Imperva management at the time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Important factors that may affect actual results and cause the Management Projections not to be achieved include general economic conditions, Imperva’s ability to achieve forecasted sales, the accuracy of certain accounting assumptions, changes in actual or projected cash flows and competitive pressures. In addition, the Management Projections do not take into account any circumstances or events occurring after the date that they were prepared. As a result, there can be no assurance that the Management Projections will be realized, and actual results may be materially better or worse than those contained in the Management Projections. The Management Projections cover multiple years, and such information by its nature becomes less reliable with each successive year. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that our Board, Imperva, Qatalyst Partners or any of their respective affiliates or representatives or any other recipient of this information considered, or now considers, the Management Projections to be predictive of actual future results. The summary of the Management Projections is not included in this proxy statement in order to induce any stockholder to vote in favor of the proposal to adopt the Merger Agreement or any of the other proposals to be voted on at the special meeting. We do not intend to update or otherwise revise the Management Projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Management Projections are shown to be in error or no longer appropriate. In light of the foregoing factors and the uncertainties inherent in the Management Projections, stockholders are cautioned not to place undue reliance (if any) on the Management Projections included in this proxy statement .

The Management Projections and the accompanying tables contain certain non-GAAP financial measures, including billings, non-GAAP operating income and unlevered free cash flow, which Imperva believes are helpful in understanding its past financial performance and future results. The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with Imperva’s consolidated financial statements prepared in accordance with GAAP. Imperva’s management regularly uses Imperva’s supplemental non-GAAP financial measures internally to understand and manage the business and forecast future periods. Reconciliations of non-GAAP financial measures to comparable GAAP measures are not provided. There is inherent difficulty and uncertainty in estimating or predicting the various components of each of net income and net cash provided by operating activities, which components could significantly impact that financial measure. In addition, when planning, forecasting and analyzing future periods, Imperva does so primarily on a non-GAAP basis without preparing a GAAP analysis, as that would require estimates for various reconciling items that would be difficult to predict with reasonable accuracy. As a result, the Company does not believe that a GAAP reconciliation to forward-looking non-GAAP financial measures would provide meaningful supplemental information about the Company’s outlook.

We calculate billings as revenue plus the change in deferred revenue during the applicable period, plus any adjustments to deferred revenue due to the adoption of the new revenue recognition standard (Accounting Standards Codification 606, Revenue from Contracts with Customers) (“ASC 606”), and excluding the impact of acquisitions.

The Management Projections are forward-looking statements. For information on factors that may cause Imperva’s future results to materially vary, see the information under the section captioned “Forward-Looking Statements.”

 

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Imperva—Management Projections

Company Projections

 

     (in millions)  
     CY2018E      CY2019E      CY2020E      CY2021E      Terminal
CY2022E
 

Billings (1)

   $ $408      $ $470      $ $543      $ $615      $ $706  

Revenue

   $ 354      $ 404      $ 472      $ 546      $ 626  

Non-GAAP Operating Income (2)

   $ 31      $ 39      $ 56      $ 81      $ 98  

Unlevered Free Cash Flow (3)

     N/A      $ 74      $ 85      $ 132      $ 144  

 

(1)

Billings is a non-GAAP financial measure and represents revenue plus the change in deferred revenue during the applicable period, plus any adjustments to deferred revenue due to the adoption of ASC 606 and excluding the impact of acquisitions.

(2)

Non-GAAP operating income is calculated to exclude stock-based compensation, amortization of intangibles, and other non-recurring charges.

(3)

Unlevered free cash flow is a non-GAAP financial measure calculated as Non-GAAP operating income less (a) cash taxes, less (b) capital expenditures, plus (c) depreciation, plus (d) decrease in working capital, less (e) other cash flow items related to litigation expense, acquisition payments for unvested equity and a planned investment. The Unlevered Free Cash Flow in terminal year 2022 assumes an effective tax rate of 25%.

As noted above, the plans and projections reflect numerous estimates and assumptions made with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to our business, all of which are difficult to predict and many of which are beyond our control.

Interests of Imperva’s Directors and Executive Officers in the Merger

When considering the recommendation of our Board that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. Our Board was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders.

Arrangements with Newco

As of the date of this proxy statement, none of our executive officers or members of our Board has entered into any agreement with Newco or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates. Prior to or following the closing of the Merger (but not prior to Imperva and Thoma Bravo arriving at the $55.75 Per Share Merger Consideration), certain of our executive officers may have discussions, or may enter into agreements with, Newco or Merger Sub or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates.

Insurance and Indemnification of Directors and Executive Officers

During the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation and Newco will indemnify, defend and hold harmless, and advance expenses to current or former directors and officers of Imperva and its subsidiaries with respect to all acts or omissions by them in their capacities as such or any transactions contemplated by the Merger Agreement, to the fullest extent that

 

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Imperva would be permitted by applicable law. In addition, during the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation and Newco will cause the certificate of incorporation, bylaws (and other organizational documents) of the Surviving Corporation and its subsidiaries to (1) honor and fulfill in all respects the obligations of Imperva and its subsidiaries under the DGCL, their respective organizational documents and any and all indemnification agreements between Imperva or any of its subsidiaries, on the one hand, and the current or former directors or officers of Imperva or Imperva’s subsidiaries, on the other hand (including any person that becomes a director or officer of Imperva or its subsidiaries prior to the Effective Time) and (2) include in the certificates of incorporation and bylaws (and similar organizational documents) of Imperva and its subsidiaries provisions with respect to indemnification, exculpation and the advancement of expenses and limitation of director and officer liability that are at least as favorable to the current or former directors and officers of Imperva and its subsidiaries as those set forth in Imperva’s and its subsidiaries’ organizational documents as of the date of the Merger Agreement. The Surviving Corporation and its subsidiaries will not, for a period of six years from the Effective Time, amend, repeal or otherwise modify these provisions in the organizational documents in any manner except as required by applicable law.

The Merger Agreement also provides that prior to the Effective Time, Imperva may purchase a six year prepaid “tail” policy of officers and directors liability insurance. If Imperva does not purchase a “tail” policy prior to the Effective Time, for at least six years after the Effective Time, Newco will cause the Surviving Corporation and its other subsidiaries to maintain in full force and effect, on terms and conditions no less advantageous to the current or former directors and officers of Imperva and its subsidiaries, the existing directors’ and officers’ liability insurance and fiduciary insurance maintained by Imperva as of the date of the Merger Agreement. The “tail” policy will cover claims arising from facts, events, acts or omissions that occurred at or prior to the Effective Time, including the transactions contemplated in the Merger Agreement. The obligation of Newco or the Surviving Corporation, as applicable, is subject to an annual premium cap of 300% of the aggregate annual premiums currently paid by Imperva for such coverage for its last full fiscal year. For more information, see the section of this proxy statement captioned “The Merger Agreement — Indemnification and Insurance.”

Treatment of Equity-Based Awards

As a result of the Merger, the treatment of Company Options, RSUs and PRSUs that are outstanding immediately prior to the Effective Time will be as follows:

Treatment of Stock Options

As of November 23, 2018, there were 552,719 outstanding stock options with an exercise price less than $55.75 per share, of which 141,858 were held by our directors and executive officers. To the extent not exercised prior to the Effective Time, each outstanding vested Company Option (including any Company Option that vests in connection with the Merger) will be cancelled at the Effective Time and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the Option Consideration, to be paid as soon as practicable (and in no event more than 10 business days) following the Closing.

Each unvested Company Option outstanding as of immediately prior to the Effective Time (and that will not vest in connection with the Merger) will be cancelled at the Effective Time and converted into the contingent right to receive an amount in cash (without interest and subject to deduction for any required withholding tax), equal to the Contingent Option Consideration. The Contingent Option Consideration will be subject to the same vesting arrangements as applied to the unvested Company Options to which the Contingent Option Consideration relates and the applicable Contingent Option Consideration will be paid in a cash payment without interest and less any required withholding taxes as soon as practicable (and in no event more than the later of (x) 10 business days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the original vesting conditions applicable to such unvested Company Option.

 

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Each outstanding Company Option (whether vested or unvested) with an exercise price per share equal to or greater than $55.75 per share will be cancelled without consideration upon the Effective Time.

Treatment of Restricted Stock Units and Performance-Based Restricted Stock Units

As of November 23, 2018, there were 2,013,826 outstanding RSUs (excluding PRSUs) and 280,188 PRSUs (assuming the maximum level of achievement), of which 202,985 RSUs and 202,788 PRSUs were held by our directors and executive officers.

Each vested RSU that is outstanding as of immediately prior to the Effective Time (including any RSU that becomes a vested RSU in connection with the Merger) will be cancelled at the Effective Time and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the RSU Consideration, to be paid as soon as practicable (and in no event more than 10 business days) following the Closing; provided that any payment in respect of any vested RSU shall be made in compliance with Section 409A.

Each unvested RSU (including each PRSU for which performance has been achieved and which remains subject to time-based vesting) that is outstanding immediately prior to the Effective Time (and that will not vest in connection with the Merger), will be cancelled at the Effective Time and converted into the contingent right to receive an amount in cash (without interest and subject to deduction for any required withholding) equal to the Contingent RSU Consideration. The Contingent RSU Consideration will be subject to the holder remaining continuously employed with the Surviving Corporation and satisfaction of the original vesting conditions applicable to the underlying unvested RSU. As soon as practicable (and in no event more than the later of (x) 10 business days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the original vesting conditions, the applicable portion of the Contingent RSU Consideration will be paid without interest and less any required withholding taxes; provided that any payment in respect of any unvested RSU shall be made in compliance with Section 409A.

For each PRSU outstanding as of immediately prior to the Effective Time, the level of achievement of the applicable performance metrics will be determined by the Company or a committee thereof in accordance with the Company equity incentive plan and the applicable PRSU agreement (provided, however, that such level of achievement shall not exceed the greater of (1) target performance and (2) the actual achievement of the performance goals attributable to such PRSUs) as of immediately prior to the Effective Time and, upon such determination, the resulting earned and vested PRSUs, if any, will be treated as vested RSUs and the resulting earned PRSUs that remain subject to time-based vesting conditions will be treated as unvested RSUs pursuant to the paragraphs above. Any PRSUs for which performance is not achieved as of immediately prior to the Effective Time will be forfeited for no consideration upon the Effective Time pursuant to the terms of the PRSUs. Additional information about the PRSUs can be found in the section of this proxy statement captioned “The Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva—Treatment of PRSUs.”

Section 102 Securities

The Option Consideration payable with respect to Section 102 Options, the RSU Consideration payable with respect to Section 102 RSUs and the consideration payable with respect to the Section 102 Shares shall be paid (either directly or indirectly) to Imperva’s Section 102 Trustee for the benefit of the beneficial owners thereof, who shall pay out the 102 Amounts, as applicable, and withhold the applicable tax either directly or through Imperva’s applicable Israeli Subsidiary.

Treatment of Purchase Rights under the Employee Stock Purchase Plan

With respect to the ESPP, after the date of the Merger Agreement and pursuant to the requirements set forth in the Merger Agreement, the compensation committee of our Board adopted resolutions and took other actions

 

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to (1) restrict participants in the ESPP from increasing their respective rates of deductions and purchases (including non-payroll contributions); (2) provide that no individual who is not participating in the ESPP as of the date of the Merger Agreement may commence participation in the ESPP; (3) provide that no offering period under the ESPP will be commenced after the date of the Merger Agreement; (4) provide that the offering period under the ESPP that is in effect as of the date of the Merger Agreement will end on the earlier of immediately prior to the Effective Time and the last day of such offering period and all outstanding purchase rights under the offering period in effect as of the date of the Merger Agreement shall automatically be exercised in accordance with the terms of the ESPP; and (5) terminate the ESPP, effective as of the date immediately prior to the date of the Effective Time. The final offering period under the ESPP ended on November 15, 2018.

Agreements or Arrangements with Executive Officers and Directors of Imperva

Transitional Service Period.  As of the date of this proxy statement, it is anticipated that Mike Burns, our Chief Financial Officer, and Trâm Phi, our Chief Legal Officer and Chief of Staff, will provide transition services to the Company for approximately 90 days following the Closing, during which time Ms. Phi and Mr. Burns will continue to receive their current base salary and be entitled to receive a pro-rata portion of their target bonus, and will terminate employment upon completion of these transition services. At the Closing, Mr. Burns and Ms. Phi will be entitled to the benefits provided by our Change in Control Plan subject to a release of claims, as described below under “Agreements or Arrangements with Executive Officers and Directors of Imperva—Change in Control Plan.”

Change in Control Plan

The Company has adopted a change in control plan (the “Change in Control Plan”) in which each of Mr. Hylen, Mr. Burns and Ms. Phi participates. Each executive officer was required to opt into the Change in Control Plan and to waive any existing severance arrangements with Imperva that would otherwise be triggered by a change in control or similar transaction in order to participate in the Change in Control Plan.

Under the Change in Control Plan, upon a termination of the executive officer’s employment other than for “cause” or the resignation of the executive officer for “good reason” within the period commencing three months prior to a change in control and ending 12 months following a change of control, each participating executive officer will be entitled to the following benefits, subject to the executive officer’s execution and non-revocation of a release of claims in favor of Imperva: (1) a lump sum cash payment equal to the sum of (x) the executive’s annual base salary and (y) the executive’s target annual bonus for the year in which the termination or resignation occurs, payable within 60 days following such termination or resignation of employment; (2) reimbursement by Imperva of up to 12 months of COBRA premiums to continue health insurance coverage for the executive officer and such executive officer’s eligible dependents; and (3) full acceleration of all outstanding equity awards (including acceleration of any Contingent Option Consideration and Contingent RSU Consideration following the Effective Time), with any outstanding PRSUs (that have not yet been converted into time-based RSUs or Contingent RSU Consideration) to accelerate at the greater of target or the then level of achievement.

The Change in Control Plan also provides that in the event any amounts provided for in the Change in Control Plan or otherwise payable to an executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code, and could be subject to the related excise tax, the executive officer will be entitled to receive either full payment of benefits or such lesser amount, which would result in no portion of the benefits being subject to an excise tax, whichever results in the greater amount of after-tax benefits to the executive officer. As noted in the section of this proxy statement captioned “The Merger—Employee Benefits,” Imperva is permitted to accelerate certain equity awards held by Mr. Hylen (relating to no more than 15,000 shares) and Mr. Burns (relating to no more than 900 shares) to mitigate certain tax impacts of Section 280G. No decisions have been made with respect to any such acceleration as of the date of this proxy statement.

 

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As noted above, each executive officer must timely execute and not revoke a release of claims in favor of Imperva to receive payments under the Change in Control Plan. The form of release agreement includes a one-year post-termination non-solicitation covenant and a non-disparagement covenant.

The merger will constitute a change in control for purposes of the Change in Control Plan and the Change in Control Plan will terminate automatically one year and one day after the Merger, or, if later, when all benefits payable under the Change in Control Plan are paid.

Amounts payable under the Change in Control Plan are “double-trigger” in nature, which means that they require both a qualifying termination of employment and the consummation of the merger to occur before they become payable.

For purposes of the Change in Control Plan, “cause” will be deemed to exist upon the occurrence of any of the following:

 

   

any willful, material violation by the executive officer of any law or regulation applicable to the business of Imperva, the executive officer’s conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration by the executive officer of a common law fraud;

 

   

the executive officer’s commission of an act of personal dishonesty which involves personal profit in connection with Imperva or any other entity having a business relationship with Imperva;

 

   

any material breach by the executive officer of any provision of any agreement or understanding between Imperva and the executive officer regarding the terms of the executive officer’s service as an employee, officer, director or consultant to Imperva, including without limitation the willful and continued failure or refusal of the executive officer to perform the material duties required of such executive officer as an employee, officer, director or consultant of Imperva, other than as a result of having a disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between Imperva and the executive officer;

 

   

the executive officer’s disregard of the policies of Imperva so as to cause loss, damage or injury to the property, reputation of employees of Imperva;

 

   

failure by the executive officer to substantially perform, or gross negligence in the performance of the executive officer’s duties after there has been delivered to the executive officer written demand for performance which describes the specific deficiencies in the executive officer’s performance and the specific manner in which performance must be improved, and which provides 30 days from the date of notice to remedy performance deficiencies subject to remedy; or

 

   

any other misconduct by the executive officer which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, Imperva.

For purposes of our Change in Control Plan, “good reason” will be deemed to exist upon the occurrence, without the affected executive officer’s written consent, of any of the following:

 

   

a material diminution in the executive officer’s authority, duties and responsibilities or, solely with respect to Imperva’s chief executive officer, chief financial officer and general counsel, a change in the executive officer’s title;

 

   

a material diminution in the executive officer’s annual base salary, annual bonus opportunity, or long-term incentive opportunity;

 

   

any action or inaction that constitutes a material breach by Imperva of the applicable employment agreement between Imperva and the affected executive officer; or

 

   

a material change (defined for this purpose to mean a change greater than 30 miles from the executive officer’s current principal place of employment) in the geographic location of the executive officer’s principal place of employment.

 

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Hylen Offer Letter

Mr. Hylen has entered into an offer letter with Imperva pursuant to which he is eligible for certain payments and benefits upon an involuntary termination of his employment under specified circumstances. However, the Change in Control Plan (and not Mr. Hylen’s offer letter) will govern upon a qualifying termination of Mr. Hylen’s employment in connection with the Merger, as described above in “Agreements or Arrangements with the Executive Officers and Directors of Imperva—Change in Control Plan” and therefore the protections that Mr. Hylen is entitled to upon a qualifying termination pursuant to his offer letter occurring outside of a change in control situation are not described in this proxy statement. Mr. Hylen’s offer letter does not include any restrictive covenants, however, Mr. Hylen was required to execute a Proprietary Information and Invention Agreement with Imperva in connection with his offer, which agreement includes, among other customary restrictive covenants, a one-year post-termination non-solicitation covenant.

Treatment of PRSUs

Each of the executive officers hold outstanding PRSUs that are subject to a one-year performance period ending December 31, 2018. According to the terms of such PRSUs, absent a change in control, the level of achievement of performance will be determined on a specific date following the end of the performance period and the number of PRSUs that will be earned will be calculated at that time, with such earned PRSUs being converted into unvested time-based RSUs to vest on the time-based vesting schedule approved for such PRSUs. As noted above in the section of this proxy statement captioned “The Merger—Treatment of Equity-Based Awards—Treatment of Restricted Stock Units,” immediately prior to the Effective Time, the Board (or a committee thereof) will determine the level of achievement of performance for the PRSUs (which will be no greater than target and the then-level of achievement) and the resulting number of PRSUs that will become earned as of immediately prior to the Effective Time. Imperva currently expects that performance for the PRSUs will be achieved at 120% of target for the applicable performance period.

2018 Bonuses

As described below in the section of this proxy statement captioned “The Merger Agreement—Employee Benefits,” pursuant to the Merger Agreement, each of our executive officers will, subject to such executive officer remaining employed by Imperva as of immediately prior to the Effective Time, receive a quarterly bonus for the fourth quarter of fiscal year 2018 under the Company’s 2018 Senior Management Bonus Plan (the “Bonus Plan”), payable in cash during the first quarter of 2019 based on Imperva’s achievement of the applicable performance criteria, which achievement will be determined in good faith by our Board immediately prior to the Effective Time. Absent the Merger, such executive officers would be required to remain employed through the payment date to be eligible to receive such bonuses. As a result, if the Closing occurs prior to the regularly-scheduled payment date in the first quarter of 2019, the vesting of fourth quarter bonuses payable to our executive officers under the Bonus Plan for fiscal year 2018 could be accelerated in connection with the Merger. Any early vesting of the fourth quarter bonus for 2018 for our executive officers would be “single-trigger” in nature, meaning it is conditioned only on the consummation of the Merger and does not require the termination of the executive officer’s employment to become payable.

Non-Employee Directors

Under the 2011 Plan, each non-employee director will receive full acceleration of all outstanding equity awards upon the Effective Time.

Golden Parachute Compensation

In accordance with Item 402(t) of Regulation S-K, the table below sets forth the compensation that is based on or otherwise relates to the Merger that will or may become payable to each of our current named executive

 

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officers in connection with the Merger. Please see the previous portions of this section for further information regarding this compensation. The other named executive officers included in the proxy statement for our 2018 annual meeting of stockholders are no longer employed with Imperva and are not entitled to any compensation that is based on or otherwise relates to the Merger and such former employees are therefore not included in the table below.

The amounts indicated in the table below are estimates of the amounts that would be payable to each of Imperva’s named executive officers, assuming, solely for purposes of this table, (1) that the Merger is consummated on January 10, 2019 and that the employment of each of the named executive officers is terminated other than for cause or the named executive officer resigns for good reason on that date, (2) that each named executive officer’s unvested RSUs (excluding PRSUs) held on November 23, 2018 will equal the number of unvested RSUs (excluding PRSUs) held by such named executive officer on the consummation of the Merger, and (3) that the number of PRSUs that will become earned and converted into unvested RSUs held by each named executive officer immediately prior to the Effective Time will be calculated based on achievement of performance at 120% of target. Severance payments have been calculated based on the named executive officer’s current base salary, current target bonus opportunity, and current elections under Imperva’s medical, dental and vision plans. Imperva’s named executive officers will not receive pension, non-qualified deferred compensation, or other benefits in connection with the Merger and none of Imperva’s named executive officers hold outstanding unvested Company Options. Regardless of the manner in which a named executive officer’s employment terminates, the named executive officer is entitled to receive amounts already earned during the term of his or her employment, such as base salary earned through the date of termination and any such earned amounts are not included in the table below.

The amounts below are estimates based on multiple assumptions that may or may not actually occur. Some of the amounts set forth in the table would be payable solely by virtue of the consummation of the Merger. In addition to the assumptions regarding the consummation date of the Merger and the termination of employment, these estimates are based on certain other assumptions that are described in the footnotes accompanying the table below. Accordingly, the ultimate values to be received by a named executive officer in connection with the Merger may differ from the amounts set forth below.

Golden Parachute Compensation

 

Name

   Cash
($)(1)
     Equity
($)(2)
     Perquisites/
Benefits
($)(3)
     Other
($)(4)
     Total
($)(5)
 

Christopher Hylen

     880,000        12,759,335        26,679        126,500        13,792,514  

Mike Burns

     592,000        5,985,320        26,679        63,825        6,667,824  

Trâm Phi

     525,000        2,136,173        32,672        50,313        2,744,158  

 

(1)

These amounts represent the value of the lump sum cash severance payment equal to the sum of the named executive officer’s (a) annual base salary and (b) target bonus, that would be paid upon a qualifying termination of employment in connection with the Merger pursuant to the Change in Control Plan, as described in greater detail above in “The Merger—Agreements and Arrangements of Executive Officers and Directors of Imperva—Change in Control Plan.” The cash severance payments are “double-trigger.” The table below sets forth the breakdown of these components for each named executive officer.

 

Name

   Annual Base
Salary
($)
     Target Bonus
($)
     Total
($)
 

Christopher Hylen

     440,000        440,000        880,000  

Mike Burns

     370,000        222,000        592,000  

Trâm Phi

     350,000        175,000        525,000  

 

(2)

These amounts represent the aggregate “double-trigger” payments to be made in respect of unvested RSUs (including PRSUs) to be converted into Contingent RSU Consideration at the Effective Time that are held

 

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  by each named executive officer and that would become accelerated upon a qualifying termination of employment in connection with the Merger as described in above in greater detail in the section of this proxy statement captioned “The Merger—Agreements and Arrangements of Executive Officers and Directors of Imperva—Change in Control Plan.”

The consideration for unvested RSUs (including PRSUs) is equal to the Contingent RSU Consideration. As mentioned above, none of the named executive officers hold unvested Company Options.

The table below sets forth, for each named executive officer, the estimated number of unvested RSUs (excluding PRSUs), and the estimated number of PRSUs that will remain outstanding and be converted into time-based RSUs immediately prior to the Effective Time (the “Unvested PRSUs”), in each case that will be converted into contingent cash consideration upon the closing. The amounts in the table below are calculated based on outstanding equity awards held by the named executive officers as of November 23, 2018, with the number of PRSUs to be converted into time-based unvested RSUs immediately prior to the Effective Time calculated based on the estimated achievement of performance at 120% of target, Imperva’s current estimate of the achievement of the performance metrics subject to the PRSUs.

 

Name

   Unvested
RSUs
(Excluding
PRSUs)

(#)
     Contingent
RSU
Consideration
(Excluding
PRSUs)

($)
     Unvested
PRSUs

(#)
     Contingent
RSU
Consideration
for PRSUs

($)
     Total
Unvested
Value

($)
 

Christopher Hylen

     96,639        5,387,624        132,228        7,371,711        12,759,335  

Mike Burns

     48,800        2,720,600        58,560        3,264,720        5,985,320  

Trâm Phi

     26,317        1,467,173        12,000        669,000        2,136,173  

 

(3)

These amounts represent the estimated value of the COBRA reimbursements to which each named executive officer may become entitled under the Change in Control Plan upon a qualifying termination of employment as described in greater detail above in the section of this proxy statement captioned “The Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva—Change in Control Plan.” These amounts are “double-trigger” in nature and are calculated based on the applicable named executive officer’s elected level of coverage for the 2018 plan year.

(4)

These amounts represent the 2018 fourth quarter bonuses for each named executive officer that would vest upon the consummation of the Merger, as described in greater detail in the section of this proxy statement captioned “The Merger—Agreements and Arrangements of Executive Officers and Directors of Imperva—2018 Bonuses”. As noted in such section, if the Closing occurs prior to the regularly-scheduled payment date of the fourth quarter bonuses in the first quarter of 2019, the vesting of the fourth quarter bonus upon the Closing would be considered a “single trigger” benefit.

(5)

The total amounts do not reflect any other reductions to “parachute payments” under Section 280G of the Code that may be made pursuant to the Change in Control Plan to avoid any excise taxes that would otherwise be imposed on any named executive officers receiving excess parachute payments under Sections 280G and 4999 of the Code as described in greater detail above in the section of this proxy statement captioned “The Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva—Change in Control Plan.” A definitive analysis of any potential “parachute payments” under Section 280G of the Code will depend on the Effective Time, the date of termination (if any) of the named executive officer’s employment and certain other assumptions used in such analysis.

Equity Interests of Imperva’s Executive Officers and Directors

The following table sets forth the number of shares of common stock and the number of shares of common stock underlying equity awards that are in-the-money and are currently held by each current executive officer and director of Imperva and each person who has been a director or executive officer of Imperva at any time since the January 1, 2017 and continues to hold shares of common stock or equity awards in Imperva, in each case that

 

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either are currently vested or that are currently unvested and could be subject to vesting in connection with the Merger as described above in the section of this proxy statement captioned “The Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva,” assuming that the Effective Time occurs on January 10, 2019. Note that none of the applicable former executive officers or directors of Imperva continued to hold shares of common stock or equity awards in Imperva as of November 23, 2018 (based on information available to Imperva as of the date of this proxy statement) and therefore none of the applicable former executive officers or directors are included in the table below. The table also sets forth the values of these shares and equity awards based on a price of $55.75 per share (minus the applicable exercise price for the in-the-money options) and is based on the number of shares and equity awards held as of November 23, 2018. No new shares of common stock or equity awards were granted to any executive officer or director in contemplation of the merger and no new shares or equity awards are contemplated to be granted to executive officers and directors prior to the consummation of the merger. The numbers below do not forecast any exercises, vesting or forfeitures that may occur between November 23, 2018 and January 10, 2019.

 

Name

   Shares
Held (#)
     Shares
Held ($)
     Options
(#)
     Options
($)(1)
     RSUs
(including
PRSUs)
Held
(#)(2)
     RSUs
(including
PRSUs)
Held
($)(3)
     Total ($)  

Non-Employee Directors

                    

Albert Pimentel

     69,949        3,899,657        21,165        556,171        4,081        227,516        4,683,344  

Roger Sippl

     8,142        453,917        0        0        11,117        619,773        1,073,690  

Randall Spratt

     12,199        680,094        0        0        7,869        438,697        1,118,791  

Allan Tessler

     48,557        2,707,053        9,455        118,684        4,081        227,516        3,053,253  

James Tolonen

     23,736        1,323,282        21,268        571,456        4,081        227,516        2,122,254  

Executive Officers

                    

Christopher Hylen

     18,725        1,043,919        0        0        228,867        12,759,335        13,803,254  

Mike Burns

     529        29,492        0        0        107,360        5,985,320        6,014,812  

Trâm Phi

     37,784        2,106,458        89,970        2,992,039        38,317        2,136,173        7,234,670  

 

(1)

Includes the value of the Option Consideration and the Contingent Option Consideration payable with respect to outstanding vested Company Options and outstanding unvested Company Options, the vesting of which may be accelerated in connection with a change in control as described in the section of this proxy statement captioned “The Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva” section above.

(2)

The number of PRSUs that could become vested RSUs at the Effective Time was calculated assuming that performance is achieved at 120% of target, the Company’s current estimation of achievement. If performance at the Effective Time is higher or lower than 120% of target, the actual number of RSUs that could become vested at the Effective Time may be higher or lower, as the case may be, than the numbers shown in the table above.

(3)

Includes the value of $55.75 per share payable with respect to vested outstanding RSUs and the Contingent RSU Consideration the vesting of which may be accelerated in connection with a change in control as described in the “Agreements and Arrangements with Executive Officers and Directors of Imperva” section above.

Litigation Relating to the Merger

On November 28, 2018, a putative class action complaint was filed in the Superior Court of California, San Mateo County, captioned Eliezer v. Imperva, Inc., et. al., Case No. 18-CIV-06387. The complaint names as defendants Imperva and the members of our Board and purports to assert claims for breaches of fiduciary duty in connection with our Board’s approval of the Merger Agreement. The complaint further alleges that the preliminary proxy statement filed by Imperva contains material misstatements and omissions relating to Imperva’s financial projections, the financial analyses of Imperva’s financial advisor, and the negotiation process leading to the execution of the Merger Agreement. The complaint seeks to enjoin defendants from holding a

 

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stockholder vote on the Merger, as well as unspecified monetary damages and attorneys’ fees and costs. Imperva believes this lawsuit is wholly without merit and intends to vigorously defend against it.

On December 3, 2018, a putative class action complaint was filed in the United States District Court for the District of Delaware, captioned Scarantino v. Imperva, Inc., et. al., Case No. 1:18-cv-1913. The complaint names as defendants Imperva and the members of our Board and purports to assert claims under Sections 14(a) and 20(a) of the Exchange Act. The complaint alleges that the preliminary proxy statement is false and misleading because it allegedly omits material information relating to Imperva’s financial projections and the financial analyses of Imperva’s financial advisor. The complaint seeks, among other things, to enjoin defendants from proceeding with the Merger or rescission or rescissory damages in the event the Merger is consummated. Imperva believes this lawsuit is wholly without merit and intends to vigorously defend against it.

The Voting Agreements

The following summary describes the material provisions of the voting agreements. The description of the voting agreements in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the form of voting agreement, a copy of which is attached to this proxy statement as Annex D and incorporated into this proxy statement by reference. We encourage you to read the form of voting agreement carefully and in its entirety.

As a condition and inducement to Newco entering into the Merger Agreement, the Company’s directors, executive officers and certain other officers entered into the voting agreements. At the close of business on December 4, 2018, the record date of the special meeting, the Company’s directors, executive officers and certain other officers who are party to the voting agreements collectively owned or controlled 280,248 shares of common stock, which represented 0.8% of all outstanding shares of common stock on the record date. In connection with the execution and delivery of the voting agreements, Newco did not pay these stockholders any consideration separate from the consideration they will receive pursuant to the Merger Agreement in respect of their shares or as described in the section of this proxy statement captioned “The Merger—Interests of Imperva’s Directors and Executive Officers in the Merger.”

Voting Provisions

Pursuant to the voting agreements, the Company’s directors, executive officers and certain other officers have agreed, subject to the terms and conditions contained in the voting agreements, to vote all of their shares of common stock or other voting securities of Imperva that they acquire beneficial ownership of after the date of their voting agreement, including, without limitation, by purchase, at any time prior to the termination of the voting agreements, in the following manner:

 

   

in favor of (1) the adoption of the Merger Agreement, (2) approval of the compensation proposal and (3) the adjournment or postponement of the special meeting to a later date if necessary or appropriate, to solicit additional proxies if there is not a quorum present or represented by proxy at the time of the special meeting, or to give holders of our common stock additional time to evaluate new material information or disclosure;

 

   

in favor of any other matter considered at the special meeting that the Imperva Board has (1) determined is necessary or desirable for the consummation of the merger, (2) disclosed in this proxy statement or other written materials distributed to all Imperva stockholders and (3) recommended that the Imperva stockholders adopt; and

 

   

against any Acquisition Proposal or Acquisition Transaction.

The voting agreements do not limit or restrict the Company’s directors, executive officers or such other officers in his or her capacity as a director or officer from acting in such capacity in such person’s discretion on any matter.

 

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Pursuant to the voting agreements, the Company directors, executive officers and certain other officers have agreed to waive appraisal rights.

Restrictions on Transfer; Other Actions

Under the voting agreements, the Company’s directors, executive officers and certain other officers have agreed that until the termination of the voting agreements, they will not:

 

  1.

transfer any shares of Imperva capital stock beneficially owned by such Company director or officer unless pursuant to certain permitted transfers; or

 

  2.

grant any proxies or powers of attorney with respect to any of shares of Imperva capital stock beneficially owned by such Company director or officer, deposit any such shares into a voting trust or enter into a voting agreement with respect to such shares.

Financing of the Merger

We anticipate that the total amount of funds necessary to complete the Merger and the related transactions will be approximately $2.1 billion, which will be funded via equity financing and debt financing described below, as well as cash on our balance sheet. This amount includes the funds needed to (1) pay stockholders the amounts due under the Merger Agreement; and (2) make payments in respect of our outstanding equity-based awards pursuant to the Merger Agreement.

Although the obligation of Newco and Merger Sub to consummate the Merger is not subject to any financing condition, the Merger Agreement provides that, without Newco’s agreement, the closing of the Merger will not occur earlier than the first business day after the expiration of the marketing period, which is the first period of 15 consecutive business days after the expiration of the Go-Shop Period and beginning on the date Newco has received certain historical financial information from Imperva required to syndicate any debt financing. For more information, see the section of this proxy statement captioned “The Merger Agreement— Marketing Period.”

Equity Financing

In connection with the financing of the Merger, Newco has entered into an equity commitment letter, dated as of October 10, 2018, with Thoma Bravo Fund XIII, L.P, for an equity commitment of $813 million, which we collectively refer to as the “equity financing.” The equity commitment letter provides, among other things, that Imperva is an express third party beneficiary thereof in connection with Imperva’s exercise of its rights related to specific performance under the Merger Agreement. The equity commitment letter may not be waived, amended or modified except by an instrument in writing signed by Newco, Imperva and Thoma Bravo Fund XIII, L.P.

Debt Financing

Newco has received a debt commitment letter from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Banks USA, Citigroup Global Markets Inc. and Jefferies Finance LLC and certain of their affiliates pursuant to which they have committed to provide Newco with $860 million in senior secured first lien facilities, which includes a $100 million revolving facility, and $290 million in a senior secured second lien credit facility, which, together with the first lien facilities, we collectively refer to as the “debt financing.” Subject to the satisfaction of certain customary conditions, the first lien term loan facility and second lien facility will be drawn at closing of the Merger and used by Newco to pay a portion of the aggregate Merger Consideration and related fees and expenses.

Imperva has agreed to use its reasonable best efforts to provide Newco and Merger Sub with all cooperation reasonably requested by Newco or Merger Sub to assist them in arranging the debt financing, including (1) participating in a reasonable number of meetings, (2) assisting with presentations, (3) furnishing Newco and

 

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Merger Sub with the necessary financial information regarding Imperva and (4) taking all corporate, limited liability or other organizational actions reasonably requested by Newco to consummate the debt financing. If the Merger is not completed for any reason, Newco will reimburse Imperva for any documented and reasonable out-of-pocket costs and expenses incurred in connection with Imperva’s cooperation with obtaining the debt financing.

Although the obligation of Newco and Merger Sub to consummate the Merger is not subject to any financing condition, the Merger Agreement provides that, without Newco’s agreement, the closing of the Merger will not occur earlier than the first business day after the expiration of the marketing period, which is the first period of 15 consecutive business days after the expiration of the go-shop period and beginning on the date that Newco has received certain required financial information from Imperva in order to market the debt offering used to finance the Merger (however, if at any time during such 15 consecutive business days, any additional information required by Newco’s debt commitment letter becomes required financial information due to the passage of time, the delivery of such additional information will not terminate or restart the marketing period). Notwithstanding the foregoing, (1) if such marketing period has not been completed on or prior to December 21, 2018, such period will not be deemed to have commenced until January 3, 2019 and (2) each of November 21, 2018, November 22, 2018, November 23, 2018, January 21, 2019 and February 18, 2019 will not constitute a business day for purposes of the marketing period, provided further that the marketing period may be delayed, suspended or restarted in the event that Imperva’s financial statements constituting the required financial information are restated or audit opinions with respect thereto are revoked.

Limited Guaranty

Pursuant to the Limited Guaranty by Thoma Bravo Fund XIII, L.P. (“Guarantor”), the Guarantor has agreed to, in the aggregate, guarantee the due and punctual observance, performance and discharge of payment of certain liabilities and obligations of Newco or Merger Sub under the Merger Agreement, including (1) the termination fee of up to $140,000,000 if and when such fee is payable to Imperva pursuant to the terms of the Merger Agreement, (2) Imperva’s out-of-pocket costs and expenses in connection with legal proceedings enforcing the payment of such termination fee and (3) the reimbursement or indemnification obligations of Newco and Merger Sub in connection with any costs and expenses incurred by Imperva in connection with its cooperation with the arrangement of the debt financing. We refer to the obligations set forth in clauses (1), (2) and (3) of the preceding sentence as the “guaranteed obligations.” The maximum aggregate liability of the Guarantor under the Limited Guaranty is $141,000,000.

Subject to specified exceptions, the Limited Guaranty will terminate upon the earliest of:

 

   

the funding of the commitment under the equity commitment letter;

 

   

the Effective Time;

 

   

(a) with respect to clause (3) of the guaranteed obligations, the date that is 30 days following the valid termination of the Merger Agreement in accordance with its terms and (b) with respect to clauses (1) and (2) of the guaranteed obligations, the date that is 90 days following the valid termination of the Merger Agreement in accordance with its terms; unless the Company shall have delivered a written notice for payment with respect to the guaranteed obligations or shall have instituted a proceeding with respect to the Limited Guaranty, in each case prior to such 30 th or 90 th day, as applicable; provided that if the Merger Agreement has been so terminated and such notice has been provided, Guarantor shall have no further liability or obligation under the Limited Guaranty from and after the earliest of (x) the consummation of the closing in accordance with the terms of the Merger Agreement, including payment of the aggregate Merger Consideration in accordance with the Merger Agreement, (y) a final, non-appealable order of a court of competent jurisdiction determining that Guarantor does not owe any amount under the Limited Guaranty, and (z) a written agreement among Guarantor and Imperva terminating the obligations and liabilities of Guarantor pursuant to the Limited Guaranty; and

 

   

payment of the guaranteed obligations by the Guarantor, Newco or Merger Sub.

 

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Closing and Effective Time

The closing of the Merger will take place no later than the second business day following the satisfaction or waiver in accordance with the Merger Agreement of all of the conditions to closing of the Merger (as described under the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions. However, if the marketing period (as described under the section of this proxy statement captioned “The Merger Agreement—Marketing Period”) has not ended at the time of the satisfaction or waiver of the conditions set forth in the Merger Agreement (other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions at the closing), then the closing will occur on the date following the satisfaction or waiver of such conditions that is the earlier to occur of (1) a business day before or during the marketing period as may be specified by Newco on no less than two business days’ prior written notice to Imperva; and (2) the first business day after the expiration of the marketing period.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement, who properly demand appraisal of their shares and who continuously hold such shares through the Effective Time of the Merger may be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in Section 262 of the DGCL and in this summary to a “stockholder” or a “holder of shares” are to the record holder of shares of common stock unless otherwise noted herein. Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of our common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Any stockholder contemplating the exercise of such appraisal rights should review carefully the provisions of Section 262, which is attached hereto as Annex C, particularly the procedural steps required to properly demand and perfect such rights. Failure to follow the steps required by Section  262 for demanding and perfecting appraisal rights may result in the loss of such rights.

Under Section 262, holders of shares of common stock who (1) do not vote in favor of the adoption of the Merger Agreement; (2) continuously are the record holders of such shares through the Effective Time; and (3) otherwise follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. However, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all holders of shares of common stock who asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of the Company’s common stock as measured in accordance with subsection (g) of Section 262 or (b) the value of the Merger Consideration in respect of such shares exceeds $1 million. We refer to these conditions as the “ownership thresholds.” Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established

 

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from time to time during such period; provided, however, that at any time before the Delaware Court of Chancery enters judgment in the appraisal proceeding, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case any such interest will accrue after the time of such payment only on the amount that equals the sum of (1) the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery and (2) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Imperva’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the Merger, any holder of shares of common stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement (without interest). Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, Imperva believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.

Stockholders wishing to exercise the right to seek an appraisal of their shares of common stock must do ALL of the following:

 

   

the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;

 

   

the stockholder must deliver to Imperva a written demand for appraisal before the vote on the Merger Agreement at the special meeting;

 

   

the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and

 

   

the stockholder or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

In addition, one of the ownership thresholds must be met.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights should not return a blank proxy, but rather must vote against the adoption of the Merger Agreement, abstain or not vote its shares.

Filing Written Demand

Any holder of shares of common stock wishing to exercise appraisal rights must deliver to Imperva, before the vote on the adoption of the Merger Agreement at the special meeting, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless timely revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a

 

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proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the special meeting may constitute a waiver of appraisal rights.

Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of common stock should be executed by or on behalf of the holder of record and must reasonably inform Imperva of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be addressed to:

Imperva, Inc.

Attention: General Counsel

3400 Bridge Parkway

Redwood Shores, California 94065

Any holder of shares of common stock who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Imperva a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just. However, notwithstanding the foregoing, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such stockholder’s demand for appraisal and accept the terms offered upon the Merger within 60 days after the Effective Time.

Notice by the Surviving Corporation

If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of common stock who has made a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the adoption of the Merger Agreement that the Merger has become effective and the effective date thereof.

 

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Filing a Petition for Appraisal

Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of common stock who has complied with Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all Imperva stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and holders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of common stock. Accordingly, any holders of shares of common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of common stock within the time and in the manner prescribed in Section 262. The failure of a holder of common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.

Within 120 days after the Effective Time, any holder of shares of common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Imperva has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statement. As noted above, however, the demand for appraisal can only be made by a stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list (the “Verified List”) containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the Verified List at the addresses stated therein. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving Corporation.

After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all Imperva stockholders who assert appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of our common stock as measured in accordance with subsection (g) of Section 262 or (b) the value of the Merger Consideration in respect of the shares for which appraisal rights have been pursued and perfected exceeds $1,000,000.

Determination of Fair Value

After determining the holders of common stock entitled to appraisal and that at least one of the ownership thresholds above has been satisfied in respect of the Imperva stockholders seeking appraisal rights, the Delaware

 

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Court of Chancery will determine the “fair value” of the shares of common stock subject to appraisal, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, the Surviving Corporation has the right, at any point prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder seeking appraisal. If the Surviving Corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (1) the difference, if any, between the amount paid by the Surviving Corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery and (2) interest accrued before such voluntary cash payment, unless paid at that time.

In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. In Weinberger  v. UOP, Inc. , the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede  & Co.  v. Technicolor, Inc. , the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger , the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” In Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd ., 177 A.3d 1 (Del. 2017) and DFC Global Corp. v. Muirfield Value Partners, L.P ., 172 A.3d 346 (Del. 2017), the Delaware Supreme Court declined to adopt a presumption favoring reliance upon the deal price in determining fair value, but noted that the deal price is one of the relevant factors to be considered, and can often be the best evidence of fair value in arm’s-length mergers with a robust sales process.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and may not in any manner address, “fair value” under Section 262 of the DGCL. Although Imperva believes that the Per Share Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Per Share Merger Consideration . Neither Imperva nor Newco anticipates offering more than the Per Share Merger Consideration to any stockholder exercising appraisal rights, and each of Imperva and Newco reserves the right to make a voluntary cash payment pursuant to subsection (h) of Section 262 of the DGCL and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of common stock is less than the Per Share Merger Consideration. If a petition for appraisal is not timely filed or if neither of the ownership thresholds is met, then the right to an appraisal will cease.

Upon application by the Surviving Corporation or by any stockholder entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares whose name appears on the Verified List and, if such shares are represented by certificates and if so required, who has submitted such

 

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stockholder’s certificates of stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights or that neither of the ownership thresholds is met. The Delaware Court of Chancery will direct the payment of the fair value of the shares, together with interest, if any, by the Surviving Corporation to the stockholders entitled thereto. Payment will be made to each such stockholder, in the case of holders of uncertificated stock, forthwith, and in the case of holders of shares represented by certificates, upon the surrender to the Surviving Corporation of the certificate(s) representing such stock. The Delaware Court of Chancery’s decree may be enforced as other decrees in such court may be enforced.

The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to appraisal. In the absence of such an order, each party bears its own expenses.

If any stockholder who demands appraisal of his, her or its shares of common stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the stockholder’s shares of common stock will be deemed to have been converted at the Effective Time into the right to receive the consideration payable in the Merger, without interest. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds is met or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the consideration payable in the Merger in accordance with Section 262 of the DGCL.

From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds is met or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Per Share Merger Consideration, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder who commenced the proceeding or joined that proceeding as a named party without the approval of the court.

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders of shares of our common stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to

 

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holders who hold their shares of common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment).

This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

 

   

tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as financial institutions; tax-exempt organizations; S-corporations; any other entities or arrangements classified as partnerships or pass-through entities for U.S. federal income tax purposes or investors in pass-through entities; insurance companies; mutual funds; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; entities that are “controlled foreign corporations” or “passive investment companies” for U.S. federal income tax purposes; or certain former citizens or long-term residents of the United States;

 

   

tax consequences to holders who hold their common stock as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;

 

   

tax consequences to holders that received their shares of common stock pursuant to the exercise of employee options or other compensation arrangements;

 

   

tax consequences to holders who own an equity interest, actually or constructively, in Newco or the Surviving Corporation following the Merger;

 

   

tax consequences to U.S. Holders whose “functional currency” is not the U.S. dollar;

 

   

tax consequences to holders who hold their common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;

 

   

any U.S. federal estate, gift or alternative minimum tax consequences; or

 

   

any state, local or foreign tax consequences.

If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of common stock, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares of common stock and partners therein should consult their tax advisors regarding the consequences of the Merger.

No opinion of counsel or ruling from the IRS has been or will be obtained regarding the U.S. federal income tax consequences of the Merger described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a holder would ultimately prevail in a final determination by a court.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of common stock that is for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code; or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

The receipt of cash by a U.S. Holder in exchange for shares of common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of common stock at different times or different prices, such U.S. Holder must determine its adjusted tax basis and holding period separately with respect to each block of common stock.

A surtax of up to 3.8% applies to so-called “net investment income” of certain U.S. citizens and residents, and to undistributed “net investment income” of certain estates and trusts. Net investment income generally includes any gain recognized on the receipt of cash in exchange for shares of common stock pursuant to the Merger. U.S. Holders should consult their own tax advisors regarding the applicability of this tax to any gain recognized pursuant to the Merger.

Non-U.S. Holders

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of shares of common stock that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

Any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable income tax treaty);

 

   

such Non-U.S. Holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year that includes the Merger, and certain other specified conditions are met, in which case such gain generally will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable income tax treaty); or

 

   

Imperva is or has been a “United States real property holding corporation” as such term is defined in Section 897(c) of the Code (“USRPHC”) at any time within the shorter of the five-year period ending on the date of completion of the Merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of common stock, which we refer to as the “relevant period,” and, if shares of common stock are regularly traded on an established securities market (within the meaning of Section 897(c)(3) of the Code), such Non-U.S. Holder owns (or is deemed to own pursuant to certain attribution rules) more than 5% of our common stock at any time during the relevant period, in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Although no assurances can be given in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the Merger.

 

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Information Reporting and Backup Withholding

Information reporting and backup withholding (at a rate of 24%) may apply to proceeds received by a holder pursuant to the Merger. Backup withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form), (2) a Non-U.S. Holder that provides a certification of such holder’s foreign status on the appropriate series of IRS Form W-8 (or a substitute or successor form), or (3) a holder that otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. Each holder should consult such holder’s own tax advisor regarding the information reporting and backup withholding tax rules.

Regulatory Approvals Required for the Merger

Imperva, Newco and Merger Sub have agreed to use their reasonable best efforts to comply with all regulatory notification requirements and obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement, including (1) obtaining all necessary consents, approvals and authorizations from Governmental Authorities, the expiration or termination of applicable waiting periods under the HSR Act and all other applicable Antitrust Laws and foreign investment laws in Australia and Austria and (2) obtaining all other necessary consents, waivers, approvals, orders and authorizations from Governmental Authorities, and making all registrations, declarations and filings with Governmental Authorities, in each case that are necessary to consummate the Merger. Newco and Merger Sub have agreed to use their best efforts to obtain all necessary approvals in Australia (provided that Newco and Merger Sub will not be required to amend or modify any contractual arrangement with third parties existing on the date of the Merger Agreement).

Newco, Merger Sub and Imperva also agreed not to take or fail to take any action that is intended to (or would reasonably be expected to have the effect of) preventing the consummation of the Merger, subjecting the filings under the HSR Act or with antitrust and foreign investment authorities in Austria and Australia to a “second request” or substantially equivalent review, or preventing (or delaying for more than 90 calendar days after the date of the Merger Agreement) receipt of necessary Australian foreign investment and antitrust approvals.

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, the Merger cannot be completed until Imperva and Newco file a notification and report form with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ”) under the HSR Act and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of waiting period following the parties’ filing of their respective HSR Act notification forms (typically a 30 day period) or the early termination of that waiting period. Imperva and Newco made the necessary filings with the FTC and the Antitrust Division of the DOJ on October 24, 2018 and early termination of the applicable waiting period under the HSR Act was granted on November 8, 2018, effective immediately.

At any time before or after consummation of the Merger, notwithstanding the expiration or termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, and notwithstanding the expiration or termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

 

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Foreign Competition Laws

Consummation of the Merger is conditioned on approval under, or filing of notices pursuant to, the competition laws and other foreign investment laws of Austria and Australia as follows:

Austrian Antitrust Laws. Under the Austrian Cartel Act, the Merger may not be completed until the expiration of a four-week waiting period following the filing of a notification with the Austrian Federal Competition Authority (“FCA”), unless the waiting period is terminated early. The parties filed such notification with the FCA in connection with the Merger on October 24, 2018. Under the Cartel Act, the required four-week waiting period will expire if neither the FCA nor the Federal Cartel Prosecutor has lodged an appeal for “Phase II” proceedings within such four-week period. If a Phase II proceeding is undertaken, the waiting period with respect to the Merger would be extended for an additional period of up to five months. Termination of the applicable waiting period under the Austrian Cartel Act was granted on November 21, 2018, effective immediately.

Australian Antitrust Approval

Section 50 of the Competition and Consumer Act 2010 (Cth) (the “CCA”) prohibits the acquisition of shares or assets that would have the likely effect of substantially lessening competition in any Australian market. The Australian Competition & Consumer Commission (“ACCC”) is responsible for enforcing Section 50 of the CCA. The ACCC investigates proposed acquisitions either at the request of the parties or by initiating its own investigation.

There are no compulsory filing or regulatory approval requirements for clearance under Section 50. In practice, persons intending to make an acquisition often seek voluntary informal clearance. This is a process under which the ACCC provides an assurance that it does not intend to intervene in the transaction, either on an unconditional or conditional basis, including potentially requiring divestitures. There is no statutory time period within which the ACCC must make a decision; there is a pre-assessment stage (typical duration 2—4 weeks), which may lead to first-phase review (typical duration 6—12 weeks), which may lead to second-phase review (typical duration 6—12 weeks); therefore the time could range from 2—24 weeks or more, depending on the complexity of the issues. Imperva and Newco filed an application for informal clearance with the ACCC on October 24, 2018. The ACCC notified Imperva and Newco that it does not intend to conduct a public review of the Merger on November 27, 2018.

Australia Foreign Investment Review Board.  Pursuant to the Foreign Acquisitions and Takeovers Act 1975 of Australia, certain acquisitions by foreign persons of Australian companies, businesses and real property assets, including the merger, must be notified to the Foreign Investment Review Board (“FIRB”) for approval by the Australian Treasurer. Newco submitted a FIRB application on October 24, 2018. The filing fee was accepted on November 20, 2018, beginning the review process.

Other Regulatory Approvals

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by stockholders and the completion of the Merger.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

 

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THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement. Capitalized terms used in this section but not defined in this proxy statement have the meaning ascribed to them in the Merger Agreement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Imperva, Newco and Merger Sub in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and in some cases were qualified by confidential matters disclosed to Newco and Merger Sub by Imperva in connection with the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk between Imperva, Newco and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Imperva, Newco or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Imperva, Newco and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Imperva, our business, Newco or Merger Sub. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Imperva and our business.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, (1) Merger Sub will be merged with and into Imperva, with Imperva becoming a wholly owned subsidiary of Newco and (2) the separate corporate existence of Merger Sub will thereupon cease. From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, powers and franchises of Imperva and Merger Sub, and all of the debts, liabilities and duties of Imperva and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

The parties will take all necessary action to ensure that, effective as of, and immediately following, the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub at the Effective Time, to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified. From and after the Effective Time, the officers of Merger Sub at the Effective Time will be the officers of the Surviving Corporation, until their

 

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successors are duly appointed. At the Effective Time, the certificate of incorporation of Imperva as the Surviving Corporation will be amended to read substantially identically to the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended.

Closing and Effective Time

Closing will take place no later than the second business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at Closing, but subject to the satisfaction or waiver of such conditions at the closing) or such other time agreed to in writing by Newco and Imperva, except that if the marketing period (described below under the caption “The Merger Agreement — Marketing Period”) has not ended as of the time described above, Closing will occur following the satisfaction or waiver of such conditions on the earlier of (1) a business day before or during the marketing period as may be specified by Newco on no less than two business days’ notice to Imperva and (2) the first business day after the expiration of the marketing period. Concurrently with Closing, the parties will file a Certificate of Merger with the Secretary of State for the State of Delaware as provided under the DGCL. The Merger will become effective upon the filing of the Certificate of Merger, or at such later time as is agreed by the parties and specified in the Certificate of Merger.

Marketing Period

The marketing period means the first period of 15 consecutive business days after the expiration of the go-shop period and beginning on the date that Newco has received certain required financial information from Imperva in order to market the debt offering used to finance the Merger (however, if at any time during such 15 consecutive business days, any additional information required by Newco’s debt commitment letter becomes required financial information due to the passage of time, the delivery of such additional information will not terminate or restart the marketing period). Notwithstanding the foregoing, (1) if such marketing period has not been completed on or prior to December 21, 2018, such period will not be deemed to have commenced until January 3, 2019 and (2) each of November 21, 2018, November 22, 2018, November 23, 2018, January 21, 2019 and February 18, 2019 will not constitute a business day for purposes of the marketing period, provided further that the marketing period may be delayed, suspended or restarted in the event that Imperva’s financial statements constituting the required financial information are restated or audit opinions with respect thereto are revoked.

Merger Consideration

Common Stock

At the Effective Time, each outstanding share of our common stock (other than shares owned by (1) Newco, Merger Sub or Imperva, or by any direct or indirect wholly owned subsidiary of Newco, Merger or Imperva and (2) stockholders who are entitled to and who properly exercise appraisal rights under the DGCL) will be converted into the right to receive the Per Share Merger Consideration (which is $55.75 per share, without interest and less any applicable withholding taxes). All shares converted into the right to receive the Per Share Merger Consideration will automatically be cancelled at the Effective Time.

Outstanding Equity Awards

As a result of the Merger, the treatment of Company Options, RSUs and PRSUs that are outstanding immediately prior to the Effective Time will be as follows:

Options

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receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the Option Consideration, to be paid as soon as practicable (and in no event more than 10 business days) following the Closing.

Each unvested Company Option outstanding as of immediately prior to the Effective Time (and that will not vest in connection with the Merger) will be cancelled and converted into the contingent right to receive an amount in cash (without interest and subject to deduction for any required withholding tax), equal to the Contingent Option Consideration. The Contingent Option Consideration will be subject to the holder remaining continuously employed with the Surviving Corporation and satisfaction of the Original Vesting Conditions. The Option Consideration will be paid in a cash payment without interest and less any required holding taxes as soon as practicable (and in no event more than the later of (x) 10 business days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the Original Vesting Conditions.

Each outstanding Company Option with an exercise price per share equal to or greater than $55.75 per share will be cancelled without consideration upon the Effective Time.

Restricted Stock Units and Performance-Based Restricted Stock Units

Each vested RSU (including each vested PRSU) outstanding as of immediately prior to the Effective Time (including any RSU that becomes a vested RSU in connection with the Merger) will be cancelled and converted into the right to receive an amount in cash (without interest and less any required withholding tax) equal to the RSU Consideration, to be paid as soon as practicable (and in no event more than 10 business days) following the Closing.

Each unvested RSU (including each unvested PRSU) outstanding immediately prior to the Effective Time (and that will not vest in connection with the Merger), will be cancelled and converted into the contingent right to receive an amount in cash (without interest and subject to deduction for any required withholding) equal to the Contingent RSU Consideration. The Contingent RSU Consideration will be subject to the holder remaining continuously employed with the Surviving Corporation and satisfaction of the Original Vesting Conditions. As soon as practicable (and in no event more than the later of (x) 10 business days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the Original Vesting Conditions, the applicable portion of the Contingent RSU Consideration will be paid without interest and less any required withholding taxes.

For PRSUs, the level of achievement of the applicable performance metrics will be determined by our Board (or a committee thereof) in accordance with the Company Equity Incentive Plan and the applicable PRSU agreement (provided, however, that such level of achievement will not exceed the greater of (1) target performance and (2) the actual achievement of the performance goals attributable to such PRSUs) as of immediately prior to the Effective Time, and, upon such determination, the resulting vested PRSUs and unvested PRSUs will be treated as vested RSUs and unvested RSUs respectively.

Treatment of Purchase Rights under the 2011 Employee Stock Purchase Plan

The compensation committee of our Board has taken all actions with respect to the ESPP that are necessary to provide that (1) with respect to the offering period in progress as of October 10, 2018 under the ESPP (the “Final Offering Period”), all outstanding purchase rights under the Final Offering Period will automatically be exercised, in accordance with the terms of the ESPP, upon the earlier of (x) immediately prior to the Effective Time and (y) the last day of such Offering Period (as defined in the ESPP) (the “Offering Period End Date”), and (2) the Offering Period End Date will constitute the last day of the Final Offering Period for purposes of determining the purchase price pursuant to the ESPP. Imperva will cause the amount credited to each participant’s account under the ESPP as of the Offering Period End Date to be applied to purchase the number of shares of our common stock that could be purchased with such amount on such date pursuant to the ESPP. Our

 

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Board has taken all such actions as are required to provide that, with respect to the ESPP: (1) no individuals will be permitted to newly enroll in the ESPP following October 10, 2018, and (2) no existing participants will be permitted to increase their respective rates of deductions and purchases (including nonpayroll contributions) following October 10, 2018. Imperva will terminate the ESPP in its entirety effective as of immediately prior to the Effective Time. For the avoidance of doubt (x) Imperva will not be permitted to extend any offering period under the ESPP that is outstanding as of October 10, 2018, (y) all shares of our common stock purchased in the Final Offering Period will be cancelled at the Effective Time and converted into the right to receive the Merger Consideration in accordance with the terms and conditions of the Merger Agreement and (z) no offering period under the ESPP will commence from and after the Offering Period End Date. The final offering period under the ESPP ended on November 15, 2018, and the corresponding purchase of shares under the ESPP was completed on that date.

Exchange and Payment Procedures

Prior to Closing, Newco will select a bank or trust company, which we refer to as the “payment agent,” to make payments of the Merger Consideration to stockholders. On the Closing Date, Newco will deposit or cause to be deposited with the payment agent cash sufficient to pay the aggregate Merger Consideration to stockholders.

Promptly following the Effective Time (and in any event within three business days), the payment agent will send to each holder of record of shares of common stock a letter of transmittal and instructions advising stockholders how to surrender stock certificates (if any) and book-entry shares in exchange for their portion of the Merger Consideration. Upon receipt of (1) surrendered certificates (or affidavits of loss in lieu thereof) or a receipt of an “agent’s message” for book-entry shares representing the shares of common stock and (2) a signed letter of transmittal and such other documents as may be required pursuant to such instructions, the holder of such shares will be entitled to receive their portion of the Merger Consideration in exchange therefor. The amount of any Merger Consideration paid to the stockholders may be reduced by any applicable withholding taxes.

If any cash deposited with the payment agent is not claimed within one year following the Effective Time, such cash will be returned to Newco, upon demand, and any holders of common stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Newco as general unsecured creditor for payment of the Merger Consideration. Any cash deposited with the payment agent that remains unclaimed two years following the Effective Time (or such earlier date as is immediately prior to the time at which such amounts would otherwise become property of a Governmental Authority) will, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of any claims or interest of any person previously entitled thereto.

The letter of transmittal will include instructions if a stockholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event any certificates have been lost, stolen or destroyed, then before such stockholder will be entitled to receive the Merger Consideration, such stockholder will have to make an affidavit of the loss, theft or destruction, and if required by Newco or the payment agent, deliver a bond in such amount as Newco or the payment agent may direct as indemnity against any claim that may be made against it with respect to such certificate.

Representations and Warranties

The Merger Agreement contains representations and warranties of Imperva, Newco and Merger Sub.

Some of the representations and warranties in the Merger Agreement made by Imperva are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means, with respect to Imperva, any fact, event, violation, inaccuracy, circumstance, change or effect that, individually or when taken together with all other such facts, events, violations, inaccuracies, circumstances, changes or effects that, individually or when taken together with all other effects

 

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that exist or have occurred prior to or at the date of determination of the occurrence of the Company Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, operations, financial condition or results of operations of Imperva and its subsidiaries taken as a whole; provided, however, that in no event will any effect directly or indirectly resulting from any of the following, either alone or in combination, and whether directly or indirectly, be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur:

 

   

general economic or political conditions in the United States or any other country or region in the world;

 

   

conditions in the industries in which Imperva or any of its subsidiaries conduct business;

 

   

changes in applicable law or GAAP or the interpretations thereof;

 

   

acts of war, terrorism or sabotage;

 

   

earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world;

 

   

the public announcement or pendency of the Merger Agreement, the Merger or any other transactions contemplated by the Merger Agreement, including any loss of, or adverse change in, the relationship of the Imperva or any of its subsidiaries with its employees, customers, partners or suppliers to the extent related thereto;

 

   

any failure by Imperva to meet published analysts’ estimates, projections or forecasts of revenues, earnings or other financial or business metrics, in and of itself, or any failure by Imperva to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that the underlying cause(s) of any such failure may be taken into consideration);

 

   

any decline in the market price or change in the trading volume of our common stock, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into consideration);

 

   

any action taken pursuant to the terms of the Merger Agreement or the failure to take any action prohibited by the terms of the Merger Agreement;

 

   

any action taken at the request of Newco or with the prior consent or approval of Newco;

 

   

the availability or cost of equity, debt or other financing to Newco, Merger Sub or the Surviving Corporation;

 

   

any legal proceedings made or brought by any of the current or former stockholders of Imperva (on their own behalf or on behalf of Imperva) against Imperva, including those arising out of the Merger or in connection with any other transactions contemplated by the Merger Agreement; and

 

   

the matters set forth in the confidential disclosure letter delivered to Newco and Merger Sub.

Notwithstanding the foregoing, if any of the first five items described in the above bullet points has or would reasonably be expected to have a materially disproportionate adverse effect on Imperva relative to other companies of a similar size operating in the industries in which Imperva and its subsidiaries conduct business, they shall not be per se excluded from a determination of whether a Company Material Adverse Effect has occurred.

In the Merger Agreement, Imperva has made customary representations and warranties to Newco and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and authority and qualification to conduct business with respect to Imperva and its subsidiaries;

 

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Imperva’s corporate power and authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

   

the necessary approval of our Board;

 

   

the inapplicability of anti-takeover statutes to the Merger;

 

   

the rendering of Qatalyst Partners’ fairness opinion to our Board;

 

   

the necessary vote of stockholders in connection with the Merger Agreement;

 

   

required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;

 

   

the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws to Imperva or its subsidiaries or the resulting creation of any lien upon Imperva’s assets due to the performance of the Merger Agreement;

 

   

the capital structure of Imperva as well as the ownership and capital structure of its subsidiaries;

 

   

the absence of any contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any securities of Imperva;

 

   

the accuracy and required filings of Imperva’s and its subsidiaries’ SEC filings and financial statements;

 

   

Imperva’s disclosure controls and procedures;

 

   

Imperva’s internal accounting controls and procedures;

 

   

the absence of specified undisclosed liabilities;

 

   

the conduct of the business of Imperva and its subsidiaries in the ordinary course of business since June 30, 2018 and the absence of a Company Material Adverse Effect since January 1, 2018;

 

   

the existence and enforceability of specified categories of Imperva’s material contracts, and any notices with respect to violation or breach of or default thereunder or intention to terminate or modify those material contracts;

 

   

Imperva’s compliance with laws and possession of necessary permits;

 

   

legal proceedings and orders;

 

   

tax matters;

 

   

employee benefit plans;

 

   

labor matters;

 

   

real property owned, leased or subleased by Imperva and its subsidiaries;

 

   

personal property of Imperva;

 

   

trademarks, patents, copyrights and other intellectual property matters;

 

   

insurance matters;

 

   

absence of any transactions, relations or understandings between Imperva or any of its subsidiaries and any affiliate or related person;

 

   

payment of fees to brokers in connection with the Merger Agreement;

 

   

Imperva’s contracts with governmental authorities;

 

   

export controls matters and compliance with anti-bribery laws;

 

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Imperva’s indebtedness; and

 

   

environmental matters.

In the Merger Agreement, Newco and Merger Sub have made customary representations and warranties to Imperva that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, good standing and authority and qualification to conduct business with respect to Newco and Merger Sub and availability of these documents;

 

   

Newco’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

   

required consents and regulatory filings in connection with the Merger Agreement;

 

   

the absence of any conflict, violation or material alteration of any organizational documents, or applicable laws due to the performance of the Merger Agreement;

 

   

ownership of capital stock of Newco and Merger Sub;

 

   

the absence of any stockholder or management arrangements related to the Merger;

 

   

the absence of litigation;

 

   

the solvency of Newco and the Surviving Corporation following the consummation of the Merger and the transactions contemplated by the Merger Agreement;

 

   

matters with respect to Newco’s financing and sufficiency of funds;

 

   

delivery and enforceability of the Limited Guaranty; and

 

   

reliance upon Newco and Merger Sub’s independent investigation of Imperva’s business, operations and financial condition.

The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.

Conduct of Business Pending the Merger

The Merger Agreement provides that, except as (1) expressly contemplated by the Merger Agreement; (2) as disclosed in the confidential disclosure letter to the Merger Agreement; or (3) approved by Newco (which approval will not be unreasonably withheld, conditioned or delayed), during the period of time between the date of the signing of the Merger Agreement and the Effective Time, Imperva will, and will cause each of its subsidiaries to:

 

   

subject to the restrictions and exceptions in the Merger Agreement, carry on its business in all material respects in the usual, regular and ordinary course in substantially the same manner as conducted prior to signing the Merger Agreement; and

 

   

use its commercially reasonable efforts, consistent with past practices and policies, to (1) preserve intact its business and operations in all material respects, (2) keep available the services of its directors, officers and employees and (3) preserve its current relationships with material customers, suppliers, distributors, licensors and licensees, as well as governmental agencies, applicable regulatory authorities and others with which it has significant business dealings.

In addition, Imperva has also agreed that, except as (1) expressly contemplated by the Merger Agreement; (2) disclosed in the confidential disclosure letter to the Merger Agreement; or (3) approved in advance by Newco in writing (which approval will not be unreasonably withheld, conditioned or delayed), during the period of time

 

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between the date of the signing of the Merger Agreement and the Effective Time, Imperva will not, and will not permit each of its subsidiaries to, among other things:

 

   

amend the organizational documents of Imperva or any of its subsidiaries;

 

   

issue, sell, or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any securities of Imperva or any of its subsidiaries, except for (1) the issuance and sale of shares of our common stock pursuant to awards outstanding prior to October 10, 2018, (2) subject to certain restrictions, under the ESPP issuable in accordance with the terms of the ESPP as of October 10, 2018, (3) issuances or sales of securities of Imperva’s subsidiaries to Imperva or another wholly owned subsidiary of Imperva or (4) grants of shares of our common stock pursuant to awards as described in the confidential disclosure letter to the Merger Agreement (provided that such awards will not be subject to or include any acceleration of vesting conditions in connection with the Merger or the transactions contemplated by the Merger Agreement);

 

   

acquire or redeem, directly or indirectly, or amend any securities of Imperva or its subsidiaries, other than (1) the acquisition by Imperva of shares of our common stock in connection with the surrender of shares of our common stock in order to pay all or a portion of the exercise price of the Company Options, (2) the withholding of shares of our common stock to satisfy all or a portion of any tax obligations with respect to awards of shares of our common stock and (3) the acquisition of awards of shares of our common stock in connection with the forfeiture of such awards;

 

   

other than cash dividends made by a subsidiary of Imperva to Imperva or another of Imperva’s subsidiaries, (1) split, combine or reclassify any shares of Imperva’s capital stock, (2) declare, set aside or pay any dividend or other distribution, or (3) make any other actual, constructive or deemed distribution in respect of shares of Imperva’s capital stock;

 

   

liquidate, dissolve or reorganize, or adopt a plan to do so;

 

   

incur, assume or suffer certain types of indebtedness or issue any debt securities;

 

   

except as may be required by the existing terms of any Employee Plan or Contract (each as defined in the Merger Agreement) in effect as of October 10, 2018 or by applicable law, (1) enter into, adopt, amend (including acceleration of vesting), modify or terminate any bonus, profit sharing, compensation, severance, termination, option, restricted stock, restricted stock unit, appreciation right, performance unit, stock equivalent, share purchase agreement, pension, retirement, deferred compensation, employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the compensation, benefit or welfare of (a) any director or officer, or, (b) other than in the ordinary course of business, any consultant, independent contractor or employee (including offer letters with new employee hires and new contractor or consultant engagements in the ordinary course of business), in each case, in any manner, (2) increase in any manner the compensation or benefits of (a) any director or officer or (b) other than in the ordinary course of business consistent with past practice, any employee who is Vice President level and below (other than a Vice President level employee who is a direct report to Imperva’s Chief Executive Officer), (3) pay any special bonus or special remuneration to any director, officer, consultant, independent contractor or employee, or (4) pay any benefit not required by or made pursuant to any plan or arrangement as in effect as of October 10, 2018 other than in the ordinary course of business consistent with past practice;

 

   

make deposits or contributions of cash or property to secure the payment of compensation or benefits under employee plans other than deposits and contributions that are required under the terms of those plans;

 

   

acquire, sell, lease, abandon (other than in Imperva’s reasonable business discretion), license or dispose of any property or assets except in connection with the marketing, development, manufacturing, sale, distribution, support or maintenance of Imperva’s products and services currently marketed, sold, licensed, provided or distributed by Imperva, or for grants of non-exclusive licenses to intellectual property rights in the ordinary course of business;

 

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change accounting principles or practices;

 

   

change tax elections, settle any tax claims or fail to pay material taxes as they become due and payable;

 

   

enter into new leases or subleases involving payments of more than $250,000 in the aggregate per year or modify existing leases and subleases (other than renewals of a lease or sublease which is terminable upon three months or less or which involves payments of no more than $100,000 in the aggregate per year);

 

   

acquire by merger, consolidation or acquisition of stock or assets, any other person or entity or any equity interest therein;

 

   

enter into or renew material contracts or amend the terms of any material contract (other than in the ordinary course of business);

 

   

incur any new capital expenditures, individually or in the aggregate, in excess of $4,000,000 per fiscal quarter for each quarter beginning January 1, 2019;

 

   

settle litigation involving Imperva;

 

   

disclose, deliver, license, escrow or otherwise make available any (1) Technology or Trade Secrets of Imperva to any person (other than pursuant to a written confidentiality agreement or agreement containing confidentiality provisions, in each case, entered into in the ordinary course of business and with reasonable protections of, and preserving all rights of Imperva and its subsidiaries in and to such Technology and/or Trade Secrets) or (2) source code for Imperva’s Software or Imperva’s products and services currently marketed, sold, licensed, provided or distributed by Imperva to any person (other than employees, consultants and independent contractors who require such source to perform his or her duties for Imperva or its subsidiaries and are subject to a written confidentiality agreements to reasonably protect against unauthorized disclosure of such source code); or

 

   

enter into agreements to do any of the foregoing.

Alternative Acquisition Proposals

For a period of 45 days following October 10, 2018 (such period, the “Go-Shop Period”), Imperva and its representatives and subsidiaries were permitted to:

 

   

solicit, initiate, encourage and facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal;

 

   

grant a waiver under or terminate any “standstill” or similar obligation of any third party with respect to Imperva or any of its subsidiaries solely to allow such third party to submit an Acquisition Proposal in accordance with the Merger Agreement; and

 

   

engage in discussions and negotiations with, and furnish non-public information relating to Imperva and its subsidiaries, and afford access to the books and records of Imperva and its subsidiaries to any third party in connection with an Acquisition Proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to an Acquisition Proposal, so long as prior to furnishing such non-public information or affording such access, Imperva has entered into a permitted confidentiality agreement with such third party and has previously provided or made available (or provides or makes available within one business day) all such information, and affords such access, to Newco.

Upon the expiration of the Go-Shop Period, Imperva and its subsidiaries immediately ceased and caused to be terminated, and will not authorize or knowingly permit any of Imperva’s or its Subsidiaries’ representatives to continue, any and all existing activities, discussions or negotiations with any third party conducted prior to the expiration of the Go-Shop Period with respect to any Acquisition Proposal or Acquisition Transaction (other than with respect to each Excluded Party only for so long as such person is and remains an Excluded Party) to any physical or electronic dataroom (other than as otherwise permitted by the Merger Agreement).

 

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From and after the expiration of the Go-Shop Period until the earlier to occur of the termination of the Merger Agreement and the Effective Time, Imperva has agreed not to, and to cause its subsidiaries and its and their respective representatives not to (other than with respect to Excluded Parties for so long as such person is and remains an Excluded Party):

 

   

solicit, initiate, knowingly encourage, knowingly facilitate or knowingly induce the making, submission or announcement of any inquiry, offer or proposal that would be reasonably likely to lead to an Acquisition Proposal or Acquisition Transaction;

 

   

furnish to any person (other than to Newco, Merger Sub or any designees of Newco or Merger Sub) any non-public information relating to Imperva or any of its subsidiaries or afford access to the business, properties, assets, books or records of Imperva or its subsidiaries, in each case in connection with an Acquisition Proposal or Acquisition Transaction or under circumstances reasonably likely to lead to an Acquisition Proposal or Acquisition Transaction, or take any other action intended to assist or facilitate the making of any Acquisition Proposal or any inquiry, offer or proposal that would be reasonably likely to lead to an Acquisition Proposal or acquisition transaction;

 

   

participate or engage in discussions or negotiations with any person (other than to Newco, Merger Sub or any designees of Newco or Merger Sub) regarding an Acquisition Proposal or Acquisition Transaction (other than solely to inform such person of these restrictions);

 

   

approve, endorse or recommend an Acquisition Proposal or Acquisition Transaction; or

 

   

enter into any letter of intent, memorandum of understanding or other contract relating to an Acquisition Proposal or Acquisition Transaction, other than certain permitted confidentiality agreements.

Notwithstanding the restriction described above, prior to the adoption of the Merger Agreement by Imperva’s stockholders, Imperva may provide information to, and engage or participate in negotiations or substantive discussions with (1) any Excluded Party (only for so long as such person is and remains an Excluded Party) and (2) a person regarding an Acquisition Proposal if our Board determines in good faith after consultation with its financial advisor and its outside legal counsel that such proposal is a Superior Proposal or would reasonably be likely to lead to a Superior Proposal; provided that (a) our Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, (b) Imperva already has entered into, or enters into, an acceptable confidentiality agreement with such third party, (c) Imperva notifies Newco of the identity of such person and provides Newco all terms and conditions of such Acquisition Proposal (and if in written form, a copy thereof) (unless such disclosures are expressly prohibited by existing confidentiality agreements, in which case Imperva will notify Newco that is has received an Acquisition Proposal and provide Newco with a description of the withheld information), and (d) if Imperva furnishes non-public information to the third party which Newco has not yet received, it will furnish such information to Newco contemporaneously or within 24 hours.

For purposes of this proxy statement and the Merger Agreement:

“Acquisition Proposal” means any offer, proposal or indication of interest (other than an offer or proposal by Newco or Merger Sub) relating to any Acquisition Transaction.

“Acquisition Transaction” means any transaction or series of related transactions (other than the Merger) involving:

(1) any acquisition or purchase by any third party, directly or indirectly, of more than 20% of any class of outstanding voting or equity securities of Imperva, or any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any third party beneficially owning more than 20% of any class of outstanding voting or equity securities of Imperva;

 

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(2) any merger, consolidation, share exchange, business combination, joint venture, recapitalization, reorganization or other similar transaction involving Imperva and a third party pursuant to which the stockholders of Imperva immediately preceding such transaction hold less than 80% of the equity interests in the surviving or resulting entity of such transaction;

(3) any sale, lease (other than in the ordinary course of business), exchange, transfer or other disposition to a third party of more than 20% of the consolidated assets, revenue or net income of Imperva and its subsidiaries (with assets being measured by the fair market value thereof); or

(4) any combination of the foregoing.

“Excluded Party” means any third party from which Imperva or its representatives received during the Go-Shop Period a bona fide written Acquisition Proposal that: (1) remains pending as of, and has not been withdrawn prior to, the expiration of the Go-Shop Period; and (2) our Board reasonably determines in good faith, after consultation with Imperva’s financial and legal advisors, constitutes or would be reasonably likely to lead to a Superior Proposal. For the avoidance of doubt, a third party that is determined to be an Excluded Party pursuant to the foregoing will cease to be an Excluded Party at such time as our Board determines in good faith that such Excluded Party’s Acquisition Proposal no long constitutes or would no longer be reasonably likely to lead to a Superior Proposal in light of the facts and circumstances available to, or known by, our Board.

“Superior Proposal” means any written Acquisition Proposal made by a third party after October 10, 2018 that (1) was not solicited in violation of the non-solicitation provisions of the Merger Agreement and (2) our Board determines in good faith (after consultation with its financial advisor and its outside legal counsel, and after taking into account the terms and conditions of such Acquisition Proposal, including the financial, legal, regulatory and other aspects of such Acquisition Proposal) is more favorable to Imperva’s stockholders than the transactions contemplated by the Merger Agreement and is reasonably likely to be consummated in accordance with its terms, taking into account all legal, regulatory and financing aspects of the proposal (including certainty of closing) and the identity of the third party making the proposal and other aspects of the Acquisition Proposal that our Board deems relevant. For purposes of the reference to an “Acquisition Proposal” in this definition, all references to “20%” in the definition of “Acquisition Transaction” will be deemed to be references to “(50%.”

The Board of Directors’ Recommendation; Company Board Recommendation Change

As described above, and subject to the provisions described below, our Board has made the recommendation that the holders of shares of common stock vote “ FOR ” the proposal to adopt the Merger Agreement. The Merger Agreement provides that our Board will not effect a company board recommendation change except as described below.

Prior to the adoption of the Merger Agreement by stockholders, our Board may not (with any action described in the following being referred to as a “company board recommendation change”):

 

   

fail to make, withdraw, amend, modify or qualify the company board recommendation in a manner that is adverse to Newco, or publicly propose to withhold, withdraw, amend, modify or qualify the company board recommendation in a manner that is adverse to Newco, or publicly propose to do so;

 

   

approve, endorse, adopt or recommend, or publicly propose to approve, endorse, adopt or recommend, an Acquisition Proposal or Acquisition Transaction;

 

   

fail to include the company board recommendation in this proxy statement; or

 

   

fail to publicly recommend against any Acquisition Proposal or Acquisition Transaction subject to Regulation 14D under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within 10 business days after the commencement of such Acquisition Proposal or Acquisition Transaction.

 

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In addition, our Board may only effect a company board recommendation change in response to a bona fide Acquisition Proposal that our Board has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal if:

 

   

the bona fide written Acquisition Proposal was not solicited in violation of Imperva’s non-solicitation obligations under the Merger Agreement;

 

   

our Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such Acquisition Proposal is a Superior Proposal (which determination and any public announcement thereof will not constitute a company board recommendation change);

 

   

Imperva has provided prior written notice to Newco at least four business days in advance to Newco of its intention to effect a company board recommendation change (which notice will include the most current version of the proposed definitive agreement and, to the extent not included therein, all material terms and conditions of such Superior Proposal and the identity of the person making such Superior Proposal);

 

   

prior to effecting such company board recommendation change or termination, Imperva and its representatives, during the four business day notice period describe above, has negotiated with Newco and its representatives in good faith (to the extent that Newco desires to so negotiate) to make such adjustments to the terms and conditions of the Merger Agreement so that such Acquisition Proposal would cease to constitute a Superior Proposal; and

 

   

our Board determined (after consultation with its outside legal counsel and after considering any counter-offer or proposal made by Newco) that, in light of such Superior Proposal, the failure to effect a company board recommendation change would reasonably be expected to be inconsistent with its fiduciary duties under applicable law.

Our Board may also effect a company board recommendation change upon the occurrence of an intervening event if (and only if) our Board determines (after consultation with its outside legal counsel) that the failure to effect a company board recommendation change in response to such intervening event would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, and:

 

   

Imperva has provided prior written notice to Newco at least four business days in advance of its intention to effect a company board recommendation change for the intervening event (which notice will include the reason (in reasonable detail) for such company board recommendation change); and

 

   

prior to effecting such company board recommendation change, Imperva during such four business day period must have negotiated with Newco in good faith (to the extent that Newco desires to so negotiate) to make modifications to the terms and conditions of the Merger Agreement so that our Board (or a committee thereof) no longer determines that the failure to make a company board recommendation change in response to such intervening event would reasonably be expected to be inconsistent with its fiduciary obligations under applicable law.

For purposes of this proxy statement and the Merger Agreement, an “intervening event” means any material fact, event, change, development or circumstance occurring or arising after October 10, 2018 not known or reasonably foreseeable by our Board as of October 10, 2018, which material fact, event, change, development or circumstance becomes known to our Board prior to the requisite affirmative vote of the stockholders and that affects, or would reasonably be likely to affect, in a material manner the business, assets, properties, liabilities, results of operations or financial condition of Imperva and its subsidiaries, taken as a whole, provided that, in no event will the receipt, existence or terms of an Acquisition Proposal or Acquisition Transaction, or any inquiry, indication of interest, proposal or offer that would be reasonably likely to lead to an Acquisition Proposal or Acquisition Transaction, or the consequences thereof, constitute an intervening event.

 

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Employee Benefits

Newco has acknowledged that a “change of control” (or similar phrase) within the meaning of the Employee Plans (as defined in the Merger Agreement), as applicable, will occur as of the Effective Time, as applicable.

As of the Effective Time, the Surviving Corporation will (and Newco will cause the Surviving Corporation to) employ the employees of Imperva and its subsidiaries who are employed as of immediately prior to the Effective Time (the “continuing employees”). For a period of one year following the Effective Time (or, if earlier, the date of termination of employment of the relevant continuing employee), the Surviving Corporation will (and Newco will cause the Surviving Corporation to) either (1) maintain for the benefit of each continuing employee the Employee Plans (as defined in the Merger Agreement) (other than equity based benefits and individual employment agreements not providing for severance) and any other employee benefit plans or other compensation (including base salary or wages, short-term incentive bonuses based on a performance period of 12 months or less and commissions, but not including equity based compensation) and severance arrangements of the Surviving Corporation or any of its subsidiaries (other than equity-based plans and individual employment agreements not providing for severance) (together, the “Company Plans”) at benefit levels that are no less than those in effect at the Imperva or its subsidiaries on October 10, 2018, and provide compensation and benefits to each continuing employee under such Company Plans, or (2) provide compensation and benefits (other than equity based benefits and individual employment agreements not providing for severance) to each continuing employee that, taken as a whole, are no less favorable in the aggregate than the compensation and benefits (other than equity based benefits and individual employment agreements not providing for severance) provided to such continuing employee immediately prior to the Effective Time (“Comparable Plans”), or (3) provide some combination of (1) and (2) above such that each continuing employee receives compensation and benefits (other than equity based benefits and individual employment agreements not providing for severance) that, taken as a whole, are no less favorable in the aggregate than the compensation and benefits (other than equity based benefits and individual employment agreements not providing for severance) provided to such continuing employee immediately prior to the Effective Time. The Surviving Corporation will (and Newco will cause the Surviving Corporation to) provide each continuing employee who incurs a termination of employment during the one-year period immediately following the Effective Time with severance benefits that are no less favorable than the severance benefits to which such employees would have been entitled with respect to such termination under the severance policies or arrangement of Imperva and its subsidiaries and employment agreements covering continuing employees as in effect immediately prior to the Effective Time.

To the extent that a Company Plan or a Comparable Plan is made available to any continuing employee on or following the Effective Time, the Surviving Corporation will (and Newco will cause the Surviving Corporation to) grant any continuing employee credit for all service with Imperva and its subsidiaries prior to the Effective Time for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant (including for purposes of vacation accrual and severance pay entitlement but not including any defined benefit pension plan or similar arrangement or for any purpose under any equity or equity-based plan). However, such service need not be credited to the extent that it would result in duplication of coverage or benefits or was not credited for the same purpose with respect to such continuing employee under the analogous Employee Plan (as defined in the Merger Agreement) immediately prior to the Effective Time. In addition, (1) each continuing employee will be immediately eligible to participate, without any waiting time, in any and all employee benefit plans sponsored by the Surviving Corporation and its subsidiaries (other than the Company Plans) (such plans, collectively, the “New Plans”) to the extent coverage under any such New Plan replaces coverage under a comparable Company Plan in which such continuing employee participates immediately before the Effective Time (such plans, collectively, the “Old Plans”), (2) for purposes of each New Plan providing medical, dental, pharmaceutical or vision benefits to any continuing employee, the Surviving Corporation will cause all waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements of such New Plan to be waived for such continuing employee and his or her covered dependents to the extent waived for such person under the analogous Employee Plan immediately prior to the Closing Date, and the Surviving Corporation will cause any eligible expenses incurred by such

 

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continuing employee and his or her covered dependents during the portion of the plan year of the Old Plan ending on the date such employee’s participation in the corresponding New Plan begins to be given full credit under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such continuing employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan, and (3) credit the accounts of such continuing employees under any New Plan which is a flexible spending plan with any unused balance in the account of such continuing employee under the applicable Company Plan. Any vacation or paid time off accrued but unused by a continuing employee as of immediately prior to the Effective Time will be credited to such continuing employee following the Effective Time, and will not be subject to accrual limits or other forfeitures that were not applicable as of the Effective Time.

To the extent that a continuing employee is eligible to receive an annual bonus for calendar year 2018 or quarterly bonus for the fourth quarter of calendar year 2018 (“2018 Bonuses”), payable in cash and based on Imperva’s achievement of performance criteria (1) the level of achievement of the applicable performance metrics will be determined in good faith by our Board or a committee thereof as of immediately prior to the Effective Time and (2) provided that the continuing employee remains employed by Imperva as of immediately prior to the Closing Date, the Surviving Corporation will pay (and Newco will cause the Surviving Corporation to pay) such 2018 bonuses.

Imperva and Newco or any subsidiary of Newco will use their reasonable best efforts to mitigate and/or minimize the impact of the tax consequences of Section 280G of the Code (including as a result of the Merger under all employment, severance and termination agreements, other compensation arrangement and employee plans) on any individual that is regarded as a “disqualified individual” (as such term is defined in proposed Treasury Regulation Section 1.280G-1) and in connection therewith Imperva is permitted to accelerate certain equity awards held by Mr. Hylen (relating to no more than 15,000 shares) and Mr. Burns (relating to no more than 900 shares). It is the Company’s current intent that no such acceleration will occur for Mr. Hylen and that acceleration with respect to 900 shares for Mr. Burns will occur prior to December 31, 2018.

Efforts to Close the Merger

Under the Merger Agreement, Newco, Merger Sub and Imperva agreed to use reasonable best efforts to take (or cause to be taken) all actions, and to do (or cause to be done), all things necessary, proper, or advisable to consummate and make effective the Merger and the other transactions contemplated thereunder, including using their reasonable best efforts to comply with all regulatory notification requirements and obtain all regulatory approvals required to consummate the merger and the other transactions contemplated by the Merger Agreement. Additionally, under the Merger Agreement, Newco, Merger Sub, and Imperva agreed, if and to the extent necessary to obtain clearance under the HSR Act any other antitrust laws applicable to the Merger, to (1) offer, negotiate, commit to and effect, by consent decree, hold separate order or otherwise, any restrictions on the activities of Newco, Merger Sub, and Imperva and (2) contest, defend and appeal any legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the Merger. Furthermore, Newco and Merger Sub agreed to use their best efforts to obtain all necessary antitrust authorities in Austria and Australia and foreign investment authorities in Australia (other than amending or modifying any contractual obligations with third parties existing on October 10, 2018). Newco, Merger Sub and Imperva also agreed not to take any action that is intended to (or would reasonably be expected to have the effect of) preventing the consummation of the Merger, subjecting the filings under the HSR Act or with antitrust and foreign investment authorities in Austria and Australia to a “second request” or substantially equivalent review, or preventing (or delaying for more than 90 calendar days after the date of the Merger Agreement) receipt of necessary Australian foreign investment and antitrust approvals.

However, neither Newco, Merger Sub, nor Imperva is required to sell, divest, license or otherwise dispose of any capital stock or other equity or voting interest, assets (whether tangible or intangible), rights, products or businesses of Newco or Merger Sub (or their respective Affiliates), on the one hand, and Imperva and its

 

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Subsidiaries, on the other hand. Additionally, neither Newco nor Merger Sub (nor their respective Affiliates) is required to take any action that, individually or in the aggregate, would reasonably be expected to have a material and adverse impact on the reasonably expected benefits to Newco or Merger Sub (or their respective Affiliates) of completing the Merger.

Indemnification and Insurance

The Merger Agreement provides that, during the six year period commencing at the Effective Time, the Surviving Corporation and its subsidiaries will (and Newco will cause the Surviving Corporation and its subsidiaries to) (1) honor and fulfill in all respects the obligations of Imperva and its subsidiaries under the DGCL, their respective organizational documents and any and all indemnification agreements between Imperva or any of its subsidiaries, on the one hand, and the current or former directors or officers of Imperva or Imperva’s subsidiaries, on the other hand (including any person that becomes a director or officer of Imperva or its subsidiaries prior to the Effective Time), and (2) include in the certificates of incorporation and bylaws (and similar organizational documents) of Imperva and its subsidiaries provisions with respect to indemnification, exculpation and the advancement of expenses that are no less favorable then those set forth in Imperva’s current certificate of incorporation and bylaws, for a period of six years from the Effective Time.

In addition, the Merger Agreement provides that, during the six year period commencing at the Effective Time, the Surviving Corporation will (and Newco must cause the Surviving Corporation to) indemnify and hold harmless each current or former director or officer of Imperva or Imperva’s subsidiaries, to the fullest extent permitted by law, from and against all costs, fees and expenses (including attorneys’ fees and investigation expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding arising, directly or indirectly, out of or pertaining, directly or indirectly, to (1) any action or omission, or alleged action or omission, in such indemnified person’s capacity as a director or officer of Imperva or Imperva’s subsidiaries or other affiliates (regardless of whether such action or omission, or alleged action or omission, occurred prior to, at or after the Effective Time); and (2) any of the transactions contemplated by the Merger Agreement. The Merger Agreement also provides that the Surviving Corporation will (and Newco must cause the Surviving Corporation to) pay all fees and expenses (including fees and expenses of any counsel) as incurred by any such indemnified person in the defense of such legal proceeding.

In addition, the Merger Agreement requires Newco to cause the Surviving Corporation to maintain, on terms no less advantageous to the indemnified parties, Imperva’s directors’ and officers’ insurance policies for a period of at least six years commencing at the Effective Time. Neither Newco nor the Surviving Corporation will be required to pay premiums for such policy to the extent such premiums exceed, on an annual basis, 300% of the aggregate annual premiums currently paid by Imperva, and if the premium for such insurance coverage would exceed such amount, Newco shall be obligated to cause the Surviving Corporation to obtain the greatest coverage available for a cost equal to such amount.

For more information, please refer to the section of this proxy statement captioned “The Merger—Interests of Imperva’s Directors and Executive Officers in the Merger.”

Other Covenants

Stockholders Meeting

Imperva has agreed to take all necessary action (in accordance with applicable law and Imperva’s organizational documents) to establish a record date for, call, give notice of, convene and hold a special meeting of the stockholders as promptly as reasonably practicable after October 10, 2018 for the purpose of voting upon the adoption of the Merger Agreement and approval of the Merger.

 

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Stockholder Litigation

Imperva has agreed to (1) provide Newco with prompt notice of all stockholder litigation relating to the Merger Agreement; (2) keep Newco reasonably informed with respect to the status thereof; (3) give Newco the opportunity to participate in the defense, settlement or prosecution of any such litigation; and (4) consult with Newco with respect to the defense, settlement or prosecution of any such litigation. Imperva may not compromise, settle or come to an arrangement regarding any such litigation without Newco’s prior written consent (such consent not to be unreasonably withheld, delayed or conditioned).

Tax Rulings

As soon as practicable after October 10, 2018, Imperva will instruct its representatives to prepare and file with the Israeli Tax Authority an application for a ruling confirming (1) that the cancellation and conversion of certain securities of Imperva will not be in violation of certain Israeli tax ordinances, (2) the deposit of the Merger Consideration with respect to such securities will not be subject to any withholding obligation and (3) the tax treatment of such securities.

Conditions to the Closing of the Merger

The obligations of Newco and Merger Sub, on the one hand, and Imperva, on the other hand, to consummate the Merger are subject to the satisfaction or waiver (where permitted by applicable law) of each of the following conditions:

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;

 

   

the (1) expiration or termination of the applicable waiting period under the HSR Act and (2) approval or clearance of the Merger by the relevant antitrust authorities in Austria and Australia and foreign investment authorities in Australia; and

 

   

the consummation of the Merger not being made illegal or otherwise prohibited by any law or order of any governmental authority.

In addition, the obligations of Newco and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permitted by applicable law) of each of the following additional conditions:

 

   

the representations and warranties of Imperva relating to organization and standing, authorization and enforceability, required governmental approvals, and brokers being true and correct in all respects as of October 10, 2018 and being true and correct in all respects on and as of the closing date with the same force and effect as if made on and as of such date, except in each case for those representations and warranties that address matters only as of a particular date (which representations shall be true and correct in all respects as of such particular date);

 

   

the representations and warranties of Imperva relating to Imperva’s capitalization (other than as described in the bullet point below) being true and correct as of October 10, 2018 and being true and correct on and as of the closing date with the same force and effect as if made on and as of such date, except (1) for those representations and warranties that address matters only as of a particular date (which representations shall have been true and correct as of such particular date), and (2) in each case for any inaccuracies that would not, individually or in the aggregate, increase the aggregate Merger Consideration by more than $6,500,000;

 

   

the other representations and warranties of Imperva set forth in the Merger Agreement being true and correct on and as of the closing date with the same force and effect as if made on and as of such date (disregarding all materiality qualifications (but not dollar thresholds) contained in such representations and warranties), except (1) for any failure to be so true and correct which has not had a Company Material Adverse Effect, and (2) for those representations and warranties that address matters only as

 

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of a particular date (which representations shall have been true and correct as of such particular date, except for any failure to be so true and correct as of such date which has not had a Company Material Adverse Effect);

 

   

Imperva having performed and complied in all material respects with all agreements, covenants and other obligations required by the Merger Agreement to be performed or complied with by Imperva at or prior to the closing date;

 

   

since October 10, 2018, there not having occurred or arisen any Company Material Adverse Effect that is continuing; and

 

   

the receipt by Newco and Merger Sub of a certificate of Imperva, validly executed for and on behalf of Imperva by the chief executive officer and the chief financial officer thereof, certifying that the conditions described in the preceding five bullets have been satisfied.

In addition, the obligation of Imperva to consummate the Merger is subject to the satisfaction or waiver (where permitted by applicable law) of each of the following additional conditions:

 

   

the representations and warranties of Newco and Merger Sub set forth in the Merger Agreement that are qualified by “materiality” being true and correct in all respects on and as of the closing date with the same force and effect as if made on and as of such date (except for those representations and warranties that address matters only as of a particular date, which representations shall have been true and correct in all respects as of such particular date);

 

   

the representations and warranties of Newco and Merger Sub set forth in the Merger Agreement that are not so qualified by “materiality” being true and correct in all material respects on and as of the closing date with the same force and effect as if made on and as of such date (except for those representations and warranties that address matters only as of a particular date, which representations shall have been true and correct in all material respects as of such particular date);

 

   

Newco and Merger Sub having performed and complied in all material respects with all agreements, covenants and obligations required by the Merger Agreement be performed and complied with by Newco or Merger Sub at or prior to the closing date; and

 

   

the receipt by Imperva of a certificate of Newco and Merger Sub, validly executed for and on behalf of Newco and Merger Sub and in their respective names by a duly authorized executive officer thereof, certifying that the conditions described in the preceding three bullets have been satisfied.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the adoption of the Merger Agreement by stockholders, in the following ways:

 

   

by mutual written agreement of Imperva and Newco;

 

   

by either Imperva or Newco if:

 

   

the Effective Time shall not have occurred on or before March 9, 2019, which we refer to as the “termination date” (except that the right to terminate the Merger Agreement as a result of the occurrence of the termination date will not be available to any party whose material breach of the Merger Agreement has been the principal cause of the failure of the Effective Time to have occurred on or before such date);

 

   

Imperva’s stockholders fail to adopt the Merger Agreement at the special meeting or any adjournment or postponement thereof; or

 

   

any governmental authority in the U.S., Austria or Australia shall have (1) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger any applicable law that is in effect

 

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and has the effect of making the consummation of any of the Merger permanently illegal in such jurisdictions, or which has the effect of permanently prohibiting the consummation of the Merger in such jurisdictions, or (2) issued or granted any order that has the effect of making the Merger illegal permanently in such jurisdictions or which has the effect of permanently prohibiting the consummation of the Merger in such jurisdictions and such order has become final and nonappealable;

 

   

By Imperva if:

 

   

Newco or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the termination date or the date that is 30 calendar days following Imperva’s delivery of written notice of such breach (provided that Imperva may terminate before the end of such 30 calendar day period if Newco or Merger Sub cease or fail to exercise and continue not to exercise commercially reasonable efforts to cure such breach or inaccuracy); provided that the right to terminate the Merger Agreement as described in this bullet point will not be available to Imperva if Imperva is in material breach of any covenant contained in the Merger Agreement;

 

   

in the event that all of the conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing), but Newco and Merger Sub have failed to consummate the Merger at the time the Merger should have occurred pursuant to the Merger Agreement, and Imperva has irrevocably notified Newco in writing that all of the conditions to closing have been satisfied and continue to be satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) or that it is willing to waive any unsatisfied conditions, and Newco and Merger Sub fail to consummate the Merger on the later of (1) the expiration of three business days after the receipt of such notice or (2) a date set forth in such notice; or

 

   

prior to the adoption of the Merger Agreement by stockholders and so long as Imperva is not then in material breach of its obligations related to Acquisition Proposals and Superior Proposals, in order to enter into a definitive agreement with respect to a Superior Proposal (provided that the Superior Proposal was not solicited in violation of the Merger Agreement) in accordance with the terms of the Merger Agreement, subject to Imperva paying to Newco, prior to such termination, a termination fee of $60,000,000 (provided that such termination fee will be $25,000,000 if Imperva terminates the Merger Agreement during the Go-Shop Period pursuant to the termination right set forth in this bullet point relating to a Superior Proposal from a third party) ; and

 

   

By Newco if:

 

   

Imperva has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the termination date or the date that is 30 calendar days following Newco’s delivery of written notice of such breach (provided that Newco may terminate before the end of such 30 calendar day period if Imperva ceases or fails to exercise and continues not to exercise commercially reasonable efforts to cure such breach or inaccuracy); provided that the right to terminate the Merger Agreement as described in this bullet point will not be available to Newco if Newco is in material breach of any covenant contained in the Merger Agreement; or

 

   

prior to the adoption of the Merger Agreement by the stockholders, our Board (1) effects a company board recommendation change or (2) fails to publicly reaffirm the company board recommendation within four business days after Newco so requests in writing following any public statement by a stockholder of Imperva or a member of our Board expressing opposition to the Merger or the Merger Consideration (provided that our Board will have no obligation to reaffirm the company board recommendation on more than two occasions).

 

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In the event that the Merger Agreement is terminated pursuant to the termination rights above, the Merger Agreement will be of no further force or effect without liability of any party to the other parties, as applicable, except certain sections of the Merger Agreement will survive the termination of the Merger Agreement in accordance with their respective terms, including terms relating to reimbursement of expenses and indemnification. Notwithstanding the foregoing, nothing in the Merger Agreement will relieve any party from any liability for any fraud in connection with the Merger Agreement. In addition, no termination of the Merger Agreement will affect the rights or obligations of any party pursuant to the confidentiality agreement between an affiliate of Thomas Bravo and Imperva or the Limited Guaranty, which rights, obligations and agreements will survive the termination of the Merger Agreement in accordance with their respective terms.

Termination Fees and Expense Reimbursement

Termination Fee Payable by Imperva

If the Merger Agreement is terminated in specified circumstances, Imperva has agreed to pay Newco a termination fee of up to $60,000,000.

Newco will be entitled to receive the termination fee from Imperva if the Merger Agreement is terminated:

 

   

by Newco or Imperva (1) because the stockholders fail to the adopt the Merger Agreement, (2) prior to the time at which a vote is taken on the adoption of the Merger Agreement (or an adjournment or postponement thereof) an offer or proposal for a competing Acquisition Transaction is publicly announced or will become publicly known and not withdrawn and (3) within one year following the termination of the Merger Agreement, the foregoing competing Acquisition Transaction is consummated or Imperva enters into a definitive contract to consummate such competing Acquisition Transaction and such competing Acquisition Transaction is subsequently consummated, less any expenses already paid to Newco;

 

   

Note that if Newco terminates the Merger Agreement due to the stockholders’ failure to adopt the Merger Agreement, but Newco is not yet entitled to the Newco termination fee, as long as Newco and Merger Sub are not in material breach of their representations, warranties or covenants under the Merger Agreement, then Imperva will reimburse Newco up to $4,000,000 of its reasonable and documented out-of-pocket expenses (including legal fees and expenses) incurred in connection with the transactions contemplated by the Merger Agreement;

 

   

by Imperva in order to enter into a definitive agreement to consummate a Superior Proposal that was not solicited in violation of the terms of the Merger Agreement, and Imperva complied with the proper notice matching rights provisions of the Merger Agreement in order to cause the proposal to cease to be a Superior Proposal (provided that the termination fee will be $25,000,000 if the termination fee becomes payable during the Go-Shop Period in connection with a termination of the Merger Agreement during the Go-Shop Period pursuant to the termination right set forth in this bullet point relating to a Superior Proposal from a third party); or

 

   

by Newco in the event that our Board (1) shall have effected a company board recommendation change or (2) fails to publicly reaffirm the company board recommendation within four business days after Newco so requests in writing following any public statement by a stockholder of Imperva or a member of our Board expressing opposition to the Merger or the Merger Consideration (it being understood that our Board will have no obligation to so reaffirm the company board recommendation on more than two occasions).

Additionally, if the termination fee is not payable or Newco terminates the Merger Agreement because Imperva has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the

 

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termination date or the date that is 30 calendar days following Newco’s delivery of written notice of such breach (provided that Newco may terminate before the end of the 30 calendar days if Imperva ceases or fails to exercise and continues not to exercise commercially reasonable efforts to cure such breach or inaccuracy), then Imperva will reimburse Newco up to $4,000,000 of its reasonable and documented out-of-pocket expenses (including legal fees and expenses) incurred in connection with the transactions contemplated by the Merger Agreement. Notwithstanding the foregoing, the right to terminate the Merger Agreement as described in this paragraph will not be available to Newco if Newco is in material breach of any covenant contained in the Merger Agreement.

Termination Fee Payable by Newco

If the Merger Agreement is terminated in specified circumstances, Newco has agreed to pay Imperva a termination fee of $140,000,000.

Imperva will be entitled to receive the termination fee from Newco if the Merger Agreement is terminated:

 

   

by Imperva because Newco has materially breached its representations, warranties, covenants or agreements in the Merger Agreement;

 

   

by Imperva (1) because all of the applicable conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) (2) Imperva has irrevocably notified Newco in writing that the conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) or it is prepared to waive unsatisfied conditions and is ready, willing and able to consummate the Merger and (3) Newco and Merger Sub fail to consummate the Merger within three business days of such notice; or

 

   

by Imperva or Newco for failure to consummate the Merger on or prior to the termination date, if Imperva would have been able to terminate pursuant to the bullets above.

Specific Performance

In the event of a breach or threatened breach of any covenant or obligation in the Merger Agreement, subject to the immediately following paragraph, the non-breaching party will be entitled to an injunction, specific performance or other equitable relief to enforce specifically the terms and provisions of the Merger Agreement.

Notwithstanding the foregoing, Imperva will be entitled to an injunction, specific performance or other equitable remedy in connection with enforcing Newco’s obligation to cause the equity financing to be funded (and to exercise its third party beneficiary rights under the equity commitment letter) and to consummate the Merger only in the event that (1) all conditions to Newco’s and Merger Sub’s obligations to close the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which must be able to be satisfied at the closing), (2) the debt financing has been funded or the parties providing the debt financing have confirmed in writing that it will be funded if the equity financing is funded at the closing, (3) Newco and Merger Sub have failed to consummate the Merger by the time the closing was required pursuant to the Merger Agreement to occur, and (4) Imperva has irrevocably confirmed in writing to Newco that if specific performance is granted and the equity financing and debt financing are funded, then it will take such actions that are required of it by the Merger Agreement to cause the closing to occur.

Although Imperva may pursue both a grant of specific performance and the payment of the termination fee by Newco, Imperva will not be permitted to pursue an injunction, specific performance or other equitable relief or any other remedy under the Merger Agreement following the payment by Newco of the termination fee when payable under the Merger Agreement.

 

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Fees and Expenses

Except in specified circumstances, whether or not the Merger is completed, Imperva, on the one hand, and Newco and Merger Sub, on the other hand, are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement.

Amendment

The Merger Agreement may be amended in writing at any time before or after adoption of the Merger Agreement by stockholders. However, after adoption of the Merger Agreement by stockholders, no amendment that requires further approval by such stockholders pursuant to the DGCL may be made without such approval.

Governing Law

The Merger Agreement is governed by Delaware law.

 

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MARKET PRICES AND DIVIDEND DATA

Our common stock is listed on The Nasdaq Global Market under the symbol “IMPV.” This table shows, for the periods indicated, the range of intraday high and low per share sales prices for our common stock as reported on The Nasdaq Global Market.

 

Three Months Ended:

   High      Low  

September 30, 2018

   $ 57.65      $ 44.70  

June 30, 2018

   $ 53.95      $ 42.10  

March 31, 2018

   $ 48.40      $ 39.66  

December 31, 2017

   $ 46.10      $ 37.17  

September 30, 2017

   $ 52.40      $ 41.60  

June 30, 2017

   $ 51.75      $ 40.15  

March 31, 2017

   $ 47.30      $ 37.20  

The following table sets forth the closing price per share of our common stock, as reported on The Nasdaq Global Market on October 9, 2018, the last full trading day before the public announcement of the merger, and on December 4, 2018, the latest practicable trading day before the printing of this proxy statement:

 

     Common
Stock
Closing
Price
 

October 9, 2018

   $ 43.06  

December 4, 2018

   $ 55.51  

You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock. If the merger is consummated, there will be no further market for our common stock and our common stock will be delisted from The Nasdaq Global Market and deregistered under the Exchange Act.

Dividends

We have never paid cash dividends on our common stock. In the event that the merger is not consummated, we would expect to retain earnings, if any, to fund the development and growth of our business and would not anticipate paying cash dividends on our common stock in the foreseeable future. In the event that the merger is not consummated, our payment of any future dividends would be at the discretion of our Board after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock as of November 23, 2018, for:

 

   

each beneficial owner of more than 5% of our outstanding common stock;

 

   

each of our executive officers and each of our directors; and

 

   

all of our executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by footnote, to our knowledge, the persons and entities named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them, subject to applicable community property laws. Securities that may be acquired within 60 days of November 23, 2018, including shares subject to stock options that may be exercised, and RSUs or PRSUs that may vest and settle, are deemed to be beneficially owned by the person or entity holding such securities for the purpose of computing beneficial ownership, but are not treated as outstanding for the purpose of computing the ownership of any other person or entity. The information as to beneficial ownership presented in the table below does not take into account any accelerated vesting that may occur in connection with the closing of the merger. The applicable percentages of beneficial ownership are based on 35,408,767 shares of common stock outstanding as of November 23, 2018.

Unless otherwise indicated, the address of each of the individuals named below is: c/o Imperva, Inc. 3400 Bridge Parkway Redwood Shores, California 94065.

 

     Shares Beneficially Owned  

Name of Beneficial Owner

   Number      Percentage  

Directors and Executive Officers

     

Albert Pimentel (1)

     91,114        *  

Roger Sippl (2)

     11,660        *  

Randall Spratt (3)

     12,199        *  

Allan Tessler (4)

     58,012        *  

James Tolonen (5)

     45,004        *  

Christopher Hylen (6)

     18,725        *  

Mike Burns (7)

     529        *  

Trâm Phi (8)

     127,754        *  

All Executive Officers and Directors as a Group (8 persons) (9)

     364,468        1.0

5% Stockholders

     

Eminence Capital, LP (10)

     2,885,315        8.1

Black Rock, Inc. (11)

     2,696,809        7.6

The Vanguard Group (12)

     2,646,883        7.5

 

 

*

Represents beneficial ownership of less than 1% of the shares of common stock.

(1)

Includes (i) options exercisable for 21,165 shares of common stock within 60 days of November 23, 2018, and (ii) 69,949 shares of common stock owned of record by the Pimentel Family Trust U/D/T dated April 24, 1991 for which Albert A. Pimentel and Laurie Jean Pimentel serve as trustees.

(2)

Includes (i) 3,518 restricted stock units that will vest within 60 days of November 23, 2018, and (ii) 8,142 shares of common stock owned of record by Mr. Sippl.

(3)

Represents 12,199 shares of common stock owned of record by Mr. Spratt.

 

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(4)

Includes (i) options exercisable for 9,455 shares of common stock within 60 days of November 23, 2018, (ii) 13,557 shares of common stock owned of record by Mr. Tessler, (iii) 3,250 shares held by International Financial GP of Nevada, of which Mr. Tessler is the sole owner and Chair/CEO, (iv) 7,500 shares held by the Allan R. Tessler Charitable Remainder Unitrust #1 u/a/d 12-16-96, of which Mr. Tessler is the sole trustee, (v) 7,500 Shares held by the Allan R. Tessler Charitable Remainder Unitrust #2 u/a/d 12-16-96, of which Mr. Tessler is the sole trustee, (vi) 6,750 shares held by Tessler Family Limited of which Mr. Tessler is a limited partner; and (vii) 10,000 shares held by the ART FGT Family Partners Limited, of which Mr. Tessler is a limited partner.

(5)

Includes (i) options exercisable for 21,268 shares of common stock within 60 days of November 23, 2018, (ii) 18,736 shares of common stock owned of record by Mr. Tolonen, and (iii) 5,000 shares of common stock owned of record by James R. Tolonen & Ginger Tolonen as Trustees of the Tolonen Family Trust, dated September 26, 1996.

(6)

Represents 18,725 shares of common stock owned of record by Mr. Hylen.

(7)

Represents 529 shares of common stock owned of record by Mr. Burns.

(8)

Includes (i) options exercisable for 89,970 shares of common stock within 60 days of November 23, 2018, and (ii) 37,784 shares of common stock owned of record by Ms. Phi.

(9)

Includes (i) options exercisable for 141,858 shares of common stock within 60 days of November 23, 2018, and (ii) 3,518 restricted stock units that will vest within 60 days of November 23, 2018.

(10)

Based on information set forth in a Schedule 13G/A filed by Eminence Capital, LP on February 14, 2018. Collectively, Eminence Capital, LP, Eminence GP, LLC, and Ricky C. Sandler beneficially own 2,885,315 shares of common stock. The address for Eminence Capital, Eminence GP and Mr. Sandler is 65 East 55th Street, 25th Floor, New York, NY 10022.

(11)

Based on information set forth in a Schedule 13G/A filed with the SEC on January 25, 2018. Includes (i) 2,613,789 shares of common stock for which Black Rock, Inc. has sole voting power, and (ii) 2,696,809 shares of common stock for which it has sole dispositive power. The principal business office of Black Rock, Inc. is 55 East 2nd Street, New York, NY 10055.

(12)

Based on information set forth in a Schedule 13G/A filed with the SEC on February 9, 2018. Includes (i) 65,549 shares of common stock for which The Vanguard Group has sole voting power, (ii) 3,453 shares of common stock for which it has shared voting power, (iii) 2,580,171 shares of common stock for which it has sole dispositive power, and (iv) 66,712 shares of common stock for which it has shared dispositive power. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group is the beneficial owner of 63,259 shares or 0.18% of the outstanding common stock as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group is the beneficial owner of 5,653 shares or 0.01% of the outstanding common stock as a result of its serving as investment manager of Australian investment offerings. The principal business office of The Vanguard Group is 100 Vanguard Boulevard, Malvern, PA 19355.

 

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ADVISORY VOTE REGARDING MERGER-RELATED COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS

Compensation Paid to Named Executive Officers in Connection with the Merger

In accordance with Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to cast an advisory (non-binding) vote on the merger-related compensation that may be paid or become payable to our named executive officers in connection with the proposed merger. The amount of this compensation is set forth and described in the table entitled “Golden Parachute Compensation” and the accompanying footnotes on page 58 and the narrative discussion under the section of this proxy statement captioned “The Merger—Interests of Imperva’s Directors and Executive Officers in the Merger—Agreements and Arrangements with Executive Officers and Directors of Imperva.” As required by those rules, we are asking our stockholders to adopt the following resolution:

RESOLVED, that the stockholders of Imperva hereby APPROVE, on an advisory basis, the compensation that may be paid or become payable to Imperva’s named executive officers in connection with the merger, in each case pursuant to Item 402(t) of Regulation S-K, described in the table entitled “Golden Parachute Compensation” and the accompanying footnotes and related narrative discussion beginning on page 58 of Imperva’s proxy statement for its special meeting of stockholders to be held on January 8, 2019.

Compensation that may be paid or become payable to our named executive officers following the merger pursuant to agreements or understandings between our named executive officers and Newco is not subject to the advisory vote on the compensation proposal. There are no agreements between Newco and our named executive officers regarding the officers’ post-closing employment terms or compensation arrangements.

Effect of Advisory Vote

The vote on this proposal is a vote separate and apart from the votes on the proposal to adopt the Merger Agreement and the proposal to approve adjournment of the special meeting. Accordingly, you may vote to approve either of the other proposals and vote not to approve this proposal, and vice versa. Approval of this proposal is not a condition to completion of the Merger.

Because the vote on this proposal is only advisory in nature, it will not be binding on either Imperva or Newco regardless of whether the proposed merger is completed. Accordingly, as the merger-related compensation described herein is contractual with respect to the executives, regardless of the outcome of this advisory vote, such compensation will be payable, subject only to the conditions applicable thereto, if the proposed merger is completed.

Vote Required and Board Recommendation

Approval of the compensation proposal requires the affirmative vote of a majority of the shares of our common stock outstanding and entitled to vote that are present in person or represented by proxy at the special meeting and voted for or against the proposal. If you abstain from voting on any matter, the shares represented by such proxy will be considered present at the special meeting for purposes of determining a quorum, but will not be considered to have been voted for or against this proposal. As such, an abstention will have no effect on the vote for the adjournment proposal.

Our Board unanimously recommends that you vote “FOR” the non-binding, advisory

approval of the compensation that may be paid to our named executive officers that is

based upon or relates to the Merger.

 

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ADJOURNMENT OF THE SPECIAL MEETING

Adjournment of the Special Meeting

In the event that a quorum is not present or represented by proxy at the special meeting, it is expected that our Board will recommend adjournment of the special meeting to solicit additional proxies if permitted by the Merger Agreement. In addition, we may move to adjourn the special meeting in order to give holders of our common stock additional time to evaluate new material information or disclosure. In either event, we will ask our stockholders to vote only upon the adjournment proposal and not on the other proposals discussed in this proxy statement.

Vote Required and Board Recommendation

Approval of the adjournment proposal requires the affirmative vote of a majority of the shares of our common stock entitled to vote on the matter that are present in person or represented by proxy at the special meeting and voted for or against the proposal. If an executed proxy is returned and a stockholder has specifically abstained from voting on any matter, the shares represented by such proxy will be considered present at the meeting for purposes of determining a quorum, but will not be considered to have voted for or against such matter. As such, an abstention will have no effect on the vote for the adjournment proposal.

Our Board unanimously recommends that you vote “FOR” this proposal.

 

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OTHER MATTERS

No business may be transacted at the special meeting other than the matters set forth in this proxy statement.

FUTURE STOCKHOLDER PROPOSALS

If the merger is completed, we will have no public stockholders and there will be no public participation in any of our future stockholder meetings. However, if the merger is not completed, our public stockholders will continue to be entitled to attend and participate in our stockholders meetings and we will hold an annual meeting of stockholders in 2019.

If the merger is not completed, then under our bylaws, our stockholders who intend to present proposals for action, or to nominate directors, at our 2019 annual meeting of stockholders must give written notice of the proposal or nomination to our Corporate Secretary in accordance with our bylaws. Our bylaws require that any such notice be given not less than 90 days nor more than 120 days prior to the first anniversary of the prior year’s annual meeting of stockholders. To be timely for the 2019 annual meeting of stockholders (if the merger is not completed and such meeting occurs), a stockholder’s notice must be received by us between December 25, 2019 and January 24, 2019. Such proposal should be delivered or mailed to the attention of our Corporate Secretary at our principal executive offices, which are Imperva, Inc., 3400 Bridge Parkway, Redwood Shores, California 94065. Additional requirements apply under our bylaws for stockholders who intend to include a proposal in Imperva’s proxy statement and proxy card for the 2019 annual meeting pursuant to Rule 14a-8 under the Exchange Act. Any such stockholder proposals were required to be delivered to our Corporate Secretary no later than November 12, 2018, satisfy the conditions established by the SEC for stockholder proposals, and comply with the deadlines and other procedures in our bylaws.

If the date of the 2019 annual meeting is more than 30 days before or more than 60 days after the first anniversary of the 2018 annual meeting, in order for a notice to be timely, it must be delivered no earlier than 120 days prior to and no later than 90 days prior to the 2019 annual meeting date or, if later, the close of business on the 10th day after we publicly announce the date of the 2019 annual meeting.

These stockholder notices must contain information required by our bylaws. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements. If a matter is properly brought before our next annual meeting under the procedures outlined in this paragraph, the proxy holders named by our board of directors will have the discretion to vote on such matter without having received directions from stockholders delivering proxies to them for such meeting, provided that our proxy statement for our next meeting briefly describes the matter and how the proxy holders intend to vote on it.

Inclusion in Imperva’s Proxy Materials

In December 2017, our Board adopted proxy access amendments to our bylaws to permit a stockholder or a group of up to 20 stockholders that has maintained continuous ownership of at least 3% of our common stock for at least three years to include nominees in Imperva’s proxy materials for an annual meeting of stockholders, provided the stockholder(s) and nominee(s) satisfy the requirements specified in our bylaws. The number of director nominees that may be so included is limited to the greater of two or 20% of the total number of directors. In order for proxy access nominations to be eligible for inclusion in our proxy statement and proxy card for the 2019 annual meeting, stockholder nominations under the proxy access provisions of our bylaws would have to be received by our Corporate Secretary between November 25, 2018 and December 25, 2018 and satisfy the requirements in our bylaws.

 

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WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Exchange Act, and file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings through the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room.

You may obtain any of the documents we file with the SEC, without charge, visiting the SEC Filings page of our website at www.imperva.com/Company/SECFilings . The information included on our website is not incorporated by reference into this proxy statement. You may also request copies from us at the following address:

Imperva, Inc.,

3400 Bridge Parkway,

Redwood Shores, California 94065, Attn: General Counsel

or call (650) 345-9000 to request a copy

If you request any documents from us, we will mail them to you by first class mail, or another equally prompt method, promptly after we receive your request.

If you would like to request documents from us, please do so as soon as possible, to receive them before the special meeting.

INCORPORATION BY REFERENCE

We are allowed to “incorporate by reference” information that we file with the SEC into this proxy statement, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this proxy statement. Information in this proxy statement supersedes information incorporated by reference that we filed with the SEC prior to the date of this proxy statement, while information that we file later with the SEC will automatically update and supersede the information in this proxy statement. We incorporate by reference into the proxy statement the documents listed below, and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than Current Reports on Form 8-K containing only information furnished under Item 2.02 or Item 7.01 of Form 8-K, unless otherwise indicated therein) after the date of this proxy statement but prior to the date of the special meeting:

 

   

our Annual Report on Form 10-K for the year ended December 31, 2017;

 

   

our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2018, June 30, 2018 and September 30, 2018;

 

   

our definitive Proxy Statement on Schedule 14A filed with the SEC on March 12, 2018; and

 

   

our Current Reports on Form 8-K filed with the SEC on July 26, 2018, August 15, 2018, August 16, 2018, October 23, 2018 and November 26, 2018.

We will make these documents available to you without charge upon your oral or written request. Requests should be directed to us at the address above under “Where You Can Find More Information.” All of these documents are also available through the SEC Filings page of our website at www.imperva.com/Company/SECFilings . The information included on our website is not incorporated by reference into this proxy statement.

 

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MISCELLANEOUS

Your vote is important. You may vote by submitting a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card, returning your proxy card using the postage prepaid envelope provided, or attending the special meeting and voting in person. If you have any questions about this proxy statement, the special meeting or the merger or need assistance with voting procedures, you should contact:

D.F. King & Co., Inc.

48 Wall Street

New York, NY 10005

Banks and Brokers Call: 212-269-5550

Stockholders (All Others) Call: (877) 283-0324

Email: impv@dfking.com

Please note, however, that if your shares are held of record by a brokerage firm, bank, trust or other nominee and you wish to vote at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote yours shares or obtain a proxy issued in your name from that record holder.

You should not send in your Imperva stock certificates, if any, until you receive the transmittal materials from the payment agent with instructions for the surrender of your stock certificates. Our record stockholders who have further questions about their share certificates or the exchange of our common stock for cash should contact the payment agent.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE ON THE PROPOSALS DESCRIBED HEREIN. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED DECEMBER 6 , 2018. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE (OR AS OF AN EARLIER DATE IF SO INDICATED IN THIS PROXY STATEMENT). NEITHER THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS NOR THE ISSUANCE OF CASH IN THE MERGER CREATES ANY IMPLICATION TO THE CONTRARY. THIS PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE A PROXY SOLICITATION.

 

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ANNEX A

AGREEMENT AND PLAN OF MERGER

by and among

IMPERIAL PURCHASER, LLC

IMPERIAL MERGER SUB, INC.

and

IMPERVA, INC.

Dated October 10, 2018


Table of Contents

TABLE OF CONTENTS

 

             Page  

ARTICLE I THE MERGER

     A-4  
       1.1  

The Merger

     A-4  
  1.2  

The Surviving Corporation of the Merger

     A-5  
  1.3  

General Effects of the Merger

     A-5  
  1.4  

Effect of the Merger on Capital Stock of the Merging Corporations

     A-5  
  1.5  

Further Action

     A-9  
  1.6  

No Further Dividends

     A-9  

ARTICLE II THE CLOSING

     A-9  
  2.1  

The Closing

     A-9  
  2.2  

Conditions to Closing

     A-9  
  2.3  

Issuance of Merger Consideration After the Closing

     A-11  

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     A-13  
  3.1  

Organization and Standing

     A-13  
  3.2  

Authorization and Enforceability

     A-13  
  3.3  

Required Governmental Approvals

     A-14  
  3.4  

No Conflicts

     A-15  
  3.5  

Capitalization

     A-15  
  3.6  

Subsidiaries

     A-16  
  3.7  

SEC Reports

     A-17  
  3.8  

Financial Statements

     A-18  
  3.9  

No Undisclosed Liabilities

     A-19  
  3.10  

Absence of Certain Changes

     A-19  
  3.11  

Material Contracts

     A-19  
  3.12  

Compliance with Laws and Orders

     A-19  
  3.13  

Permits

     A-20  
  3.14  

Legal Proceedings and Orders

     A-20  
  3.15  

Taxes

     A-20  
  3.16  

Employee Benefit Plans

     A-23  
  3.17  

Labor Matters

     A-24  
  3.18  

Real Property

     A-26  
  3.19  

Personal Property

     A-27  
  3.20  

Intellectual Property

     A-27  
  3.21  

Insurance

     A-28  
  3.22  

Related Party Transactions

     A-29  
  3.23  

Brokers

     A-29  
  3.24  

Government Contracts

     A-29  
  3.25  

Anti-Bribery and Export Compliance

     A-29  
  3.26  

Indebtedness

     A-30  
  3.27  

Environmental Matters

     A-30  
  3.28  

No Other Representations

     A-30  

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEWCO AND MERGER SUB

     A-30  
  4.1  

Organization and Good Standing

     A-30  
  4.2  

Authorization and Enforceability

     A-31  
  4.3  

Required Governmental Consents

     A-31  
  4.4  

No Conflicts

     A-31  
  4.5  

No Ownership of Company Common Stock

     A-31  
  4.6  

No Stockholder and Management Arrangements

     A-31  

 

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Table of Contents
             Page  
  4.7  

No Litigation

     A-32  
  4.8  

Solvency

     A-32  
  4.9  

Financing

     A-32  
  4.10  

Guaranty

     A-34  
  4.11  

Non-Reliance

     A-34  

ARTICLE V CONDUCT OF COMPANY BUSINESS

     A-35  
  5.1  

Conduct of Company Business

     A-35  
  5.2  

Restrictions on Company Operations

     A-35  
  5.3  

No Control

     A-37  

ARTICLE VI GO-SHOP; NON-SOLICITATION OF ACQUISITION PROPOSALS

     A-38  
  6.1  

Go-Shop

     A-38  
  6.2  

Non-Solicitation

     A-38  
  6.3  

Notice and Information

     A-40  

ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS

     A-40  
  7.1  

Company Stockholder Approval

     A-40  
  7.2  

Regulatory Approvals

     A-44  
  7.3  

Financing

     A-45  
  7.4  

Efforts to Close

     A-50  
  7.5  

Access to the Company

     A-51  
  7.6  

Notice of Breach

     A-51  
  7.7  

Confidentiality

     A-52  
  7.8  

Public Disclosure

     A-52  
  7.9  

Transaction Litigation

     A-52  
  7.10  

Section 16(b) Exemption

     A-53  
  7.11  

Directors and Officers Exculpation, Indemnification and Insurance

     A-53  
  7.12  

Employee Matters

     A-55  
  7.13  

Obligations of Merger Sub

     A-57  
  7.14  

Newco Vote

     A-57  
  7.15  

Delisting

     A-57  
  7.16  

Tax Rulings

     A-57  

ARTICLE VIII TERMINATION OF AGREEMENT

     A-58  
  8.1  

Termination

     A-58  
  8.2  

Notice of Termination

     A-59  
 

8.3

 

Effect of Termination

     A-59  
 

8.4

 

Termination Fees

     A-59  

ARTICLE IX GENERAL PROVISIONS

     A-61  
  9.1  

Certain Interpretations

     A-61  
  9.2  

Amendment

     A-62  
  9.3  

Waiver

     A-62  
  9.4  

Assignment

     A-62  
  9.5  

Notices

     A-62  
  9.6  

Non-Survival of Representations, Warranties

     A-63  
  9.7  

Expenses

     A-63  
  9.8  

Entire Agreement

     A-63  
  9.9  

Third-Party Beneficiaries

     A-64  
  9.10  

Severability

     A-64  
  9.11  

Remedies

     A-64  
  9.12  

Governing Law

     A-67  
  9.13  

Consent to Jurisdiction

     A-67  
  9.14  

WAIVER OF JURY TRIAL

     A-67  
  9.15  

Counterparts

     A-68  

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of October 10, 2018 by and among Imperial Purchaser, LLC, a Delaware limited liability company (“ Newco ”), Imperial Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Newco (“ Merger Sub ”), and Imperva, Inc., a Delaware corporation (the “ Company ”). All capitalized terms that are not defined elsewhere in this Agreement shall have the respective meanings assigned thereto in Annex A .

W I T N E S S E T H:

WHEREAS, it is proposed that, upon the terms and subject to the conditions set forth herein, Merger Sub will merge with and into the Company (the “ Merger ”), and each share (each, a “ Share ”) of common stock, par value $0.0001 per share, of the Company (“ Company Common Stock ”) then outstanding will thereupon be cancelled and converted into the right to receive Fifty-Five Dollars and Seventy-Five Cents ($55.75) in cash, without interest (the “ Merger Consideration ”).

WHEREAS, the Board of Directors of the Company (the “ Company Board ”) has unanimously (i) determined and declared that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, (ii) determined that this Agreement and the transactions contemplated hereby, including the Merger and Merger Consideration, are fair to and in the best interests of the Company and its stockholders, (iii) approved this Agreement and the transactions contemplated hereby, including the Merger and (iv) resolved to recommend that the Company’s stockholders adopt this Agreement.

WHEREAS, the Board of Managers of Newco and the Board of Directors of Merger Sub have each unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and (ii) approved this Agreement and the transactions contemplated hereby, including the Merger.

WHEREAS, concurrently with the execution of this Agreement, Newco is delivering to the Company a limited guaranty (the “ Guaranty ”) of Thoma Bravo Fund XIII, L.P. (“ Guarantor ”), pursuant to which the Guarantor has guaranteed certain of the obligations of Newco and Merger Sub under this Agreement.

WHEREAS, concurrently with the execution of this Agreement, the Company’s directors and officers have entered into voting agreements in the form attached hereto as Exhibit A (the “ Voting Agreements ”), dated as of the date hereof, with Newco and the Company, pursuant to which, among other things, such individuals have agreed to vote such individuals’ Shares in favor of the approval of this Agreement and against any Acquisition Proposal.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, and intending to be legally bound hereby, Newco, Merger Sub and the Company hereby agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement and the applicable provisions of the DGCL, on the Closing Date, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall thereupon cease and the Company shall continue as the surviving corporation of the Merger and a wholly owned subsidiary of Newco. The Company, as the surviving corporation of the Merger, is sometimes referred to herein as the “ Surviving Corporation .” Upon the

 

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Table of Contents

terms and subject to the conditions set forth in this Agreement, on the Closing Date, Newco, Merger Sub and the Company shall cause the Merger to be consummated under the DGCL by filing a certificate of merger in customary form and substance (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware (the “ Delaware Secretary of State ”) in accordance with the applicable provisions of the DGCL. The time of such filing and acceptance by the Delaware Secretary of State, or such later time as may be agreed in writing by Newco and the Company and specified in the Certificate of Merger, is referred to herein as the “ Effective Time .”

1.2 The Surviving Corporation of the Merger .

(a) Certificate of Incorporation and Bylaws of the Surviving Corporation .

(i) Certificate of Incorporation . Subject to the terms of Section  7.11 , at the Effective Time, the Certificate of Incorporation of the Company shall be amended and restated in its entirety to read identically to the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, and such amended and restated Certificate of Incorporation shall become the Certificate of Incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL and such Certificate of Incorporation; provided, however , that, at the Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended so that the name of the Surviving Corporation shall be “Imperva, Inc.”

(ii) Bylaws . Subject to the terms of Section  7.11 , at the Effective Time, the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall become the Bylaws of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL, the Certificate of Incorporation of the Surviving Corporation and such Bylaws.

(b) Directors and Officers of the Surviving Corporation .

(i) Directors . At the Effective Time, the initial directors of the Surviving Corporation shall be the directors of Merger Sub immediately prior to the Effective Time, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.

(ii) Officers . At the Effective Time, the initial officers of the Surviving Corporation shall be the officers of the Company immediately prior to the Effective Time, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until their respective successors are duly appointed.

1.3 General Effects of the Merger . The effects of the Merger shall be as provided in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

1.4 Effect of the Merger on Capital Stock of the Merging Corporations .

(a) Capital Stock of Merger Sub . Each share of common stock, par value $0.01 per share, of Merger Sub that is outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Each certificate evidencing ownership of such shares of common stock of Merger Sub shall thereafter evidence ownership of shares of common stock of the Surviving Corporation.

(b) Capital Stock of the Company .

(i) Generally . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Newco, Merger Sub, the Company, or the holders of any Company Securities, other than as otherwise set forth in this Section  1.4(b) , each Share that

 

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is outstanding immediately prior to the Effective Time shall be cancelled and extinguished and automatically converted into the right to receive the Merger Consideration upon the surrender of the Certificate representing such Share or the transfer of such Uncertificated Share in the manner provided in Section  2.3(c) (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in the manner provided in Section  2.3(d) ); provided, however , that the Merger Consideration shall be appropriately adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Shares), reorganization, recapitalization, reclassification or other like change with respect to Shares having a record date on or after the date hereof and prior to the Effective Time. From and after the Effective Time, all Shares shall no longer be outstanding and shall automatically be cancelled, retired and cease to exist, and each holder of Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration issuable in respect thereof pursuant to this Section  1.4(b)(i) . The Merger Consideration issued upon the surrender for exchange of Shares in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such Shares, and there shall be no further registration of transfers on the records of the Surviving Corporation of Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, a certificate representing Shares is presented to the Surviving Corporation for any reason, then such certificate shall be cancelled and exchanged for the Merger Consideration in accordance with this Section  1.4(b) .

(ii) Owned Shares . Notwithstanding anything to the contrary set forth herein, upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Newco, Merger Sub, the Company or the holders of any Company Securities, each Share that is owned by Newco, Merger Sub or the Company, or by any direct or indirect wholly owned Subsidiary of Newco, Merger Sub or the Company, in each case immediately prior to the Effective Time (“ Owned Shares ”), shall be cancelled and extinguished without any conversion thereof or consideration paid therefor.

(iii) Dissenting Shares . Notwithstanding anything to the contrary set forth herein, Shares issued and outstanding immediately prior to the Effective Time (other than Owned Shares) and held by a holder who has not voted in favor of adoption of this Agreement or consented thereto in writing and who has properly exercised appraisal rights of such Shares in accordance with Section 262 of the DGCL (such Shares being referred to collectively as the “ Dissenting Shares ” until such time as such holder fails to perfect, withdraws or otherwise loses such holder’s appraisal rights under Delaware Law with respect to such Shares) shall not be converted into a right to receive the Merger Consideration but instead shall be entitled to payment of the appraised value of such Shares in accordance with Section 262 of the DGCL; provided, however , that if, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses such holder’s right to appraisal pursuant to Section 262 of the DGCL, or if a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, such Shares shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration in accordance with Section  1.4(b)(i) , without interest thereon, upon surrender of such Certificate formerly representing such Share or transfer of such Uncertificated Share, as the case may be (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in the manner provided in Section  2.3(d) ). The Company shall provide Newco prompt written notice of any demands received by the Company for appraisal of Shares, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to Delaware Law that relates to such demand, and Newco shall have the opportunity and right to participate in and direct all negotiations and Legal Proceedings with respect to such demands. Except with the prior written consent of Newco, the Company shall not make any payment with respect to, or offer to settle or settle, any such demands.

(c) Stock Awards of the Company .

(i) Stock Options .

(A) To the extent not exercised prior to the Effective Time, each outstanding vested Company Option (including any Company Option that vests in connection with the Merger) shall, without any action on the part of Newco, Merger Sub, the Company or the holder thereof, be cancelled and converted into the

 

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right to receive, an amount in cash (without interest and subject to deduction for any required withholding Tax as contemplated in Section  2.3(f) of this Agreement) equal to the product of: (x) the excess, if any, of the Merger Consideration over the exercise price per share of each such vested Company Option, multiplied by (y) the number of Shares issuable upon the exercise in full of such vested Company Option (the “ Option Consideration ”); provided , however , that if the exercise price per share of any such vested Company Option is equal to or greater than the Merger Consideration, such vested Company Option shall be cancelled and terminated without any cash payment or other consideration being made in respect thereof. The Company agrees to take all action reasonably necessary to effectuate this cancellation of Company Options upon the Effective Time and to give effect to this Section  1.4(c)(i)(A) (including the satisfaction of the requirements of Rule 16b-3(e) under the Exchange Act). As soon as practicable (and in no event more than ten (10) Business Days) following the Closing, Newco shall cause the Surviving Corporation to pay to each holder of a Company Option the Option Consideration (if any), without interest and less any applicable withholding Taxes, required to be paid to the holder of such Company Option. The cancellation of a Company Option as provided in the first sentence of this Section  1.4(c)(i)(A) shall be deemed the termination, and satisfaction in full, of any and all rights the holder had or may have had in respect of such Company Option.

(B) Each unvested Company Option outstanding as of immediately prior to the Effective Time (and that will not vest in connection with the Merger) shall be cancelled and converted into the contingent right to receive at the Effective Time, in consideration of the cancellation of such unvested Company Option, an amount in cash (without interest and subject to deduction for any required withholding Tax as contemplated in Section  2.3(f) of the Merger Agreement), equal to the product of: (x) the excess, if any, of the Merger Consideration over the exercise price per share of each such unvested Company Option; and (y) the number of Shares issuable upon the exercise in full of such unvested Company Option (the “ Contingent Option Consideration ”); provided , however , that if the exercise price per share of any such unvested Company Option is equal to or greater than the Merger Consideration, such unvested Company Option shall be cancelled and terminated without any cash payment being made, or any contingent right to receive any cash payment being granted, in respect thereof; provided , further , that such per share Contingent Option Consideration shall not be paid at the Effective Time but shall instead be subject to the holder remaining continuously employed with the Surviving Corporation and satisfaction of the Original Vesting Conditions. As soon as practicable (and in no event more than the later of (x) ten (10) Business Days and (y) the next regularly scheduled payroll of the Surviving Corporation) following satisfaction of the Original Vesting Conditions, Newco shall cause the Surviving Corporation to pay the per share Contingent Option Consideration, without interest and less any applicable withholding Taxes, required to be paid to the holder of such Company Option. The cancellation of a vested Company Option as provided in the first sentence of this Section  1.4(c)(i)(B) shall be deemed the termination, and satisfaction in full, of any and all rights the holder had or may have had in respect of such Company Option.

(ii) RSUs .

(A) Each vested RSU (including each vested PRSU) outstanding as of immediately prior to the Effective Time (including any RSU that becomes a vested RSU in connection with the Merger) shall, without any action on the part of Newco, Merger Sub, the Company or the holder thereof, be cancelled and converted into the right to receive, an amount in cash (without interest and subject to deduction for any required withholding Tax as contemplated in Section  2.3(f) of this Agreement) equal to the product of: (x) the Merger Consideration and (y) the number of Shares subject to such vested RSU (the “ RSU Consideration ”). As soon as practicable (and in no event more than ten (10) Business Days) following the Closing, Newco shall cause the Surviving Corporation to pay to each holder of a vested RSU the RSU Consideration, without interest and less any applicable withholding Taxes, required to be paid to the holder of such vested RSU; provided , however , that any payment in respect of any vested RSU shall be made in compliance with Section&