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Item 1.01.
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Entry into a Material Definitive Agreement.
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Merger Agreement
On December 23, 2019, AquaVenture
Holdings Limited, a business company incorporated under the laws of the British Virgin Islands (“AquaVenture”),
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Culligan International Company, a
Delaware corporation (“Parent”), and Amberjack Merger Sub Limited, a business company incorporated under the
laws of the British Virgin Islands and wholly-owned subsidiary of Parent (“Merger Sub” and, together with Parent,
the “Acquiring Parties”) pursuant to which, subject to the satisfaction or waiver of the conditions therein,
Merger Sub will merge with and into AquaVenture (the “Merger”), with AquaVenture surviving as a wholly-owned
subsidiary of Parent. The Merger Agreement was unanimously approved by the members of the board of directors of AquaVenture (the
“Board”) and the Board resolved to recommend approval of the Merger Agreement to AquaVenture’s shareholders.
Subject to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”), each ordinary share, of no par value per share,
of AquaVenture issued and outstanding immediately prior to the Effective Time (other than
shares held by the Company in treasury, or owned by Parent or Merger Sub or held by stockholders who are entitled to dissent and
who properly demand dissenter’s rights under BVI law) will be converted into, and thereafter only represent the right
to receive $27.10 in cash, without interest (the “Merger Consideration”).
At the Effective Time, each AquaVenture
stock option, whether vested or unvested, that is outstanding immediately prior to the Effective Time will be cancelled and automatically
exchanged for the right to receive an amount in cash (less any applicable tax withholdings) equal to the product of the excess,
if any, of the Merger Consideration over the applicable per share exercise price. At the Effective Time, each outstanding
AquaVenture restricted stock unit, whether vested or unvested, will vest in full and will be cancelled in exchange for the right
to receive an amount in cash (less any applicable tax withholdings) equal to the Merger Consideration. At the Effective Time,
each AquaVenture phantom unit, whether vested or unvested, that is outstanding immediately prior to the Effective Time will vest
in full and will be cancelled in exchange for the right to receive an amount in cash (less any applicable tax withholdings) equal
to the Merger Consideration.
The Merger Agreement contains customary
representations, warranties and covenants of AquaVenture and the Acquiring Parties, including, among others, covenants by AquaVenture
to conduct its business in the ordinary course of business during the period between execution of the Merger Agreement and consummation
of the Merger (the “Closing”) and prohibiting AquaVenture from engaging in certain kinds of activities during
such period without the consent of the Parent. The Merger Agreement also contains customary termination provisions for both
AquaVenture and Parent, as discussed in more detail below.
The Merger is conditioned upon, among other
things, the approval of the Merger Agreement by the affirmative vote of holders of at least two-thirds of the shareholders of AquaVenture
(the “Shareholders”) present at a meeting of the Shareholders held for such purpose, the expiration of the applicable
waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing
conditions. The Closing is not subject to a financing condition.
The Merger Agreement contains a customary
“no-shop” provision whereby, subject to certain exceptions, AquaVenture will be prohibited from (i) entering into
discussions concerning, or providing confidential information in connection with, any alternative transaction and (ii) withholding,
withdrawing, or modifying in any manner adverse to Parent the recommendation of the Board that the Shareholders adopt the Merger
Agreement. The “no shop” provision is subject to a customary “fiduciary out” provision.
The Merger Agreement contains certain termination
rights for both AquaVenture and Parent, and provides that, upon termination of the Merger Agreement under specified circumstances,
the Parent may be required to pay a break-up fee of $54,611,815 and any Financing Cooperation Expenses (as defined in the Merger
Agreement) to which AquaVenture is entitled. In addition, under specified circumstances resulting in termination of the Merger
Agreement, including, subject to compliance with specified process and notice requirements, if AquaVenture exercise its “fiduciary
out” to terminate the Merger Agreement in order to enter into an agreement providing for a Superior Proposal (as such term
is defined in the Merger Agreement), AquaVenture may be required to pay Parent a break-up fee in the amount of $34,132,500.
Voting Agreements
In connection with the execution and delivery of the Merger
Agreement, certain shareholders of AquaVenture have entered into voting agreements with Parent (the “Voting Agreements”),
pursuant to which such individuals have agreed, among other things, to vote their respective Shares (as defined in the Merger Agreement)
for the approval and adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated by
the Merger Agreement. The shareholders signing Voting Agreements currently own an aggregate of 35.50% of the outstanding Shares.
The foregoing description of Voting Agreements does not purport
to be complete and is subject to, and qualified in its entirety, by the Form of Voting Agreement, which accompanies this Current
Report on Form 8-K as Exhibit 99.1 and which is incorporated herein by reference.
Financing Commitments
Parent has obtained equity and debt financing
commitments for the transactions contemplated by the Merger Agreement, the aggregate proceeds of which will be sufficient for Parent
to pay the aggregate Merger Consideration and all related fees and expenses of the Acquiring Parties and to repay certain indebtedness
of AquaVenture. Investors affiliated with Parent have committed, pursuant to an equity commitment letter dated as of December 23,
2019 (the “Equity Commitment Letter”), to capitalize Parent, at or prior to the Effective Time, with an aggregate
equity contribution in an amount of $656,847,678.29, on the terms and subject to the conditions set forth in the Equity Commitment
Letter.
Morgan Stanley Senior Funding, Inc., Ares
Capital Management, LLC, PSP Investment Credits USA LLC, Royal Bank of Canada, RBC Capital Markets, Bank of America, N.A. Credit
Suisse AG and Credit Suisse Loan Funding LLC (collectively, the “Lenders”) have committed to provide
$500 million in debt financing (the “Debt Financing”) for the Merger, which may be comprised of a senior secured
cash flow revolver, a senior secured term loan facility and/or senior unsecured notes, on the terms and subject to the conditions
set forth in a debt commitment letter, dated as December 23, 2019 and delivered to AquaVenture in advance of execution of the Merger
Agreement (the “Debt Commitment Letter”). The obligations of the Lenders to provide the Debt Financing under
the Debt Commitment Letter are subject to a number of conditions, including the receipt of executed loan documentation, accuracy
of representations and warranties, consummation of the transactions contemplated in the Merger Agreement and contribution of the
equity contemplated by the Equity Commitment Letter.
The foregoing description of the Merger
Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety,
by the full text of the Merger Agreement, which accompanies this Current Report on Form 8-K as Exhibit 2.1 and which is incorporated
herein by reference.
The Merger Agreement is attached to provide
investors with information regarding its terms and is not intended to provide any other factual information about AquaVenture,
Parent or Merger Sub. The Merger Agreement also contains representations and warranties of each of AquaVenture, Parent and Merger
Sub. The assertions embodied in those representations and warranties were made for purposes of the Merger Agreement and are
subject to qualifications and limitations agreed to by the respective parties in connection with negotiating the terms of the Merger
Agreement, including information contained in certain disclosures between the parties. Accordingly, investors and security
holders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances,
since they were only made as of a specific date and are modified in important part by the disclosures between the parties. In
addition, certain representations and warranties may be subject to a contractual standard of materiality different from what might
be viewed as material to shareholders, or may have been used for purposes of allocating risk between the respective parties rather
than establishing matters of fact. Moreover, information concerning the subject matter of such representations and warranties
may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in AquaVenture’s
or the Acquiring Parties’ public disclosures.