Standstill Effective from the date of this Agreement and continuing until the later of the certification of votes for the Company 2017 Annual Meeting of Stockholders or the certification of votes for the FSFR (as defined below) 2017 Annual Meeting of Stockholders (the “Standstill Period”), except to the extent expressly permitted by the terms of this Agreement, none of the Sellers shall, and Sellers shall cause their respective controlled Affiliates not to, directly or indirectly, in any manner, alone or in concert with others:
(a) solicit, or knowingly encourage or in any way engage in any solicitation of, any proxies or consents or become a “participant” in a “solicitation,” directly or indirectly, as such terms are defined in Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of proxies or consents (including, without limitation, any solicitation of consents that seeks to call a special meeting of stockholders or by encouraging or participating in any “withhold” or similar campaign), in each case, with respect to securities of the Company or Fifth Street Senior Floating Rate Corp. (“FSFR”) or any securities convertible or exchangeable into or exercisable for any such securities (collectively, “securities of the Companies”);
(b) make any proposal for consideration by stockholders at any annual or special meeting of the stockholders of the Company or FSFR, whether pursuant to Rule 14a-8 under the Exchange Act, either such company’s constituent documents or otherwise;
(c) knowingly advise, encourage, support, instruct or influence any person with respect to any of the matters covered by this Section 3.1 or with respect to the voting or disposition of any securities of the Companies at any annual or special meeting of stockholders of the Company or FSFR, except in accordance with Section 3.4, or seek to do so;
(d) agree, attempt, seek or propose to deposit any securities of the Companies in any voting trust or similar arrangement, or subject any securities of the Companies to any arrangement or agreement with respect to the voting thereof, except in accordance with Section 3.4;
(e) knowingly seek or encourage any person to submit nominations in furtherance of a “contested solicitation” or take other action for the election or removal of directors with respect to the Company or FSFR, including any action that is intended to, or is reasonably likely to result in, the replacement of the investment advisor of the Company or FSFR, or a modification to the terms or conditions of either the Company’s or FSFR’s investment advisory agreement;
(f) form, join in or in any way participate in a partnership, limited partnership, syndicate or other group, including, without limitation, a group as defined under Section 13(d) of the Exchange Act (except such participation related to the reasonable unwinding of any such group currently existing as of the date of this Agreement) with any person who is not identified on Schedule I hereto (any such person, a “Third Party”), with respect to any securities of the Companies or take any other action that would interfere with the ability of Sellers to vote in accordance with this Agreement;
(g) make any disclosure, communication, announcement or statement regarding any intent, purpose, plan or proposal with respect to the FSC Board of Directors (the “Company Board”), the Company investment advisor or the terms and conditions of the Company’s investment advisory agreement, the FSFR Board of Directors (the “FSFR Board”), the FSFR investment advisor or the terms and conditions of FSFR’s investment advisory agreement, the Company, FSFR, or the management, policies or affairs of either the Company or FSFR, or with respect to this Agreement, that is inconsistent with the provisions of this Agreement;
(h) effect or seek to effect, offer or propose to effect, cause or participate in, or in any way assist or facilitate any other person to effect or seek, offer or propose to effect or participate in, any tender or exchange offer, merger, consolidation, acquisition, scheme, arrangement, business combination, recapitalization, reorganization, sale or acquisition of assets, liquidation, dissolution, extraordinary dividend, significant share repurchase or other extraordinary transaction involving the Company, FSFR or either of their investment advisors, or any of their subsidiaries or joint ventures or any of their respective securities (each, an “Extraordinary Transaction”), or make any statement or disclosure regarding any intent, purpose, plan or proposal with respect to any Extraordinary Transaction or this Agreement that is inconsistent with the provisions of this Agreement, including any intent, purpose, plan or proposal that is conditioned on, or would require waiver, amendment, nullification or invalidation of, any provision of this Agreement or take any action that could require the Company or FSFR to make any public disclosure relating to any such intent, purpose, plan, proposal or condition;
(i) (i) call or seek to call or request the calling of any meeting of stockholders at either the Company or FSFR, including by written consent, (ii) seek, alone or in concert with others, representation on, or nominate any candidate to, the Company Board or the FSFR Board, (iii) seek the removal of any member of the Company Board or the FSFR Board, (iv) seek, alone or in concert with others, or support any Third Party in seeking, to replace the investment advisor of the Company or the investment advisor of FSFR, (v) solicit consents from the Company or FSFR stockholders or otherwise act or seek to act by written consent, (vi) conduct a referendum of the Company or FSFR stockholders or (vii) make a request for any stockholders list or any other books and records in Sellers’ capacity as a Company or FSFR stockholder;
(j) purchase or cause to be purchased or otherwise acquire or agree to acquire beneficial ownership of any securities issued by the Company or FSFR, or any securities convertible into or exchangeable for securities issued by the Company or FSFR;
(k) sell, offer to sell, give, pledge, grant a security interest in, encumber, assign, grant any option for the sale of or otherwise transfer or dispose of (each, a “Transfer”) any securities issued by the Company and/or any securities convertible into or exchangeable for securities issued by the Company, unless any Buyer fails to timely perform each of its obligations under Section 1.2(b), Section 1.3(c) and/or Section 1.3(d)(i) of this Agreement;
(l) institute, solicit or join, as a party, or knowingly assist any other person in instituting, soliciting or joining, any litigation, arbitration or other proceeding against the Company or FSFR or any of their current or former directors or officers (including derivative actions), other than (i) litigation to enforce the provisions of this Agreement and (ii) counterclaims with respect to any proceeding initiated by, or on behalf of, a party to this Agreement or FSFR against Sellers;
(m) enter into or engage in any short sale or purchase, sale or grant of any option, warrant, derivative, convertible security, stock appreciation right or other similar right (including, without limitation, any put or call option or swap transaction) with respect to or having any measurement relating to any securities of the Companies;
(n) enter into any negotiations, arrangements, understanding or agreements (whether written or oral) with, or advise, finance, assist, seek to knowingly persuade or encourage, any Third Party to take any action or make any statement in connection with any of the foregoing, or make any investment in or enter into any arrangement with any other person that engages, or offers or proposes to engage, in any of the foregoing, or otherwise take or cause any action or make any statement inconsistent with any of the foregoing; or
(o) take any action challenging the validity or enforceability of this Agreement, or make or in any way advance any request or proposal that the Company, FSFR, the Company Board or the FSFR Board amend, modify or waive any provision of this Agreement.
Standstill Agreement During the period beginning at the Effective Time and ending on the later of (x) the day the Stockholder Designee is no longer a director and (y) two weeks prior to the deadline for the submission of notices of stockholder nominations or proposals under the Company Bylaws for the 2017 Annual Meeting (the “Standstill Period”), neither of the Stockholders shall, and each of the Stockholders shall cause its Affiliates and Associates under its control or direction, in each case either directly or indirectly, not to:
(a) solicit (as such term is used in the proxy rules of the SEC) proxies or consents, become a “participant” in a “solicitation,” as such terms are defined in Instruction 3 of Item 4 of Schedule 14A and Rule 14a-1 of Regulation 14A, respectively, under the Exchange Act or conduct any other type of referendum (binding or non-binding) in each case with respect to, or from the holders of, any shares of Company Common Stock or assist any third party in any solicitation of any proxy, consent or other authority (as such terms are defined under the Exchange Act) to vote any shares of Company Common Stock in each case in opposition to the recommendation or proposal of the Board;
(b) seek to call, or to request the calling of, a special meeting of the Company’s stockholders, or make a request for a list of the Company’s stockholders or for any books and records of the Company;
(c) except as specifically permitted in Section 3(c) of this Agreement, nominate persons for election to, or seek to remove any person from, the Board or propose any other business at any meeting of the Company’s stockholders or initiate, encourage or participate in any “withhold” or similar campaign with respect to any meeting of the Company’s stockholders;
(d) commence, encourage, support or join as a party any litigation, arbitration or other proceeding (including a derivative action) against or involving the Company or any of its current or former directors or officers (including derivative actions) other than to enforce the provisions of this Agreement;
(e) seek or propose any merger, acquisition, recapitalization, restructuring, disposition or other extraordinary transaction involving the Company; or
(f) take or encourage any action, alone or in concert with others, to (i) form, join or in any way participate in a “group” (as defined under the Exchange Act) (other than a group comprised solely of the Stockholders and their respective Affiliates and Associates) with respect to the Company, (ii) otherwise act, alone or in concert with others, to seek representation on or to control the management, the Board or the policies, strategy, operations or governance of the Company, to control the composition of management or the Board (except as provided in Section 3(c) of this Agreement), (iii) take any action that would or would reasonably be expected to force the Company or either of the Stockholders to make a public announcement regarding any of the types of matters set forth in the foregoing provisions of this Section 4 or (iv) take any action challenging the validity or enforceability of any of the provisions of this Section 4. Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Stockholder Designee from exercising his or her rights and fiduciary duties as a director of the Company. The foregoing provisions of this Section 4 shall not be deemed to prohibit either of the Stockholders from (i) engaging in ordinary course stockholder communications (which may include a Stockholder presenting its opinions) privately with the Company or its Board members or employees or (ii) privately requesting a waiver of any of the foregoing provisions of this Section 4.
Confidentiality; Exceptions Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, for the term of this Agreement and for three (3) years thereafter, the receiving Party shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose other than proper performance hereunder any information furnished to it by the other Party pursuant to this Agreement, except to the extent that it can be established by the receiving Party by competent proof that such information:
(a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or
(e) was independently developed by or for the receiving Party by persons not having access to such information, as determined by the written records of such party.
Standstill Provisions During the Standstill Period, unless expressly authorized in writing to do so by a majority of the members of the Board of Directors, acting through a committee of directors that qualify as “independent directors” as defined by applicable stock exchange listing rules [(which term, for this purpose, will exclude any directors nominated by the Block Sale Transferee)]1, the Block Sale Transferee shall not, and shall cause its Affiliates not to, directly or indirectly, acting alone or as part of a group:
(a) make, or in any way participate in any solicitation of any proxy [(but without regard to the exclusion set forth in Rule 14a-1(l)(2)(iv) under the Exchange Act from the definition of “solicitation”)]2 to vote any Company Common Shares (or other equity securities of the Company) with respect to any matter (including, without limitation, any contested solicitation for the election of directors with respect to the Company), other than solicitations or acting as a participant in support of all of the Company’s nominees [including, without limitation, the nominees of the Block Sale Transferee pursuant to Article 5]3;
(b) form, join in or in any way participate in a group (for the avoidance of doubt, the Block Sale Transferee shall not be deemed to have formed, joined in or in any way participated in a group with the Company as a result of the Block Sale Transferee’s execution of this Agreement) with respect to the Company Common Shares (or other equity securities of the Company) or deposit any Company Common Shares (or other equity securities of the Company) in a voting trust or similar arrangement or subject any Company Common Shares (or other equity securities of the Company) to any voting agreement or similar arrangement, or grant any proxy with respect to any Company Common Shares (or other equity securities of the Company) (other than to a designated representative of the 1 Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights. 2 Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights. 3 Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights. Company pursuant to a proxy statement of the Company), other than as contemplated by the Governance Agreement or the Stockholders Agreement or the transactions contemplated thereby;
(c) seek to call, or to request the calling of, or call a special meeting of the stockholders of the Company, or seek to make, or make, a stockholder proposal (whether pursuant to Rule 14a-8 under the Exchange Act or otherwise) at any meeting of the stockholders of the Company, or make a request for a list of the Company’s stockholders, or[, other than pursuant to the Block Sale Transferee’s nomination rights in accordance with Article 5 of this Agreement,]4 seek election of a representative to the Board of Directors, seek to place a representative on the Board of Directors or seek the removal of any director from the Board of Directors, or otherwise acting alone, or by participating in a group, seek to control or influence the governance or policies of the Company;
(d) effect or seek to effect (including, without limitation, by entering into any discussions, negotiations, agreements or understandings whether or not legally enforceable with any third Person), offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way assist or facilitate any other Person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in any acquisition of any Company Common Shares (or other equity securities of the Company) (or Beneficial Ownership thereof) in excess of the Ownership Limitation, except in accordance with Section 2.1; provided, that, for the avoidance of doubt, the Block Sale Transferee is permitted to Transfer to an unaffiliated third party any Company Common Shares (or other equity securities of the Company) Beneficially Owned by the Block Sale Transferee, subject to the provisions of Article 8 hereof, if applicable;
(e) effect or seek to effect (including, without limitation, by entering into any discussions, negotiations, agreements or understandings whether or not legally enforceable with any third Person), offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way assist or facilitate any other Person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in (i) any tender offer or exchange offer, merger, acquisition, share exchange or other business combination involving the Company or any of its Subsidiaries, (ii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its Subsidiaries or any material portion of its or their businesses, or (iii) any acquisition of any material assets or businesses of the Company or any of its Subsidiaries;
(f) publicly disclose, or cause or, in a material manner, facilitate the public disclosure (including without limitation through the filing by it of any document or report with the SEC or any other governmental agency or any disclosure to any 4 Note to form: bracketed language to be removed if Block Sale Transferee does not accept the board nomination rights. journalist, member of the media or securities analyst) of any intent, purpose, plan or proposal to obtain any waiver, or consent under, or any amendment of, any of the provisions of Section 2.1, this Section 3.1, or Article 4 (except as described in Section 4.1) or bring any action to (i) contest the validity of Section 2.1, this Section 3.1 or Article 4, or (ii) seek a release from the restrictions contained in Section 2.1, this Section 3.1 or Article 4;
(g) unless required by law, make or issue or cause to be made or issued any public disclosure, announcement or statement (including without limitation the filing of any document or report with the SEC or any other governmental agency or any disclosure to any journalist, member of the media or securities analyst) (i) in support of any solicitation described in paragraph (a) above (other than solicitations by the Company), (ii) in support of any matter described in paragraph (c) above, (iii) concerning any potential matter described in paragraph (d) above; (iv) concerning any potential matter described in paragraph (e) above; or (v) negatively commenting upon the Company’s corporate strategy, business, corporate activities, board of directors or management (for the avoidance of doubt, making any factual statement about the Company’s corporate strategy, business, corporate activities, board of directors or management shall not be prohibited by this Section 3.1(g)(v)); or
(h) enter into any discussions, negotiations, agreements or understandings with any Person with respect to any of the foregoing or advise, assist or seek to persuade others to take any action with respect to any of the foregoing. Notwithstanding the foregoing, (a) [the restrictions in Sections 3.1(d), 3.1(e), 3.1(f), 3.1(g)(iii), 3.1(g)(iv), 3.1(g)(v) and 3.1(h) (to the extent it relates to any of the foregoing) shall not apply at any time that (i) the Company fails to comply in all material respects with its obligations under Article 5 hereof, which failure continues unremedied for a period of 10 business days following receipt by the Company of a written notice from the Block Sale Transferee of such failure or (ii) the Block Sale Transferee has relinquished its nomination rights pursuant to Article 5 and all Block Sale Transferee nominated directors have resigned; or (b)]5 in the event that (x) the Board of Directors determines that the Company should engage in any transaction described in Section 3.1(e)(i) or 3.1(e)(ii), the Block Sale Transferee shall be permitted to participate in such Board of Directors’ approved transaction as a shareholder on the same terms and conditions as any other shareholder of the Company, (y) the Board of Directors determines that the Company should solicit from one or more Persons or enter into discussions with one or more Persons regarding, or invites any other Person or group to make a proposal (without similarly inviting the Block Sale Transferee to make a similar proposal) with respect to an acquisition of (i) all or substantially all of the equity securities or assets of the Company or any of its Subsidiaries (by merger, tender offer or otherwise) or (ii) any material assets or businesses of the Company or any of its Subsidiaries, the Block Sale Transferee shall have the right to make a non-public competing proposal to the Board of Directors in compliance with any written procedures generally applicable to Persons making proposals provided by the Company 5 Note to form: enumerated restrictions to be removed if the Block Sale Transferee does not accept the board nomination rights. or the Board of Directors or (z) any third party that is not an Affiliate of the Block Sale Transferee makes a bona fide offer or proposal, with respect to a matter described in Section 3.1(d) or 3.1(e) above (a “Third Party Proposal”), the Block Sale Transferee (A) shall have the right to make a non-public competing proposal to the Board of Directors and may publicly announce that it has made a competing proposal to the Board of Directors so long as such public announcement does not constitute an offer or a solicitation to any recipient thereof and (B) may tender, exchange or otherwise sell or transfer its Company Common Shares (or other equity securities of the Company) to such third party in accordance with the Third Party Proposal; provided, however, that in the case of clauses (y) and (z), the Block Sale Transferee shall be prohibited from participating with, joining in a group with or providing financing to any such third party). [For the avoidance of doubt, any discussions involving the directors nominated by the Block Sale Transferee pursuant to Article 5 hereof (i) at a meeting of the Board of Directors or (ii) with management of the Company, other members of the Board of Directors or any of the Company’s advisors or representatives, in the case of clauses (i) and (ii), while acting in such directors’ capacity as members of the Board of Directors, shall not be deemed to violate any of the provisions of this Article 3.]6
Existing Lock-Up Agreement The Company will enforce all existing agreements between the Company and any of its security holders that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Securities in connection with the Offering. In addition, the Company will direct the Company’s transfer agent to place stop transfer restrictions upon any such Securities of the Company that are bound by such existing “lock-up” agreements for the duration of the periods contemplated in such agreements.