424B3 1 nt10024621x5_424b3.htm 424B3

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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-256401

To the shareholders of Herman Miller, Inc. and the stockholders of Knoll, Inc.
TRANSACTION PROPOSED — YOUR VOTE IS VERY IMPORTANT
Dear Shareholders and Stockholders:
On April 19, 2021, Herman Miller, Inc. (which we refer to as “Herman Miller”), Heat Merger Sub, Inc., a wholly owned subsidiary of Herman Miller (which we refer to as “Merger Sub”), and Knoll, Inc. (which we refer to as “Knoll”) entered into an Agreement and Plan of Merger (which we refer to as the “merger agreement”), pursuant to which, subject to approval by Herman Miller shareholders and Knoll stockholders and the satisfaction or (to the extent permitted by law) waiver of other specified closing conditions, at the completion of the merger, Merger Sub will merge with and into Knoll, with Knoll surviving the merger and becoming a subsidiary of Herman Miller. As a result of the merger, Knoll will no longer be a publicly-held company. Following the merger, Knoll common stock will be delisted from the New York Stock Exchange (which we refer to as the “NYSE”) and deregistered under the Securities Exchange Act of 1934. The common stock of Herman Miller is traded on the NASDAQ Global Select Market (which we refer to as the “NASDAQ”) under the symbol “MLHR.” The common stock of Knoll is traded on the NYSE under the symbol “KNL.”
If the merger is completed, each share of Knoll common stock (other than any excluded shares, converted shares, dissenting shares and shares subject to Knoll option awards, Knoll restricted stock awards and Knoll PSU awards (each as defined in the accompanying joint proxy statement/prospectus)) will be converted into the right to receive 0.32 fully paid and nonassessable shares of Herman Miller common stock (with, if applicable, cash in lieu of fractional shares) and $11.00 in cash, without interest (which we refer to, collectively, as the “merger consideration”), less any applicable withholding taxes. For more details on the merger consideration, see “The Merger Agreement—Merger Consideration.”
The market value of Herman Miller common stock at the time of completion of the merger could be greater than, less than or the same as the market value of Herman Miller common stock on the date of the accompanying joint proxy statement/prospectus and/or the date of the Herman Miller and Knoll special meetings. We cannot predict the amount of any change in value, as the market price of shares of Herman Miller common stock may fluctuate based on the perceived values of the common stock of Herman Miller in anticipation of the merger, and it may not be possible to estimate the market value of Herman Miller common stock.
Based on the current number of shares of Knoll common stock outstanding, Herman Miller expects to issue approximately 16.3 million shares of Herman Miller common stock to holders of Knoll common stock and pay approximately $560 million in cash to holders of Knoll common stock in the aggregate in the merger. Based on the current number of shares of Knoll common stock outstanding, and the current number of shares of Herman Miller common stock outstanding, we estimate that, immediately following completion of the merger, former holders of Knoll common stock will own approximately 22% of the common stock of the combined company, excluding equity-based awards that converted into Herman Miller awards pursuant to the terms of the merger agreement, and pre-merger holders of Herman Miller common stock will own approximately 78% of the common stock of the combined company.
In connection with the consummation of the merger and pursuant to the Stock Purchase Agreement, dated April 19, 2021, between Herman Miller and Furniture Investments Acquisitions S.C.S., the holder of all of the outstanding shares of Knoll preferred stock (which we refer to as the “preferred stock purchase agreement”), Herman Miller will acquire all of the outstanding shares of Knoll preferred stock for approximately $253 million in cash in the aggregate. As a result of the consummation of the transactions contemplated by the merger agreement and by the preferred stock purchase agreement, Knoll will become a wholly owned subsidiary of Herman Miller.
Each of Herman Miller and Knoll is holding a special meeting of its shareholders and stockholders, respectively, to vote on the proposals necessary to complete the merger. In light of the ongoing coronavirus (COVID-19) pandemic, each of the Herman Miller special meeting and the Knoll special meeting will be held in a virtual meeting format only, via live webcast, without a physical meeting location. Please be sure to follow instructions found on your proxy card and/or voting instruction form and subsequent instructions that will be delivered to you via email.
Information about each meeting, the merger and the other business to be considered by shareholders and stockholders at each special meeting is contained in the accompanying joint proxy statement/prospectus. Any shareholder or stockholder entitled to attend and vote at the applicable special meeting is entitled to appoint a proxy to attend and vote on such shareholder’s or stockholder’s behalf. Such proxy need not be a holder of Herman Miller common stock or Knoll common stock. We urge you to read the accompanying joint proxy statement/prospectus and the annexes and documents incorporated by reference carefully. You should also carefully consider the risks that are described in the “Risk Factors” section beginning on page 33.
Your vote is very important regardless of the number of shares of Herman Miller common stock or Knoll capital stock that you own. The merger cannot be completed without (1) the adoption of the merger agreement by the affirmative vote of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis) and (2) the approval of the issuance of Herman Miller common stock to Knoll stockholders in connection with the merger by the affirmative vote of a majority of shares of Herman Miller common stock entitled to vote thereon and present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting.
Whether or not you plan to attend the Herman Miller special meeting or the Knoll special meeting, please submit your proxy as soon as possible to make sure that your shares are represented at the applicable meeting.



Andrea R. Owen
President and
Chief Executive Officer
Herman Miller, Inc.
Andrew B. Cogan
Chairman and
Chief Executive Officer
Knoll, Inc.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the other transactions described in the accompanying joint proxy statement/prospectus or the securities to be issued in connection with the merger or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
The accompanying joint proxy statement/prospectus is dated June 11, 2021, and is first being mailed to shareholders of Herman Miller and stockholders of Knoll on or about June 11, 2021.

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HERMAN MILLER, INC.
855 East Main Avenue
Zeeland, Michigan 49464
NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD VIRTUALLY VIA THE INTERNET ON JULY 13, 2021
To the Shareholders of Herman Miller, Inc.:
We are pleased to invite you to attend a special meeting of the shareholders of Herman Miller, Inc. (which we refer to as the “Herman Miller special meeting”) held virtually via the Internet on July 13, 2021 at 10:00 a.m., Eastern Time, to consider and vote on the following proposals:
1.
Approval of the Herman Miller Share Issuance. To approve the issuance of Herman Miller common stock, par value $0.20 per share, to Knoll stockholders in connection with the merger contemplated by the Agreement and Plan of Merger (which we refer to as the “merger agreement”), dated as of April 19, 2021, by and among Herman Miller, Inc., Heat Merger Sub, Inc. and Knoll, Inc. (which we refer to as the “Herman Miller share issuance proposal”); and
2.
Adjournment of the Herman Miller Special Meeting. To adjourn the Herman Miller special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Herman Miller special meeting to approve the Herman Miller share issuance proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to Herman Miller shareholders (which we refer to as the “Herman Miller adjournment proposal”).
Herman Miller will transact no other business at the Herman Miller special meeting, except such business as may properly be brought before the Herman Miller special meeting or any adjournment or postponement thereof. Please refer to the joint proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the Herman Miller special meeting.
The Herman Miller board of directors (which we refer to as the “Herman Miller Board”), has fixed the close of business on June 7, 2021 as the record date for the Herman Miller special meeting (which we refer to as the “Herman Miller record date”). Only Herman Miller shareholders of record at that time are entitled to receive notice of, and to vote at, the Herman Miller special meeting or any adjournment or postponement thereof. The list of Herman Miller shareholders entitled to vote at the Herman Miller special meeting will be made available for inspection during the Herman Miller special meeting via the Herman Miller special meeting website at www.virtualshareholdermeeting.com/MLHR2021SM. Herman Miller is commencing its solicitation of proxies on or about June 11, 2021. Herman Miller will continue to solicit proxies until the date of the Herman Miller special meeting.
Completion of the merger is conditioned upon, among other things, approval of the Herman Miller share issuance proposal by the Herman Miller shareholders, which requires the affirmative vote of a majority of shares of Herman Miller common stock entitled to vote thereon and present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting.
Immediately prior to and subject to the occurrence of the effective time of the merger, Herman Miller will acquire all outstanding shares of Knoll preferred stock from Investindustrial for consideration of approximately $253 million in cash pursuant to the preferred stock purchase agreement.
The Herman Miller Board unanimously approved and declared advisable the transactions contemplated by the merger agreement and the preferred stock purchase agreement, including the merger, the preferred stock purchase and the Herman Miller share issuance, and determined that the merger agreement, the preferred stock purchase agreement and the transactions contemplated thereby, including the merger, the preferred stock purchase and the Herman Miller share issuance, are advisable and fair to and in the best interests of Herman Miller and its shareholders, and unanimously recommends that Herman Miller shareholders vote:
“FOR” the Herman Miller share issuance proposal; and
“FOR” the Herman Miller adjournment proposal.

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The Herman Miller shareholder proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.
PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE HERMAN MILLER SPECIAL MEETING VIA THE HERMAN MILLER SPECIAL MEETING WEBSITE. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
Submitting a proxy will not prevent you from voting at the Herman Miller special meeting, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of Herman Miller common stock who is present at the Herman Miller special meeting may vote via the Herman Miller special meeting website, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the Herman Miller special meeting in the manner described in the accompanying joint proxy statement/prospectus. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished by the bank, broker or other nominee.
The Herman Miller special meeting will be held virtually on July 13, 2021, beginning promptly at 10:00 a.m., Eastern Time. You will be able to listen, vote, and submit questions from any remote location that has Internet connectivity. There will be no physical location. You may participate online by logging in at www.virtualshareholdermeeting.com/MLHR2021SM and entering the 16-digit control number included on your proxy card, or on the instructions that accompanied your proxy materials. For additional information regarding the Herman Miller special meeting, please see the section entitled “The Herman Miller Special Meeting” beginning on page 144 of the joint proxy statement/prospectus accompanying this notice.
The enclosed joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the Herman Miller special meeting. We urge you to carefully read this joint proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. If you have any questions concerning either of the proposals in this notice, the merger or the joint proxy statement/prospectus, would like additional copies or need help voting your shares of Herman Miller common stock, please contact Herman Miller’s proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, New York 10018
(800) 322-2885
Banks and Brokers: (212) 929-5500
Email: proxy@mackenziepartners.com
Your vote is very important regardless of the number of shares of Herman Miller common stock that you own. The votes cast in favor of the Herman Miller share issuance proposal must exceed the aggregate of votes cast against the Herman Miller share issuance proposal and abstentions. We encourage each shareholder to vote at your earliest convenience, by visiting www.proxyvote.com online, by calling (within the U.S. or Canada) toll-free at 1 (800) 690-6903; or by signing and returning your proxy card. You may also vote at the meeting online by visiting www.virtualshareholdermeeting.com/MLHR2021SM and following the instructions. Regardless of whether you expect to attend the virtual meeting online, please vote your shares in one of the ways listed above.
 
BY ORDER OF THE HERMAN MILLER, INC. BOARD OF DIRECTORS,
 
 
 
Jacqueline H. Rice
 
Jacqueline H. Rice
General Counsel and Corporate Secretary
Herman Miller, Inc.

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KNOLL, INC.
1235 Water Street
East Greenville, Pennsylvania 18041
NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD VIRTUALLY VIA THE INTERNET ON JULY 13, 2021
To the Stockholders of Knoll, Inc.:
We are pleased to invite you to attend a special meeting of stockholders of Knoll, Inc. (which we refer to as “Knoll”) held virtually via the Internet on July 13, 2021, at 8:30 a.m., Eastern Time, to consider and vote on the following proposals:
1.
Adoption of the Merger Agreement. To adopt the Agreement and Plan of Merger, dated as of April 19, 2021 (which, as it may be amended from time to time, we refer to as the “merger agreement”), among Herman Miller, Inc., Heat Merger Sub, Inc. (which we refer to as “Merger Sub”) and Knoll (which we refer to as the “Knoll merger proposal”);
2.
Knoll Merger-Related Compensation. To approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Knoll’s named executive officers that is based on or otherwise relates to the merger contemplated by the merger agreement (which we refer to as the “Knoll non-binding compensation advisory proposal”); and
3.
Adjournment of the Knoll Special Meeting. To adjourn the Knoll special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Knoll special meeting to approve the Knoll merger proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to Knoll stockholders (which we refer to as the “Knoll adjournment proposal”).
In light of the ongoing COVID-19 pandemic, the Knoll special meeting will be held in a virtual meeting format only, via live webcast, and there will not be a physical meeting location. You will be able to attend the Knoll special meeting online and to vote your shares electronically at the meeting by visiting www.meetingcenter.io/228735283 (which we refer to as the “Knoll special meeting website”). The password for the meeting is KNL2021.
Knoll stockholder approval of the Knoll merger proposal is required to complete the merger between Merger Sub and Knoll, as contemplated by the merger agreement. Knoll stockholders will also be asked to approve the Knoll non-binding compensation advisory proposal and the Knoll adjournment proposal. Knoll will transact no other business at the Knoll special meeting. The record date for the Knoll special meeting has been set as June 7, 2021. Only Knoll stockholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the Knoll special meeting via the Knoll special meeting website or any adjournments and postponements of the Knoll special meeting. The list of Knoll stockholders entitled to vote at the Knoll special meeting will be made available for inspection during the Knoll special meeting via the Knoll special meeting website at www.meetingcenter.io/228735283. For additional information regarding the Knoll special meeting, see the section entitled “The Knoll Special Meeting” beginning on page 150 of the joint proxy statement/prospectus accompanying this notice.
The Knoll Board of Directors (other than Mr. Ardagna who recused himself from determinations relating to the transactions contemplated by the merger agreement due to his affiliation with Investindustrial Advisors Limited and its affiliates) unanimously recommends that you vote “FOR” the Knoll merger proposal, “FOR” the Knoll non-binding compensation advisory proposal and “FOR” the Knoll adjournment proposal.

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The Knoll stockholder proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/prospectus. If you have any questions concerning the proposals in this notice, the merger or the joint proxy statement/prospectus, would like additional copies or need help voting your shares of Knoll capital stock, please contact Knoll’s proxy solicitor:
Kingsdale Advisors
745 Fifth Avenue, 5th Floor, New York, NY 10151
North American Toll Free Phone:
1 (866) 581-1514
Email: contactus@kingsdaleadvisors.com
Call Collect Outside North America: (416) 867-2272
PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE KNOLL SPECIAL MEETING VIA THE KNOLL SPECIAL MEETING WEBSITE. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
Your vote is very important regardless of the number of shares of Knoll capital stock that you own. Approval of the Knoll merger proposal by the Knoll stockholders is a condition to the merger and requires the affirmative vote of the holders of a majority of the outstanding shares of Knoll common stock and Knoll preferred stock, on an as-converted basis, voting as a single class. Knoll stockholders are requested to complete, date, sign and return the enclosed proxy in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes by phone or the Internet. Simply follow the instructions provided on the enclosed proxy card. Abstentions, failure to submit a proxy or vote via the Knoll special meeting website and broker non-votes will have the same effect as a vote “AGAINST” the Knoll merger proposal.
 
BY ORDER OF THE KNOLL, INC.
BOARD OF DIRECTORS,
 
 
Michael A. Pollner
Senior Vice President, Chief Administrative Officer,
General Counsel & Secretary
Knoll, Inc.

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REFERENCES TO ADDITIONAL INFORMATION
The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about Herman Miller and Knoll from other documents that are not included in or delivered with the accompanying joint proxy statement/prospectus. For a listing of the documents incorporated by reference into the accompanying joint proxy statement/prospectus, see “Where You Can Find More Information.”
You can obtain any of the documents incorporated by reference into the accompanying joint proxy statement/prospectus by requesting them in writing or by telephone as follows:
For Herman Miller Shareholders:
Herman Miller, Inc.
855 East Main Avenue
Zeeland, Michigan 49464
Attention: Investor Relations
(616) 654-3000
investor@hermanmiller.com
For Knoll Stockholders:
Knoll, Inc.
1235 Water Street
East Greenville, Pennsylvania 18041
Attention: Investor Relations
(215) 679-7991
Investor_Relations@knoll.com
To receive timely delivery of the documents in advance of the Herman Miller special meeting and the Knoll special meeting, you should submit your request no later than July 6, 2021.
You may also obtain any of the documents incorporated by reference into the accompanying joint proxy statement/prospectus without charge through the Securities and Exchange Commission website at www.sec.gov. In addition, you may obtain copies of documents filed by Herman Miller with the SEC on Herman Miller’s Internet website at https://investors.hermanmiller.com/sec-filings or by contacting Herman Miller’s Investor Relations department at investor@hermanmiller.com or by calling (616) 654-3000. You may also obtain copies of documents filed by Knoll with the SEC on Knoll’s Internet website at https://knoll.gcs-web.com/sec-filings or by contacting Knoll’s Investor Relations at Investor_Relations@knoll.com or by calling (215) 679-7991.
We are not incorporating the contents of the websites of the SEC, Herman Miller, Knoll or any other entity or any other website into the accompanying joint proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into the accompanying joint proxy statement/prospectus at these websites only for your convenience.
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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Herman Miller (File No. 333-256401), constitutes a prospectus of Herman Miller under Section 5 of the Securities Act of 1933, as amended, with respect to the shares of common stock, par value $0.20 per share, of Herman Miller to be issued to Knoll stockholders pursuant to the merger agreement. This document also constitutes a joint proxy statement of each of Herman Miller and Knoll under Section 14(a) of the Securities Exchange Act of 1934. It also constitutes a notice of meeting with respect to the Knoll special meeting, at which Knoll stockholders will be asked to consider and vote upon the Knoll merger proposal and certain other proposals, and it constitutes a notice of meeting with respect to the Herman Miller special meeting, at which Herman Miller shareholders will be asked to consider and vote upon the Herman Miller share issuance proposal.
Herman Miller has supplied all information contained or incorporated by reference into this joint proxy statement/prospectus relating to Herman Miller and Heat Merger Sub, Inc., and Knoll has supplied all such information relating to Knoll.
You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. Herman Miller and Knoll have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated as of the date set forth above on the cover page of this joint proxy statement/prospectus, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this joint proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint proxy statement/prospectus to Herman Miller shareholders or Knoll stockholders nor the issuance by Herman Miller of shares of Herman Miller common stock pursuant to the merger agreement will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
Unless otherwise indicated or as the context otherwise requires, all references in this joint proxy statement/prospectus to:
“BofA Securities” refers to BofA Securities, Inc.
“cash consideration” refers to $11.00 in cash, without interest, per share of Knoll common stock
“Code” refers to the Internal Revenue Code of 1986, as amended
“converted shares” refers to shares of Knoll common stock owned by any direct or indirect subsidiary of Knoll or Herman Miller (other than Merger Sub) immediately prior to the effective time of the merger
“debt financing” refers to the debt financing incurred or intended to be incurred pursuant to the debt commitment letter
“DGCL” refers to the General Corporation Law of the State of Delaware
“dissenting shares” refers to shares of Knoll common stock or Knoll preferred stock, as applicable, issued and outstanding immediately prior to the effective time of the merger and held by a holder who has properly exercised and perfected his or her demand for appraisal rights under Section 262 of the DGCL and not effectively withdrawn or lost such holder’s rights to appraisal
“equity award exchange ratio” refers to the sum of (1) the exchange ratio, and (2) the quotient (rounded to four decimal places) of (a) the cash consideration, divided by (b) the Herman Miller share price
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended
“exchange agent” refers to Computershare Trust Company, N.A.
“exchange ratio” refers to 0.32 shares of Herman Miller common stock per share of Knoll common stock (with, if applicable, cash in lieu of fractional shares)
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“excluded shares” refers to shares of Knoll common stock held by Knoll as treasury shares or by Herman Miller or Merger Sub immediately prior to the effective time of the merger (in each case, not held on behalf of third parties)
“GAAP” refers to accounting principles generally accepted in the United States
“Goldman Sachs” refers to Goldman Sachs & Co. LLC
“Herman Miller” refers to Herman Miller, Inc., a Michigan corporation
“Herman Miller adjournment proposal” refers to the proposal to adjourn the Herman Miller special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Herman Miller special meeting to approve the Herman Miller share issuance proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to Herman Miller shareholders
“Herman Miller Board” refers to the Herman Miller board of directors
“Herman Miller common stock” refers to the common stock of Herman Miller, $0.20 par value per share
“Herman Miller PSU award” refers to an award of performance-based vesting restricted stock units relating to Herman Miller common stock
“Herman Miller record date” refers to June 7, 2021
“Herman Miller restricted stock award” refers to an award of restricted common stock of Herman Miller
“Herman Miller RSU award” refers to an award of time-based vesting restricted stock units relating to Herman Miller common stock
“Herman Miller share issuance proposal” refers to the proposal that Herman Miller shareholders approve the issuance of Herman Miller common stock to Knoll stockholders in connection with the merger
“Herman Miller share price” refers to the volume-weighted average price per share of Herman Miller common stock for the five consecutive trading days ending the two trading days prior to the closing date as reported by Bloomberg, L.P.
“Herman Miller shareholder” or “Herman Miller shareholders” refers to one or more holders of Herman Miller common stock, as applicable
“Herman Miller shareholder approval” refers to the affirmative vote of a majority of shares of Herman Miller common stock entitled to vote thereon and present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting in favor of the Herman Miller share issuance proposal
“Herman Miller special meeting” refers to the virtual special meeting of Herman Miller shareholders to consider and vote upon the Herman Miller share issuance proposal
“HSR Act” refers to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
“Investindustrial” refers to Furniture Investments Acquisitions S.C.S., the holder of all of the outstanding shares of Knoll preferred stock and, as the context requires, certain of its affiliates, including Investindustrial Advisors Limited
“IRS” refers to the Internal Revenue Service
“Knoll” refers to Knoll, Inc., a Delaware corporation
“Knoll adjournment proposal” refers to the proposal to adjourn the Knoll special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Knoll special meeting to approve the Knoll merger proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to Knoll stockholders
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“Knoll Board” refers to the Knoll board of directors
“Knoll capital stock” refers to the Knoll common stock and Knoll preferred stock, collectively
“Knoll common stock” refers to the common stock of Knoll, $0.01 par value per share
“Knoll merger proposal” refers to the proposal that Knoll stockholders adopt the merger agreement
“Knoll non-binding compensation advisory proposal” refers to the proposal that Knoll stockholders approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Knoll’s named executive officers that is based on or otherwise relates to the merger contemplated by the merger agreement
“Knoll option award” refers to an award of stock options to purchase Knoll common stock
“Knoll preferred stock” refers to the shares of Series A Convertible Preferred Stock of Knoll, $1.00 par value per share
“Knoll PSU award” refers to an award of performance-based vesting restricted stock units relating to Knoll common stock
“Knoll record date” refers to June 7, 2021
“Knoll restricted stock award” refers to an award of unvested restricted shares of Knoll common stock
“Knoll stockholder” or “Knoll stockholders” refers to one or more holders of Knoll common stock or Knoll preferred stock, as applicable
“Knoll stockholder approval” refers to the affirmative vote of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis) in favor of the Knoll merger proposal
“Knoll stock plans” refers to Knoll’s (a) 2021 Stock Incentive Plan, (b) Amended and Restated 2018 Stock Incentive Plan, (c) Amended and Restated 2013 Stock Incentive Plan and (d) Amended and Restated 2010 Stock Incentive Plan
“Knoll special meeting” refers to the virtual special meeting of Knoll stockholders to consider and vote upon the Knoll merger proposal and related matters
“MBCA” refers to the Michigan Business Corporation Act
“merger” refers to the merger of Merger Sub with and into Knoll, with Knoll being the surviving corporation in the merger
“merger agreement” refers to the Agreement and Plan of Merger, dated as of April 19, 2021, by and among Herman Miller, Merger Sub and Knoll
“merger consideration” refers to the right of Knoll stockholders to receive the exchange ratio and the cash consideration
“Merger Sub” refers to Heat Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Herman Miller
“NASDAQ” refers to the NASDAQ Global Select Market
“NYSE” refers to the New York Stock Exchange
“preferred stock purchase” refers to the acquisition by Herman Miller of all of the shares of Knoll preferred stock held by Investindustrial immediately prior to, and conditioned upon the occurrence of, the effective time of the merger
“preferred stock purchase agreement” refers to the Stock Purchase Agreement, dated as of April 19, 2021, by and between Herman Miller and Furniture Investments Acquisitions S.C.S., an Investindustrial entity
“preferred stock purchase price” refers to $1,496.12 per share of Knoll preferred stock, in cash, without interest
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“SEC” refers to the Securities and Exchange Commission
“Securities Act” refers to the Securities Act of 1933, as amended
“voting agreement” refers to the Voting and Support Agreement, dated as of April 19, 2021, by and between Herman Miller and Furniture Investments Acquisitions S.C.S., an Investindustrial entity
“we”, “our” and “us” refer to Herman Miller and Knoll, collectively
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS
The following questions and answers briefly address some commonly asked questions about the merger, the merger agreement, the preferred stock purchase agreement, the transactions contemplated by the merger agreement and the preferred stock purchase agreement, the Herman Miller special meeting and the Knoll special meeting. They may not include all the information that is important to Herman Miller shareholders and Knoll stockholders. Herman Miller shareholders and Knoll stockholders should carefully read this entire joint proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference herein.
Q:
What is the merger?
A:
Herman Miller, Merger Sub and Knoll have entered into a merger agreement. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. Under the merger agreement, subject to satisfaction or (to the extent permitted by law) waiver of the conditions set forth in the merger agreement and described in this joint proxy statement/prospectus, in each case prior to the completion of the merger, Merger Sub will merge with and into Knoll, with Knoll continuing as the surviving corporation and a wholly owned subsidiary of Herman Miller. As a result of the merger, Knoll will no longer be a publicly-traded company. Following the merger, Knoll common stock will be delisted from the NYSE and deregistered under the Exchange Act. The common stock of Herman Miller is traded on the NASDAQ under the symbol “MLHR.” The common stock of Knoll is traded on the NYSE under the symbol “KNL.”
Q:
Why am I receiving these materials?
A:
You are receiving this joint proxy statement/prospectus to help you decide how to vote your shares of Herman Miller common stock or Knoll capital stock with respect to the Herman Miller share issuance proposal or the Knoll merger proposal, respectively, and other matters to be considered at the virtual special meetings.
The transactions contemplated by the merger agreement and the preferred stock purchase agreement, including the merger and the preferred stock purchase, cannot be completed unless, among other things: (1) Herman Miller shareholders approve the issuance of Herman Miller common stock to Knoll stockholders in connection with the merger at the Herman Miller special meeting, and (2) Knoll stockholders adopt the merger agreement at the Knoll special meeting.
This joint proxy statement/prospectus constitutes both a joint proxy statement of Herman Miller and Knoll and a prospectus of Herman Miller. It is a joint proxy statement because each of the Herman Miller Board and the Knoll Board is soliciting proxies from its shareholders and stockholders, respectively. It is a prospectus because Herman Miller will issue shares of its common stock in exchange for outstanding shares of Knoll common stock in the merger. Information about the Herman Miller special meeting, the Knoll special meeting, the merger, the merger agreement, the preferred stock purchase agreement and the other business to be considered by Herman Miller shareholders at the Herman Miller special meeting and Knoll stockholders at the Knoll special meeting is contained in this joint proxy statement/prospectus. Herman Miller shareholders and Knoll stockholders should read this information carefully and in its entirety. The enclosed voting materials allow Herman Miller shareholders and Knoll stockholders to vote their shares by proxy without attending the applicable special meeting.
Q:
What will Knoll stockholders receive in the merger?
A:
If the merger is completed, each outstanding share of Knoll common stock (other than any excluded shares, converted shares, dissenting shares and shares subject to certain Knoll equity awards held by employees) will be converted into the merger consideration, which is the right to receive (i) $11.00 per share in cash, without interest and (ii) 0.32 shares of Herman Miller common stock, with, if applicable, cash in lieu of fractional shares, less any applicable withholding taxes. The merger consideration is described in more detail in “The Merger Agreement—Merger Consideration.”
Q:
How will I receive the merger consideration to which I am entitled?
A:
If you hold physical share certificates of Knoll common stock, you will be sent a letter of transmittal and instructions as soon as practicable after the effective time of the merger describing how you may exchange
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your shares of Knoll common stock for the merger consideration. Upon surrender to the exchange agent of your certificates of Knoll common stock together with a completed and executed letter of transmittal, and any other customary documents as may be reasonably required by the exchange agent, the exchange agent will forward to you the shares of Herman Miller common stock (which will be in uncertificated book-entry form) and cash to which you are entitled. If you hold your shares of Knoll common stock in uncertificated book-entry form, you are not required to take any specific actions to exchange your shares of Knoll common stock, and after the completion of the merger, such shares will be automatically exchanged for the merger consideration. For more information on the documentation you are required to deliver to the exchange agent, see the section entitled “The Merger Agreement—Conversion of Shares; Exchange of Certificates.”
Q:
What respective percentage of the outstanding stock of Herman Miller will Herman Miller shareholders and Knoll stockholders hold immediately following the completion of the merger?
A:
Based on the number of shares of Herman Miller common stock and Knoll common stock outstanding as of June 7, 2021, and the exchange ratio, we estimate that, immediately following the completion of the merger, pre-merger holders of Herman Miller common stock will own approximately 78%, and former holders of Knoll common stock will own approximately 22%, of the common stock of Herman Miller. The exact ownership percentages of Herman Miller shareholders and Knoll stockholders in Herman Miller immediately following the merger will depend on the number of shares of Herman Miller common stock and Knoll common stock issued and outstanding immediately prior to the merger.
Q:
Who will serve on the board of directors of the combined company following the merger?
A:
The composition of the Herman Miller Board will not change upon the closing of the merger.
Q:
Will the market value of the merger consideration change between the date of this joint proxy statement/prospectus and the time the merger is completed?
A:
Yes. Although the merger consideration that holders of Knoll common stock will receive is fixed, the market value of the merger consideration will fluctuate between the date of this joint proxy statement/prospectus and the completion of merger based upon the trading price of shares of Herman Miller common stock. Any fluctuation in the trading price of shares of Herman Miller common stock after the date of this joint proxy statement/prospectus will change the market value of the shares of Herman Miller common stock that holders of Knoll common stock will receive as part of the merger consideration.
Q:
When do Herman Miller and Knoll expect to complete the transactions contemplated by the merger agreement and preferred stock purchase agreement?
Herman Miller and Knoll are working to complete the transactions contemplated by the merger agreement and preferred stock purchase agreement as soon as practicable. We currently expect that the merger and preferred stock purchase will be completed within one week from the date of the special meetings, if Herman Miller shareholder approval and Knoll stockholder approval are obtained and subject to the satisfaction or permitted waiver of other closing conditions. Neither Herman Miller nor Knoll can predict, however, the actual date on which the transactions will be completed because they are subject to conditions beyond each company’s control, including obtaining the necessary regulatory approvals.
See “The Merger Agreement—Conditions to the Merger” and “The Preferred Stock Purchase Agreement—Conditions to Completion of the Preferred Stock Purchase.”
Q:
What are the preferred stock purchase agreement and the voting agreement?
A:
On April 19, 2021, in connection with entering into the merger agreement, Herman Miller entered into the preferred stock purchase agreement and the voting agreement with Furniture Investments Acquisitions S.C.S., an Investindustrial entity. The preferred stock purchase agreement provides for the acquisition by Herman Miller of all outstanding shares of Knoll preferred stock from Investindustrial for consideration of approximately $253 million in cash, immediately prior to and subject to the occurrence of the effective time of the merger. The voting agreement provides, among other things, that Investindustrial will vote the shares of Knoll preferred stock in favor of the Knoll merger proposal.
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Q:
What matters will be considered at each of the special meetings?
A:
Herman Miller shareholders are being asked to vote on the following proposals:
Approval of the Herman Miller Share Issuance. To vote on a proposal to approve the issuance of Herman Miller common stock, par value $0.20 per share, to Knoll stockholders in connection with the merger agreement (which we refer to as the “Herman Miller share issuance proposal”); and
Adjournment of the Herman Miller Special Meeting. To vote on a proposal to approve the adjournment of the Herman Miller special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Herman Miller special meeting to approve the Herman Miller share issuance proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to Herman Miller shareholders (which we refer to as the “Herman Miller adjournment proposal”).
Knoll stockholders are being asked to vote on the following proposals:
Adoption of the Merger Agreement. To vote on a proposal to adopt the merger agreement, which is further described in the section entitled “The Merger Agreement,” and a copy of which merger agreement is attached as Annex A to this joint proxy statement/prospectus (which we refer to as the “Knoll merger proposal”);
Knoll Non-Binding Compensation Advisory Proposal. To vote on a proposal to approve, by advisory (non-binding) vote, certain compensation arrangements that may be paid or become payable to Knoll’s named executive officers in connection with the merger (which we refer to as the “Knoll non-binding compensation advisory proposal”); and
Adjournment of the Knoll Special Meeting. To vote on a proposal to approve the adjournment of the Knoll special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Knoll special meeting to approve the Knoll merger proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to Knoll stockholders (which we refer to as the “Knoll adjournment proposal”).
Approval of the Herman Miller share issuance proposal by Herman Miller shareholders and approval of the Knoll merger proposal by Knoll stockholders are required for completion of the merger.
Q:
What vote is required to approve each proposal at the Herman Miller special meeting?
A:
The Herman Miller share issuance proposal: The affirmative vote of a majority of shares of Herman Miller common stock entitled to vote thereon and present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting is required to approve the Herman Miller share issuance proposal.
Herman Miller adjournment proposal: The affirmative vote of a majority of the shares of Herman Miller common stock present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting, whether or not a quorum is present is required to approve the Herman Miller adjournment proposal.
Q:
What vote is required to approve each proposal at the Knoll special meeting?
A:
The Knoll merger proposal: The affirmative vote of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis) is required to approve the Knoll merger proposal.
The Knoll non-binding compensation advisory proposal: The affirmative vote of holders of a majority of the votes entitled to be cast by the stockholders who are present or represented by proxy at the Knoll special meeting is required to approve the Knoll non-binding compensation advisory proposal.
The Knoll adjournment proposal: The affirmative vote of holders of a majority of the votes entitled to be cast by the Knoll stockholders who are present via the Knoll special meeting website or represented by proxy at the Knoll special meeting, whether or not a quorum is present, is required to approve the Knoll adjournment proposal.
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Q:
Why are Knoll stockholders being asked to consider and vote on a proposal to approve, by advisory (non-binding) vote, the Knoll merger-related executive compensation?
A:
Under SEC rules, Knoll is required to seek an advisory (non-binding) vote with respect to the compensation that may be paid or become payable to its named executive officers that is based on, or otherwise relates to, the merger.
Q:
What happens if the Knoll non-binding compensation advisory proposal is not approved?
A:
Approval of the Knoll non-binding compensation advisory proposal is not a condition to completion of the merger, and because the vote on the Knoll non-binding compensation advisory proposal is advisory only, it will not be binding on Knoll. Accordingly, if the merger is approved and the other conditions to closing are satisfied or waived, the merger will be completed even if the Knoll non-binding compensation advisory proposal is not approved. If the Knoll merger proposal is approved and the Herman Miller share issuance proposal is approved and the merger is completed, the Knoll merger-related compensation will be payable to Knoll’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the Knoll non-binding compensation advisory proposal.
Q:
Do any of Herman Miller’s or Knoll’s directors or executive officers have interests in the merger that may differ from those of Herman Miller shareholders or Knoll stockholders?
A:
Certain of Knoll’s directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of Knoll stockholders generally. The Knoll Board was aware of the interests of Knoll’s directors and executive officers, and the Knoll Board considered such interests, among other matters, when it approved the merger agreement and in making its recommendations to its shareholders and stockholders. For more information regarding these interests, see the section entitled “The Merger—Interests of Knoll’s Directors and Executive Officers in the Merger.”
Q:
How many votes do I have?
A:
Each Herman Miller shareholder is entitled to one vote for each share of Herman Miller common stock held of record as of the Herman Miller record date. Each holder of Knoll common stock is entitled to one vote for each share of Knoll common stock held of record as of the Knoll record date. Each holder of Knoll preferred stock is entitled to one vote for each share of Knoll common stock underlying each share of Knoll preferred stock held of record as of the Knoll record date, which is equivalent to 59.7 votes per share of Knoll preferred stock.
As of the close of business on the Herman Miller record date, there were 59,029,165 shares of Herman Miller common stock outstanding. As of the close of business on the Knoll record date, there were 49,440,762 shares of Knoll common stock outstanding (excluding shares of restricted stock that are not entitled to vote) and 169,165 shares of Knoll preferred stock outstanding. As summarized below, there are some important distinctions between shares held of record and those owned beneficially in street name.
Q:
What constitutes a quorum for the Herman Miller special meeting?
A:
The presence, via the Herman Miller special meeting website or by proxy, of holders of Herman Miller shares that are outstanding and entitled to cast a majority of the votes at the Herman Miller special meeting will constitute a quorum for the transaction of business at the Herman Miller special meeting. Abstentions (which are described below) will count for the purpose of determining the presence of a quorum for the transaction of business at the Herman Miller special meeting.
Q:
What constitutes a quorum for the Knoll special meeting?
A:
The presence, via the Knoll special meeting website or by proxy, of the holders of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis), at the Knoll special meeting will constitute a quorum for the transaction of business at the Knoll special meeting. Abstentions (which are described below) will count for the purpose of determining the presence of a quorum for the transaction of business at the Knoll special meeting.
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Q:
How does the Herman Miller Board recommend that Herman Miller shareholders vote?
A:
The Herman Miller Board unanimously recommends that Herman Miller shareholders vote: “FOR” the Herman Miller share issuance proposal and “FOR” the Herman Miller adjournment proposal.
Q:
How does the Knoll Board recommend that Knoll stockholders vote?
A:
The Knoll Board (other than Mr. Ardagna who recused himself from determinations relating to the transactions contemplated by the merger agreement due to his affiliation with Investindustrial) unanimously recommends that Knoll stockholders vote: “FOR” the Knoll merger proposal, “FOR” the Knoll non-binding compensation advisory proposal and “FOR” the Knoll adjournment proposal.
Q:
Why did the Herman Miller Board approve the transactions contemplated by the merger agreement and the preferred stock purchase agreement, including the merger and the preferred stock purchase?
A:
For information regarding the Herman Miller Board’s reasons for approving the transactions contemplated by the merger agreement and the preferred stock purchase agreement, including the merger and the preferred stock purchase, and recommending that Herman Miller shareholders approve the Herman Miller share issuance proposal, see the section entitled “The Merger—Herman Miller Board’s Recommendation and Reasons for the Transactions.”
Q:
Why did the Knoll Board approve the merger agreement and the transactions contemplated by the merger agreement, including the merger?
A:
For information regarding the Knoll Board’s reasons for approving and recommending adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, see the section entitled “The Merger—Knoll Board’s Recommendation and Reasons for the Merger.”
Q:
What if I hold shares in both Herman Miller and Knoll?
A:
If you hold shares of both Herman Miller common stock and Knoll capital stock, you will receive two separate packages of proxy materials. A vote cast as a holder of Herman Miller common stock will not count as a vote cast as a holder of Knoll capital stock, and a vote cast as a holder of Knoll capital stock will not count as a vote cast as a holder of Herman Miller common stock. Therefore, please submit separate proxies for your shares of Herman Miller common stock and your shares of Knoll capital stock.
Q:
What do I need to do now?
A:
After carefully reading and considering the information contained in this joint proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at the Herman Miller special meeting or Knoll special meeting, as applicable. Please follow the instructions set forth on the Herman Miller proxy card or the Knoll proxy card, as applicable, or on the voting instruction form provided by the record holder if your shares are held in the name of your bank, broker or other nominee.
If you are a Knoll stockholder, please do not submit your stock certificates at this time. If the merger is completed, you will receive instructions for surrendering your stock certificates in exchange for shares of Herman Miller common stock from the exchange agent.
Q:
Does my vote matter?
A:
Yes. The transactions cannot be completed unless the Herman Miller share issuance proposal is approved by the affirmative vote of a majority of shares of Herman Miller common stock entitled to vote thereon and present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting and the Knoll merger proposal is approved by the affirmative vote of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis).
Q:
How do I vote?
A:
If you are a shareholder of record of Herman Miller as of the Herman Miller record date of June 7, 2021, you are entitled to receive notice of, and cast a vote at, the Herman Miller special meeting via the Herman
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Miller special meeting website. If you are a stockholder of record of Knoll as of the Knoll record date of June 7, 2021, you are entitled to receive notice of, and cast a vote at, the Knoll special meeting via the Knoll special meeting website. Each holder of Herman Miller common stock is entitled to cast one vote on each matter properly brought before the Herman Miller special meeting for each share of Herman Miller common stock that such holder owned of record as of the Herman Miller record date. Each holder of Knoll common stock is entitled to cast one vote on each matter properly brought before the Knoll special meeting for each share of Knoll common stock that such holder owned of record as of the Knoll record date. Each share of Knoll preferred stock held as of the close of business on the record date is entitled to approximately 59.7 votes on an as-converted basis. You may submit your proxy before the Herman Miller special meeting or the Knoll special meeting in one of the following ways:
Telephone Voting—use the toll-free number shown on your proxy card;
Via the Internet—visit the website shown on your proxy card to vote via the Internet; or
Voting by Mail—complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.
If you are a shareholder or stockholder of record, you may also attend the Herman Miller special meeting via the Herman Miller special meeting website or attend the Knoll special meeting via the Knoll special meeting website, as applicable, and cast your vote at the applicable special meeting.
If your shares are held in “street name,” through a bank, broker or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. “Street name” shareholders or stockholders who wish to vote at the Herman Miller special meeting or the Knoll special meeting will need to obtain a “legal proxy” form from their bank, broker or other nominee.
Q:
What is the difference between holding shares as a shareholder or stockholder of record and as a beneficial owner?
A:
You are a “shareholder or stockholder of record” if your shares are registered directly in your name with Herman Miller’s and Knoll’s transfer agent, Computershare Trust Company, N.A. (which we refer to as “Computershare”). As the shareholder or stockholder of record, you have the right to vote at the Herman Miller special meeting or the Knoll special meeting via the Herman Miller special meeting website or the Knoll special meeting website, as applicable. You may also vote before the Herman Miller special meeting or the Knoll special meeting, as applicable, by Internet, telephone or mail, as described in the notice and above under the heading “How do I vote?” You are deemed to beneficially own shares in “street name” if your shares are held by a bank, broker or other nominee. Your bank, broker or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. If you beneficially own your shares, you are invited to attend the Herman Miller special meeting or Knoll special meeting via the Herman Miller special meeting website or the Knoll special meeting website, as applicable; however, you may not attend or vote your shares at the Herman Miller special meeting or the Knoll special meeting, as applicable, unless you register with Computershare in advance and obtain a “legal proxy” from your bank, broker or other nominee that holds your shares, giving you the right to vote the shares at the Herman Miller special meeting or the Knoll special meeting, as applicable.
Q:
If my shares are held in “street name” by a bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me?
A:
If your shares are held in “street name” by a bank, broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Herman Miller or Knoll, as applicable, or by voting at the Herman Miller special meeting or Knoll special meeting, as applicable, unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee. Your bank, broker or other nominee is obligated to provide you with a voting instruction card for you to use.
Banks, brokers or other nominees who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on ‘‘routine” proposals when they have not received
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instructions from beneficial owners. However, banks, brokers or other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine” without specific instructions from the beneficial owner. It is expected that all proposals to be voted on at each of the Herman Miller special meeting and the Knoll special meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the bank, broker or other nominee does not have discretionary voting power.
If you are a beneficial owner of Herman Miller shares and you do not instruct your bank, broker or other nominee on how to vote your shares:
your bank, broker or other nominee may not vote your shares on the Herman Miller share issuance proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal; and
your bank, broker or other nominee may not vote your shares on the Herman Miller adjournment proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal.
If you are a beneficial owner of Knoll shares and you do not instruct your bank, broker or other nominee on how to vote your shares:
your bank, broker or other nominee may not vote your shares on the Knoll merger proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” such proposal;
your bank, broker or other nominee may not vote your shares on the Knoll non-binding compensation advisory proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal; and
your bank, broker or other nominee may not vote your shares on the Knoll adjournment proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal.
Q:
May I attend the Herman Miller special meeting or the Knoll special meeting?
A:
You or your authorized proxy may attend the Herman Miller special meeting if you were a registered or beneficial shareholder of Herman Miller common stock as of the Herman Miller record date.
You or your authorized proxy may attend the Knoll special meeting if you were a registered or beneficial holder of Knoll capital stock as of the Knoll record date.
Q:
When and where will each of the Herman Miller special meeting and Knoll special meeting take place? What must I bring to attend the Herman Miller special meeting or the Knoll special meeting?
A:
The Herman Miller special meeting will be held virtually via the Internet at 10:00 a.m., Eastern Time, on July 13, 2021. The Herman Miller special meeting will be held solely via live webcast, and there will not be a physical meeting location. Herman Miller shareholders will be able to attend the Herman Miller special meeting online and vote their shares electronically during the meeting by visiting the Herman Miller special meeting website. If you choose to attend the Herman Miller special meeting and vote your shares via the Herman Miller special meeting website, you will need the 16-digit control number included on your proxy card. If you are a beneficial owner of Herman Miller common stock but not the shareholder of record of such shares of Herman Miller common stock, you will need to obtain a control number from your broker, bank or other nominee holder of record giving you the right to vote the shares.
The Knoll special meeting will be held virtually via the Internet at 8:30 a.m., Eastern Time, on July 13, 2021. The Knoll special meeting will be held solely via live webcast, and there will not be a physical meeting location. Knoll stockholders will be able to attend the Knoll special meeting online and vote their shares electronically during the meeting by visiting the Knoll special meeting website. If you choose to attend the Knoll special meeting and vote your shares via the Knoll special meeting website, you will need the 15-digit control number included on your proxy card. If you are a beneficial owner of Knoll capital stock but not the holder of record of such shares of Knoll capital stock, you will need to obtain a control number from your broker, bank or other nominee holder of record giving you the right to vote the shares.
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Q:
What if I fail to vote or abstain?
A:
For purposes of the Herman Miller special meeting, an abstention occurs when a Herman Miller shareholder attends the Herman Miller special meeting and does not vote or returns a proxy with an “abstain” instruction.
Herman Miller share issuance proposal: An abstention will have the same effect as a vote cast AGAINST” the Herman Miller share issuance proposal. If a Herman Miller shareholder is not present at the Herman Miller special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal.
Herman Miller adjournment proposal: An abstention will have the same effect as a vote cast AGAINST” the Herman Miller adjournment proposal. If a Herman Miller shareholder is not present at the Herman Miller special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal.
For purposes of the Knoll special meeting, an abstention occurs when a Knoll stockholder attends the Knoll special meeting and does not vote or returns a proxy with an “abstain” instruction.
Knoll merger proposal: An abstention will have the same effect as a vote cast “AGAINST” the Knoll merger proposal. If a Knoll stockholder is not present at the Knoll special meeting and does not respond by proxy, it will have the same effect of a vote cast “AGAINST” such proposal.
Knoll non-binding compensation advisory proposal: An abstention will have the same effect as a vote cast “AGAINST” the Knoll non-binding compensation advisory proposal. If a Knoll stockholder is not present at the Knoll special meeting and does not respond by proxy, it will have no effect on the outcome of Knoll the non-binding compensation advisory proposal.
Knoll adjournment proposal: An abstention will have the same effect as a vote cast “AGAINST” the Knoll adjournment proposal. If a Knoll stockholder is not present at the Knoll special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal.
Q:
What will happen if I return my proxy or voting instruction card without indicating how to vote?
A:
If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the Herman Miller common stock or Knoll capital stock represented by your proxy will be voted as recommended by the Herman Miller Board or the Knoll Board, as applicable, with respect to that proposal.
Q:
May I change or revoke my vote after I have delivered my proxy or voting instruction card?
A:
Yes. If you are a record holder, you may change or revoke your vote before your proxy is voted at the Herman Miller special meeting or the Knoll special meeting, as applicable, as described herein. You may do this in one of the following four ways:
by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case, if you are eligible to do so;
by sending a notice of revocation to the corporate secretary of Herman Miller or Knoll, as applicable;
by sending a completed proxy card bearing a later date than your original proxy card; or
by attending the Herman Miller special meeting or the Knoll special meeting, as applicable, and voting your shares.
If you choose any of the first three methods, you must take the described action no later than the beginning of the Herman Miller special meeting or the Knoll special meeting, as applicable.
If your shares are held in an account at a bank, broker or other nominee or through a Herman Miller or Knoll employee savings plan and you have delivered your voting instruction card or otherwise given instruction on how to vote your shares to your bank, broker or other nominee or your applicable plan administrator, you should contact your bank, broker or other nominee or your applicable plan administrator to change your vote.
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Q:
What are the material U.S. federal income tax consequences of the merger?
A:
The receipt of merger consideration in exchange for shares of Knoll common stock pursuant to the merger agreement generally will be a taxable transaction for U.S. federal income tax purposes. For U.S. federal income tax purposes, a U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) will generally recognize gain or loss equal to the difference, if any, between (i) the sum of the cash and the fair market value of the Herman Miller common stock received in the merger and (ii) the U.S. holder’s adjusted tax basis in the Knoll common stock surrendered in exchange therefor. Non-U.S. holders (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) that receive the merger consideration pursuant to the merger may be subject to U.S. withholding tax with respect to any cash received.
For a more detailed description of the U.S. federal income tax consequences of the merger, see the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” The tax consequences of the merger to a particular holder of Knoll common stock will depend on such holder’s particular facts and circumstances. Holders of Knoll common stock should consult their own tax advisors to determine the specific tax consequences of the merger to them, including the applicability and effect of any U.S. federal, state and local tax laws, as well as any non-U.S. tax laws.
Q:
Where can I find the voting results of the Herman Miller special meeting and the Knoll special meeting?
A:
Within four business days following certification of the final voting results, each of Herman Miller and Knoll intends to file the final voting results with the SEC on a Current Report on Form 8-K.
Q:
What are my rights if I do not support the merger as a Knoll stockholder?
A:
Pursuant to Section 262 of the DGCL, holders of Knoll capital stock who hold their shares through the effective time of the merger, who do not vote their shares in favor of adoption of the merger agreement and who comply fully with and properly demand appraisal for their shares under the applicable requirements of Section 262 of the DGCL and do not otherwise withdraw or lose the right to appraisal under Delaware law, have the right to seek appraisal of the fair value of their shares of Knoll capital stock, as determined by the Delaware Court of Chancery, if the merger is completed. The “fair value” of shares of Knoll capital stock as determined by the Delaware Court of Chancery may be more than, less than, or equal to the value of the consideration that Knoll stockholders may otherwise be entitled to receive under the terms of the merger agreement and the preferred stock purchase agreement, as applicable. Knoll stockholders should also be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Holders of Knoll capital stock who wish to preserve any appraisal rights they may have must so advise Knoll by submitting a written demand for appraisal prior to the vote to adopt the merger agreement and approve the transactions contemplated thereby, and must otherwise follow fully the procedures prescribed by Section 262 of the DGCL.
All of the outstanding shares of Knoll preferred stock are held by Investindustrial. Under the voting agreement, Investindustrial has irrevocably and unconditionally waived, and agreed not to exercise, all appraisal rights under Section 262 of the DGCL (and any other appraisal, dissenters’ or similar rights) related to the transactions contemplated by the merger agreement with respect to the Knoll capital stock subject to the voting agreement, to the fullest extent permitted by law.
For more information, see the section entitled “Appraisal Rights.”
Q:
Are holders of Herman Miller common stock entitled to appraisal rights?
A:
No. Holders of Herman Miller common stock are not entitled to appraisal rights under the DGCL. For more information, see the section entitled “Appraisal Rights.”
Q:
What happens if I sell my shares of Herman Miller common stock after the Herman Miller record date but before the Herman Miller special meeting?
A:
The Herman Miller record date for the Herman Miller special meeting (the close of business on June 7, 2021) is earlier than the date of the Herman Miller special meeting and earlier than the date that the merger
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and preferred stock purchase are expected to be completed. If you sell or otherwise transfer your shares of Herman Miller common stock after the Herman Miller record date but before the date of the Herman Miller special meeting, you will retain your right to vote at the Herman Miller special meeting.
Q:
What happens if I sell my shares of Knoll capital stock after the Knoll record date but before the Knoll special meeting?
A:
The Knoll record date for the Knoll special meeting (the close of business on June 7, 2021) is earlier than the date of the Knoll special meeting and earlier than the date that the merger and preferred stock purchase are expected to be completed. If you sell or otherwise transfer your shares of Knoll capital stock after the Knoll record date but before the date of the Knoll special meeting, you will retain your right to vote at the Knoll special meeting. However, you will not have the right to receive the consideration to be received by Knoll stockholders pursuant to the merger agreement or the preferred stock purchase agreement, as applicable. In order to receive such consideration, you must hold your shares through completion of the transactions.
Q:
Are there any risks that I should consider in deciding whether to vote in favor of the Herman Miller share issuance proposal or the Knoll merger proposal, or the other proposals to be considered at the Herman Miller special meeting or the Knoll special meeting, as applicable?
A:
Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 33. You also should read and carefully consider the risk factors of Herman Miller and Knoll contained in the documents that are incorporated by reference into this joint proxy statement/prospectus.
Q:
Whom should I contact if I have any questions about the proxy materials or voting?
If you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed Herman Miller proxy card or Knoll proxy card, as applicable, you should contact MacKenzie Partners, Inc. (which we refer to as “MacKenzie Partners”), the proxy solicitation agent for Herman Miller, at 1407 Broadway, 27th Floor, New York, New York 10018, (800) 322-2885, (212) 929-5500 (Banks and Brokers) or by email at proxy@mackenziepartners.com, or Kingsdale Advisors (which we refer to as “Kingsdale”), the proxy solicitation agent for Knoll, at 1 (866) 581-1514 (toll free in North America), (416) 867-2272 (collect call outside North America), or by email at contactus@kingsdaleadvisors.com, as applicable.
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SUMMARY
This summary highlights selected information contained in this joint proxy statement/prospectus and does not contain all the information that may be important to you. Herman Miller and Knoll urge you to read carefully this joint proxy statement/prospectus in its entirety, including the annexes. Additional, important information, which Herman Miller and Knoll also urge you to read, is contained in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.”
The Parties (page 43)
Herman Miller, Inc.
Herman Miller was incorporated in Michigan in 1905. Herman Miller’s purpose is design for the good of humankind. To this end, Herman Miller researches, designs, manufactures and distributes interior furnishings for environments where people live, learn, work, heal and play and provides related services that support organizations and individuals all over the world. Through research, Herman Miller seeks to understand, define and clarify customer needs and problems existing in its markets and to design products, systems and services that serve as innovative solutions to those needs and problems.
Herman Miller’s family of brands includes Herman Miller®, Design Within Reach®, Geiger®, Maharam®, Nemschoff®, Colebrook Bosson Saunders®, naughtone®, Maars® Living Walls and HAY®. Herman Miller products are sold primarily through the following channels: independent and owned contract furniture dealers, direct contract sales, retail studios, e-commerce platforms and direct-mail catalogs.
Herman Miller’s principal executive offices are located at 855 East Main Avenue, Zeeland, Michigan 49464, and its telephone number is (616) 654-3000. Herman Miller’s website address is www.hermanmiller.com. Information contained on Herman Miller’s website does not constitute part of this joint proxy statement/prospectus. Herman Miller’s stock is publicly traded on the NASDAQ, under the ticker symbol “MLHR.” Additional information about Herman Miller is included in documents incorporated by reference in this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”
Knoll, Inc.
Knoll designs, manufactures, markets and sells high-end commercial and residential furniture, lighting, accessories, textiles, fine leathers and designer felt for the workplace and residential markets, as well as modern outdoor furniture. Knoll works with clients to create inspired modern interiors. Knoll’s design-driven businesses share a reputation for high-quality and sophistication, offering a diversified product portfolio that endures throughout evolving trends and performs throughout business cycles. Knoll’s products are targeted at the middle to upper-end of the market where it reaches customers primarily through a broad network of independent dealers and distribution partners, its direct sales force, its showrooms, and its online presence.
Knoll focuses on two distinct markets, commercial and residential. Knoll targets commercial workplace clients through its direct sales force that is focused on furnishing offices by working with independent dealers, designers, architects and decorators. Knoll serves residential consumers directly and through “to the trade” specifiers including designers and architects, through Knoll’s online marketspace, retail shops and showrooms.
Knoll’s principal executive offices are located at 1235 Water Street, East Greenville, Pennsylvania 18041 and its telephone number is (215) 679-7991. Knoll’s website address is www.Knoll.com. Information contained on Knoll’s website does not constitute part of this joint proxy statement/prospectus. Knoll’s stock is publicly traded on the NYSE, under the ticker symbol “KNL.” Additional information about Knoll is included in documents incorporated by reference in this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”
Heat Merger Sub, Inc.
Heat Merger Sub, Inc., a wholly owned subsidiary of Herman Miller, is a Delaware corporation incorporated on April 16, 2021, for the purpose of effecting the merger. Heat Merger Sub, Inc. has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Heat Merger Sub, Inc. are located at 855 East Main Avenue, Zeeland, Michigan 49464, and its telephone number is (616) 654-3000.
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The Transactions (page 44)
The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. The terms and conditions of the preferred stock purchase are contained in the preferred stock purchase agreement, a copy of which is attached as Annex E to this joint proxy statement/prospectus. We encourage you to read the merger agreement and the preferred stock purchase agreement carefully and in their entirety, as they are the legal documents that govern the transactions contemplated by the merger agreement and the preferred stock purchase agreement.
On April 19, 2021, Herman Miller, Merger Sub and Knoll entered into the merger agreement, which provides that, subject to the terms and conditions of the merger agreement and in accordance with the DGCL, Merger Sub will merge with and into Knoll, with Knoll continuing as the surviving corporation. Subject to the terms and conditions of the preferred stock purchase agreement, immediately prior to the effective time of the merger, Herman Miller will acquire all of the Knoll preferred stock from Investindustrial. As a result of these transactions, Knoll will become a wholly owned subsidiary of Herman Miller.
Merger Consideration (page 111)
At the effective time of the merger, each share of Knoll common stock that is issued and outstanding immediately prior to the completion of the merger (other than any excluded shares, converted shares, dissenting shares and shares subject to Knoll option awards, Knoll restricted stock awards and Knoll PSU awards) will be converted into the right to receive (a) $11.00 in cash, without interest and (b) 0.32 shares of Herman Miller common stock, with cash in lieu of any fractional shares of Herman Miller common stock, less applicable withholding taxes. The market value of Herman Miller common stock at the time of completion of the merger could be greater than, less than or the same as the market value of Herman Miller common stock on the date of this joint proxy statement/prospectus. We urge you to obtain current market quotations for the shares of common stock of Herman Miller and Knoll.
For more details on the exchange ratio, see “The Merger Agreement—Merger Consideration.”
Treatment of Knoll Equity Awards (page 112)
Knoll Option Awards
At the effective time of the merger, each outstanding and unexercised Knoll option, whether or not vested, will be canceled in consideration for the right to receive, within five business days following the effective time of the merger, an amount in cash, without interest and less applicable withholding taxes, equal to the product obtained by multiplying (i) the excess, if any, of the value of the merger consideration over the exercise price per share of such Knoll option immediately prior to the effective time of the merger by (ii) the number of shares of Knoll common stock subject to each such Knoll option immediately prior to the effective time of the merger. For purposes of the preceding sentence, the value of the merger consideration equals the sum of (i) the cash consideration and (ii) the product obtained by multiplying (x) the exchange ratio by (y) the Herman Miller share price.
Knoll Restricted Stock Awards
At the effective time of the merger, each outstanding Knoll restricted stock award granted pursuant to the Knoll stock plans (other than Knoll restricted stock awards held by non-employee directors of Knoll) will be converted into an award of restricted common stock of Herman Miller in respect of the number of whole shares of Herman Miller common stock equal to the product, rounded to the nearest whole number of shares, of (i) the total number of shares of Knoll common stock subject to such Knoll restricted stock award multiplied by (ii) the equity award exchange ratio, with such converted award subject to substantially the same terms and conditions as applied to the corresponding Knoll restricted stock award immediately prior to the effective time of the merger (including any performance-based vesting conditions).
Treatment of Knoll Restricted Stock Awards Held by Non-Employee Directors
At the effective time of the merger, each outstanding Knoll restricted stock award granted pursuant to the Knoll stock plans held by a non-employee director of Knoll will fully vest and be converted into the right to receive the merger consideration in respect of each share of Knoll common stock subject to such Knoll restricted
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stock award immediately prior to the effective time of the merger, together with payment of any dividend equivalents that are accrued but unpaid as of the effective time of the merger pursuant to the terms of such Knoll restricted stock award.
Knoll PSU Awards
At the effective time of the merger, each outstanding Knoll PSU award (other than specified Knoll PSU awards and Knoll PSU Awards held by former employees) granted pursuant to the Knoll stock plans will be converted into a Herman Miller restricted stock unit award in respect of that number of whole shares of Herman Miller common stock equal to the product (rounded to the nearest whole number of shares) of (i) the total number of shares of Knoll common stock subject to such Knoll PSU award immediately prior to the effective time of the merger (determined by deeming the performance goals to be achieved at 100%) multiplied by (ii) the equity award exchange ratio, with such converted award subject to substantially the same terms and conditions as applied to the corresponding Knoll PSU award immediately prior to the effective time of the merger (excluding, however, any performance-based vesting conditions).
For additional information with respect to treatment of Knoll equity awards, please see “The Merger Agreement—Treatment of Knoll Equity Awards.”
Recommendation of the Herman Miller Board (page 144)
After careful consideration of various factors described in “The Merger—Herman Miller Board’s Recommendation and Reasons for the Transactions,” the Herman Miller Board unanimously determined that the merger agreement, the preferred stock purchase agreement and the transactions contemplated thereby (including the merger, the preferred stock purchase and the Herman Miller share issuance) are advisable and fair to and in the best interests of Herman Miller and its shareholders, and the Herman Miller Board unanimously recommends that holders of Herman Miller common stock vote:
“FOR” the Herman Miller share issuance proposal; and
“FOR” the Herman Miller adjournment proposal.
Recommendation of the Knoll Board (page 150)
After careful consideration of various factors described in the section entitled “The Merger—Knoll Board’s Recommendation and Reasons for the Merger” beginning on page 71, the Knoll Board (other than Mr. Ardagna who recused himself from determinations relating to the transactions contemplated by the merger agreement due to his affiliation with Investindustrial) unanimously determined that the merger agreement and the transactions contemplated by the merger agreement (including the merger) are fair to and in the best interests of Knoll and its stockholders, and unanimously recommends that Knoll stockholders vote:
“FOR” the Knoll merger proposal;
“FOR” the Knoll non-binding compensation advisory proposal; and
“FOR” the Knoll adjournment proposal.
Opinion of Herman Miller’s Financial Advisor (page 77)
Goldman Sachs delivered its oral opinion, subsequently confirmed in writing, to the Herman Miller Board that, as of April 19, 2021, and based upon and subject to the factors and assumptions set forth therein, the merger consideration and the preferred stock purchase price, taken in the aggregate, were fair from a financial point of view to Herman Miller.
The full text of the written opinion of Goldman Sachs, dated April 19, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Herman Miller Board in connection with its consideration of the transactions contemplated by the merger agreement and the preferred stock purchase agreement. Goldman Sachs’ opinion is not a recommendation as to how any holder of Herman Miller common stock should vote with respect to the Herman Miller share issuance proposal or any other matter.
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Pursuant to an engagement letter between Herman Miller and Goldman Sachs, Herman Miller has agreed to pay Goldman Sachs a transaction fee of $15 million, $3 million of which became payable at announcement of the transactions contemplated by the merger agreement and the preferred stock purchase agreement, and the reminder of which is contingent upon consummation of such transactions.
This summary is qualified in its entirety by reference to the full text of such opinion. For additional information, see Annex B and the section entitled “The Merger—Opinion of Goldman Sachs, Herman Miller’s Financial Advisor.”
Opinion of Knoll’s Financial Advisor (page 84)
On April 18, 2021, at a meeting of the Knoll Board held to evaluate the merger, BofA Securities, Knoll’s financial advisor, delivered to the Knoll Board an oral opinion, which was confirmed by delivery of a written opinion dated April 19, 2021, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in BofA Securities’ written opinion, the consideration to be received in the merger by holders of the Knoll eligible shares (as defined in the section entitled “The Merger— Opinion of BofA Securities, Knoll’s Financial Advisor”) was fair, from a financial point of view, to such holders.
The full text of BofA Securities’ written opinion to the Knoll Board, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex C to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety. The summary of BofA Securities’ opinion included in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of BofA Securities’ written opinion. BofA Securities delivered its opinion to the Knoll Board for the benefit and use of the Knoll Board (in its capacity as such) in connection with and for purposes of its evaluation of the merger. BofA Securities’ opinion does not address any other terms or other aspects or implications of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Knoll or in which Knoll might engage or as to the underlying business decision of Knoll to proceed with or effect the merger. BofA Securities’ opinion does not address any other aspect of the merger and does not express any opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any related matter.
Knoll has agreed to pay BofA Securities for its services in connection with the merger an aggregate fee, which is estimated, based on the information available as of the date of announcement of the merger, to be approximately $23 million, $1 million of which was payable upon delivery of its opinion and the remainder of which is payable upon the closing of the merger.
See the section entitled “The Merger—Opinion of BofA Securities, Knoll’s Financial Advisor” beginning on page 84.
Interests of Knoll’s Directors and Executive Officers in the Merger (page 100)
The directors and executive officers of Knoll have interests in the merger that are different from, or in addition to, the interests of stockholders of Knoll generally. The members of the Knoll Board were aware of, and considered, these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the stockholders of Knoll adopt the merger agreement.
See the sections entitled “The Merger—Interests of Knoll’s Directors and Executive Officers in the Merger” and “The Merger Agreement—Covenants and Agreements—Indemnification, Exculpation and Insurance” for a more detailed description of these interests.
Information about the Herman Miller Special Meeting (page 144)
Date, Time, Place and Purpose of the Herman Miller Special Meeting
The Herman Miller special meeting to consider and vote upon the Herman Miller share issuance proposal and related matters will be held on July 13, 2021 at 10:00 a.m., Eastern Time.
At the Herman Miller special meeting, Herman Miller shareholders will be asked to consider and vote upon the Herman Miller share issuance proposal and the Herman Miller adjournment proposal.
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Herman Miller Record Date and Quorum
You are entitled to receive notice of, and to vote at, the Herman Miller special meeting if you are an owner of record of shares of Herman Miller common stock as of the close of business on June 7, 2021 the Herman Miller record date. On the Herman Miller record date, there were 59,029,165 shares of Herman Miller common stock outstanding and entitled to vote. Herman Miller shareholders will have one vote on the Herman Miller share issuance proposal for each share of Herman Miller common stock owned by such shareholders on the Herman Miller record date.
The Herman Miller bylaws provide that the holders of Herman Miller shares that are outstanding and entitled to cast a majority of the votes at the Herman Miller special meeting will constitute a quorum for the transaction of business at the Herman Miller special meeting.
Vote Required
The Herman Miller share issuance proposal requires the affirmative vote of a majority of shares of Herman Miller common stock entitled to vote thereon and present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting. If a Herman Miller shareholder present at the Herman Miller special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Herman Miller shareholder is not present at the Herman Miller special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.
The Herman Miller adjournment proposal requires the affirmative vote of a majority of the shares of Herman Miller common stock present via the Herman Miller special meeting website or represented by proxy at the Herman Miller special meeting, whether or not a quorum is present. If a Herman Miller shareholder present at the Herman Miller special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Herman Miller shareholder is not present at the Herman Miller special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.
Proxies and Revocations
Any Herman Miller shareholder of record entitled to vote at the Herman Miller special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed Herman Miller proxy card in the accompanying prepaid reply envelope or may vote during the Herman Miller special meeting via the Herman Miller special meeting website. If your shares of Herman Miller common stock are held in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how to vote your shares of Herman Miller common stock using the instructions provided by your bank, broker or other nominee. If your shares of common stock are held through a Herman Miller employee savings plan, you should instruct your plan trustee on how to vote your shares of common stock using the instructions provided by your trustee.
If you are a record holder, you may change or revoke your vote before your proxy is voted at the Herman Miller special meeting as described herein. You may do this in one of the following four ways: (1) by logging onto the Internet website specified on your Herman Miller proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your Herman Miller proxy card, in each case, if you are eligible to do so; (2) by delivering a notice of revocation to the Corporate Secretary of Herman Miller; (3) by delivering a completed Herman Miller proxy card bearing a later date than your original Herman Miller proxy card; or (4) by attending the Herman Miller special meeting and voting via the Herman Miller special meeting website. If you choose any of the first three methods, you must take the described action no later than the beginning of the Herman Miller special meeting.
Information about the Knoll Special Meeting (page 150)
Date, Time, Place and Purpose of the Knoll Special Meeting
The Knoll special meeting to consider and vote upon the Knoll merger proposal and related matters will be held on July 13, 2021 at 8:30 a.m., Eastern Time. Knoll stockholders will be able to attend the Knoll special
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meeting online and vote their shares electronically during the meeting by visiting www.meetingcenter.io/228735283 (which we refer to as the “Knoll special meeting website”). The password for the meeting is KNL2021.
The purpose of the Knoll special meeting is to consider and vote on the Knoll merger proposal, the Knoll non-binding compensation advisory proposal and, if necessary, the Knoll adjournment proposal. Approval of the Knoll merger proposal is a condition to the obligations of Knoll and Herman Miller to complete the merger. The obligations of Knoll and Herman Miller to complete the merger are not conditioned upon approval of the Knoll non-binding compensation advisory proposal or the Knoll adjournment proposal.
Knoll Record Date and Quorum
Only stockholders of record as of the close of business on June 7, 2021, the record date for the Knoll special meeting, are entitled to notice of, and to vote at, the Knoll special meeting via the Knoll special meeting website or any adjournment or postponement of the Knoll special meeting.
As of the close of business on the record date, there were 49,440,762 shares of Knoll common stock issued and outstanding and entitled to vote at the Knoll special meeting and 169,165 shares of Knoll preferred stock issued and outstanding and entitled to vote at the Knoll special meeting. Each share of Knoll common stock that you held as of the close of business on the record date entitles you to one vote. Each share of preferred stock is entitled to approximately 59.7 votes on an as-converted basis.
A quorum of Knoll stockholders is necessary for Knoll to hold a valid meeting. The presence at the Knoll special meeting, via the Knoll special meeting website or by proxy, of the holders of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis) constitutes a quorum.
Vote Required
Approval of the Knoll merger proposal requires the affirmative vote of a majority of the outstanding shares of Knoll common stock and the outstanding shares of Knoll preferred stock (voting as a single class with the Knoll common stock, on an as-converted basis). Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the Knoll merger proposal. Failure to vote on the Knoll merger proposal will have the same effect as a vote “AGAINST” the Knoll merger proposal.
Approval of the Knoll non-binding compensation advisory proposal requires the affirmative vote of holders of a majority of the votes entitled to be cast by the stockholders who are present via the Knoll special meeting website or represented by proxy at the Knoll special meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the vote.
Approval of the Knoll adjournment proposal requires the affirmative vote of holders of a majority of the votes entitled to be cast by the Knoll stockholders who are present via the Knoll special meeting website or represented by proxy at the Knoll special meeting, whether or not a quorum is present, is required to approve the Knoll adjournment proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the vote.
Proxies and Revocations
Any Knoll stockholders of record entitled to vote at the Knoll special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed Knoll proxy card in the accompanying prepaid reply envelope or may vote at the Knoll special meeting via the Knoll special meeting website. Knoll stockholders who hold their shares in “street name” by a broker, bank or other nominee should refer to the proxy card, voting instruction form or other information forwarded by their broker, bank or other nominee for instructions on how to vote their shares.
If you are a stockholder of record of Knoll, whether you vote by phone, the Internet or mail, you can change or revoke your proxy before it is voted at the meeting as described herein. You may do this in one of the following four ways: (1) submit a new proxy card bearing a later date; (2) vote again by phone or the Internet at a later time; (3) provide signed written notice before the meeting to the Knoll Secretary at Knoll, Inc.,
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c/o Corporate Secretary, 1235 Water Street, East Greenville, Pennsylvania 18041 stating that you are revoking your proxy; or (4) attend the Knoll special meeting and vote your shares via the Knoll special meeting website. Please note that your attendance at the meeting via the Knoll special meeting website will not alone serve to revoke your proxy; instead, you must vote your shares via the Knoll special meeting website. If you choose any of the first three methods, you must take the described action no later than the beginning of the Knoll special meeting.
Voting by Herman Miller Directors and Executive Officers (page 145)
As of the close of business on June 7, 2021, the most recent practicable date for which such information was available, directors and executive officers of Herman Miller and their affiliates owned and were entitled to vote 574,102 shares of Herman Miller common stock, or less than 1% of the shares of common stock outstanding on that date. It is currently expected that Herman Miller’s directors and executive officers will vote their shares of Herman Miller common stock in favor of each of the proposals to be considered at the Herman Miller special meeting, although none of them have entered into any agreements obligating them to do so. For information with respect to Herman Miller common stock owned by directors and executive officers of Herman Miller, please see the section entitled “Herman Miller Beneficial Ownership Table.”
Voting by Knoll Directors and Executive Officers (page 151)
As of the close of business on June 7, 2021, the most recent practicable date for which such information was available, Knoll directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 10,850,255 shares of Knoll common stock (including shares of Knoll preferred stock on an as-converted basis), or approximately 18.22% of the total voting power of the holders of Knoll capital stock as of June 7, 2021 voting as a single class, with the holders of Knoll preferred stock voting on an as-converted basis. As of such date, Investindustrial owned 169,165 shares of Knoll preferred stock, and was entitled to vote 10,099,402 shares of Knoll common stock on an as-converted basis, or approximately 16.96% of the total voting power of the holders of Knoll capital stock voting as a single class, with the holders of Knoll preferred stock voting on an as-converted basis, as of June 7, 2021. Pursuant to the voting agreement, Investindustrial has agreed to, among other things, vote all of its shares of Knoll preferred stock in favor of the Knoll merger proposal. Excluding Investindustrial’s shares of Knoll preferred stock, the remaining Knoll directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 750,853 shares of Knoll common stock, or approximately 1.23% of the total voting power of the holders of Knoll capital stock voting as a single class, with the holders of Knoll preferred stock voting on an as-converted basis, as of June 7, 2021.
Knoll currently expects that all of its directors and executive officers will vote their shares “FOR” the Knoll merger proposal, “FOR” the Knoll non-binding compensation advisory proposal and “FOR” the Knoll adjournment proposal, although none of them have entered into any agreements obligating them to do so. For information with respect to Knoll stock owned by directors and executive officers of Knoll, please see the section entitled “Knoll Beneficial Ownership Table.”
Debt Financing (page 105)
Herman Miller’s obligation to complete the transaction is not contingent on the receipt by Herman Miller of any financing. Herman Miller estimates that it will need approximately $1.5 billion in order to pay amounts due under the merger agreement and the preferred stock purchase agreement and to pay related fees and transaction costs in connection therewith. Herman Miller anticipates that the funds needed to pay the foregoing amount will be derived from a combination of cash on hand and borrowings under new credit facilities described below and/or alternative financing obtained in lieu thereof.
In connection with the execution of the merger agreement, Herman Miller entered into a commitment letter on April 19, 2021 with Goldman Sachs Bank USA (which we refer to as the “initial debt commitment letter”), which was amended, restated and superseded in its entirety by an amended and restated commitment letter entered into by Herman Miller on May 4, 2021 with Goldman Sachs Bank USA, Wells Fargo, National Association, and Wells Fargo Securities, LLC, which was amended, restated and superseded in its entirety by a second and amended and restated commitment letter entered into by Herman Miller on May 15, 2021 (we refer to such second amended and restated commitment letter as the “debt commitment letter”) with Goldman Sachs Bank USA, Wells Fargo, National Association, Wells Fargo Securities, LLC, Citizens Bank, National Association,
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JPMorgan Chase Bank, N.A., KeyBanc Capital Markets Inc., KeyBank National Association, PNC Capital Markets LLC, PNC Bank, National Association, The Huntington National Bank, Truist Bank, and Truist Securities, Inc. (which we refer to collectively as the “commitment parties”), pursuant to which the commitment parties have committed to provide, subject to the terms and conditions set forth therein and the related fee letters, Herman Miller with $1,750 million in aggregate principal amount of senior secured financing, consisting of a senior secured term loan “B” facility in an aggregate principal amount of $725 million, a senior secured term loan “A” facility in an aggregate principal amount of $300 million and a senior secured revolving credit facility in an aggregate principal amount of $725 million (which we refer to together as the “senior secured facilities”). The availability of the senior secured facilities is subject to certain terms and conditions. For information with respect to the debt commitment letter and the senior secured facilities, please see the section entitled “The Merger—Debt Financing.”
Regulatory Approvals (page 105)
Under the HSR Act and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division of the United States Department of Justice (which we refer to as the “Antitrust Division”), and the United States Federal Trade Commission (which we refer to as the “FTC”), and all statutory waiting period requirements have been satisfied. Completion of the merger is subject to the expiration or earlier termination of the applicable waiting period under the HSR Act. Herman Miller and Knoll each filed their respective HSR Act notification forms on May 3, 2021. The applicable waiting period under the HSR Act expired at 11:59 p.m., Eastern Time, on June 2, 2021.
Neither Herman Miller nor Knoll is aware of any material governmental approvals or actions that are required for completion of the merger other than as described above. It is presently contemplated that if any such additional material governmental approvals or actions are required, those approvals or actions will be sought. There can be no assurance that a challenge to the merger on antitrust or other regulatory grounds will not be made or, if such a challenge is made, that it would not be successful.
See “The Merger—Regulatory Approvals.”
Conditions to the Merger (page 133)
In addition to the approval of the Herman Miller share issuance proposal and the Knoll merger proposal, completion of the merger is subject to the satisfaction (or waiver, to the extent permitted by applicable law) of a number of conditions including:
Any waiting period (or any agreed upon extension of any waiting period or commitment not to consummate the merger for any period of time) applicable to the merger under the HSR Act must have expired or been terminated, and any authorization or consent from any other governmental entity required to be obtained with respect to the merger as set forth on the Herman Miller disclosure letter must have been obtained and remain in full force and effect, in each case without the imposition, individually or in the aggregate, of a burdensome condition;
The absence of any order, decree, ruling, injunction or law (whether temporary, preliminary or permanent) issued by a governmental authority of competent jurisdiction restraining, enjoining, making illegal or otherwise prohibiting the consummation of the merger or imposing, individually or in the aggregate, a burdensome condition (any such order, decree, ruling, injunction law or other action, a “relevant legal restraint”);
The effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part, and the absence of any stop order or pending or threatened in writing proceedings seeking a stop order relating to such registration statement;
The authorization for listing on the NASDAQ of the shares of Herman Miller common stock issuable pursuant to the merger, subject to official notice of issuance;
The accuracy of certain representations and warranties of Knoll or Herman Miller, as applicable, set forth in the merger agreement;
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The performance and compliance by Knoll or Herman Miller and Merger Sub, as applicable, in all material respects, of all agreements and covenants required to be performed or complied with by them under the merger agreement on or prior to the effective time of the merger; and
The receipt of an officer’s certificate of Herman Miller or Knoll, as applicable, confirming the satisfaction of certain conditions.
For a more complete description of the conditions to the merger, see “The Merger Agreement—Conditions to the Merger.”
Timing of the Transactions (page 106)
The parties expect the merger and the preferred stock purchase to be completed within one week from the date of the special meetings, if Herman Miller shareholder approval and Knoll stockholder approval are obtained and subject to the satisfaction or permitted waiver of other closing conditions. Neither Herman Miller nor Knoll can predict, however, the actual date on which the merger and the preferred stock purchase will be completed because the merger is subject to conditions beyond each company’s control, including obtaining necessary regulatory approvals. For a more complete description of the conditions to the merger, see “The Merger Agreement—Conditions to the Merger.”
Ownership of Herman Miller after the Merger
Based on the number of shares of Herman Miller common stock and Knoll common stock outstanding as of June 7, 2021, and the exchange ratio, we estimate that, immediately following completion of the merger, former holders of Knoll common stock will own approximately 22% and pre-merger holders of Herman Miller common stock will own approximately 78% of the common stock of Herman Miller. The exact ownership percentages of Herman Miller shareholders and Knoll stockholders in Herman Miller immediately following the merger will depend on the number of shares of Herman Miller common stock and Knoll common stock outstanding immediately prior to the merger.
No Solicitation; Change of Recommendation (page 122)
As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the exceptions summarized below, Herman Miller and Knoll have each agreed not to, and to cause their respective controlled affiliates and its and their respective directors and officers not to, and use its reasonable best efforts to cause its and their other representatives not to, directly or indirectly:
solicit, initiate or knowingly encourage (including by way of furnishing information), or knowingly facilitate, any inquiries regarding, or the making of, any proposal the consummation of which would constitute an “alternative transaction” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions”) (other than discussions solely to clarify whether any proposal or offer constitutes an alternative transaction); or
participate in any discussions or negotiations, or knowingly cooperate with any person (or group of persons) with respect to any inquiries regarding, or the making of, any proposal the consummation of which would constitute an alternative transaction (other than to state that the terms of this provision prohibit such discussions or negotiations or discussions solely to clarify whether such proposal or offer constitutes an alternative transaction).
Notwithstanding these restrictions, the merger agreement provides that, at any time prior to obtaining the Knoll stockholder approval or Herman Miller shareholder approval, as applicable, the Knoll Board or Herman Miller Board, as applicable, determines in good faith (after consultation with its outside counsel and financial advisors) that any such proposal that did not result from a breach of the non-solicitation obligations set forth in the merger agreement (other than any breach that is immaterial in scope and effect) constitutes or would reasonably be expected to lead to a “superior proposal” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions”), subject to compliance with the non-solicitation obligations set forth in the merger agreement (other than any non-compliance that is immaterial in scope and effect), Knoll or Herman Miller, as applicable, its controlled affiliates and its and their representatives, in each case as applicable, may (1) furnish information with respect to itself and its affiliates to the person (or group of persons) making such proposal (and its representatives) (provided that all such
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information has previously been made available to the other party or is made available to the other party prior to or substantially concurrent with the time it is provided to such person) pursuant to a customary confidentiality agreement containing confidentiality terms no less restrictive in any material respect than the terms of the confidentiality agreement between Herman Miller and Knoll and that does not prohibit compliance with the terms of the non-solicitation obligations in the merger agreement, and (2) participate in discussions or negotiations regarding such proposal with the person (or group of persons) making such proposal and its representatives.
As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the exceptions summarized below, Herman Miller and Knoll have each agreed not to:
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify, or fail to make, in each case in a manner adverse to the other party, the recommendation of the Herman Miller Board or Knoll Board to approve the Herman Miller share issuance proposal and the Knoll merger proposal, respectively;
approve or recommend, or propose publicly to approve or recommend, any alternative transaction;
fail to include in this joint proxy statement/prospectus the recommendation of the Herman Miller Board or Knoll Board to approve the Herman Miller share issuance proposal and the Knoll merger proposal, respectively; or
fail to, within 10 business days after the commencement of a tender or exchange offer relating to shares of Herman Miller common stock or Knoll capital stock, as applicable, recommend rejection of such tender or exchange offer or to reaffirm the Herman Miller Board or Knoll Board recommendation to approve the Herman Miller share issuance proposal and the Knoll merger proposal, respectively.
Notwithstanding the above, the merger agreement provides that, in the event that Herman Miller or Knoll, prior to obtaining the required approval of its stockholders, determines in good faith (after consultation with its outside counsel and financial advisors) that it has received a superior proposal that was not solicited, initiated, knowingly encouraged or knowingly facilitated or otherwise procured in violation of the non-solicitation obligations set forth in the merger agreement (other than any violation that is immaterial in scope and effect), the Herman Miller Board or Knoll Board may change its recommendation or terminate the merger agreement if certain conditions are satisfied. The merger agreement further provides that, other than in connection with an alternative transaction or superior proposal, the Herman Miller Board or the Knoll Board may, prior to obtaining the required approval of its shareholders or stockholders, as applicable, in response to an “intervening event” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations”), take any action prohibited by the first and third bullets above if certain conditions are satisfied.
For a more complete description of the limitations on the solicitation of transaction proposals from third parties and the ability of the Herman Miller Board or the Knoll Board, as applicable, to change its respective recommendation with respect to the transaction or terminate the merger agreement in order to enter into an alternative transaction, see “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions” and “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations.”
Termination of the Merger Agreement (page 135)
The merger agreement may be terminated by mutual written consent of Knoll and Herman Miller at any time before the completion of the merger. In addition, the merger agreement may be terminated by either Knoll or Herman Miller:
if a relevant legal restraint permanently restraining, enjoining, making illegal or otherwise prohibiting the consummation of the merger has become final and nonappealable, so long as the terminating party has not breached any obligation under the merger agreement in any material respect that has proximately caused or resulted in such action or event;
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if the merger has not been consummated on or before the “end date” (as defined in the section entitled “The Merger Agreement—Termination”); provided that the right to terminate the merger agreement under this bullet point will not be available to a party whose breach of any obligation under the merger agreement in any material respect has proximately caused or resulted in the failure of the merger to occur on or before the end date; or
if (i) the Knoll stockholders do not approve the Knoll merger proposal upon a vote taken at the Knoll special meeting (or, if the Knoll special meeting has been adjourned or postponed in accordance with the merger agreement, at the final adjournment or postponement thereof) or (ii) the Herman Miller shareholders do not approve the Herman Miller share issuance proposal upon a vote taken at the Herman Miller special meeting (or, if the Herman Miller special meeting has been adjourned or postponed in accordance with the merger agreement, at the final adjournment or postponement thereof).
In addition, the merger agreement may be terminated by Herman Miller:
if there has been a breach by the Knoll of any of its representations, warranties, covenants or agreements set forth in the merger agreement such that the closing conditions relating to accuracy of Knoll’s representations or warranties or Knoll’s performance of covenants would not be satisfied, subject to certain limitations;
prior to the approval of the Knoll merger proposal by Knoll stockholders, if the Knoll Board has effected a recommendation change (whether or not such recommendation change is permitted by the merger agreement); or
at any time prior to the receipt of approval of the Herman Miller share issuance proposal by Herman Miller shareholders, in order for Herman Miller to enter into a definitive agreement with respect to a superior proposal to the extent permitted by, and subject to the applicable terms and conditions of, the merger agreement; provided that prior to or substantially concurrently with such termination, Herman Miller pays or causes to be paid to Knoll the Herman Miller termination fee.
Further, the merger agreement may be terminated by Knoll:
if there has been a breach by Herman Miller of any of its representations, warranties, covenants or agreements set forth in the merger agreement such that the closing conditions relating to accuracy of Herman Miller’s representations or warranties or Herman Miller’s performance of covenants would not be satisfied, subject to certain limitations;
prior to approval of the Herman Miller share issuance proposal by the Herman Miller shareholders, if the Herman Miller Board has effected a recommendation change (whether or not such recommendation change is permitted by the merger agreement); or
at any time prior to approval of the Knoll merger proposal by the Knoll stockholders, in order for Knoll to enter into a definitive agreement with respect to a superior proposal to the extent permitted by, and subject to the applicable terms and conditions of, the merger agreement; provided that prior to or substantially concurrently with such termination Knoll pays or causes to be paid to Herman Miller the Knoll termination fee.
In the event of termination of the merger agreement, the merger agreement (other than certain provisions as set forth in the merger agreement) will become void and of no effect with no liability on the part of any party to the merger agreement or any of its representatives or affiliates (other than the obligation of a party to pay a termination fee or no vote fee, if applicable), subject to certain limitations. For additional information, see the section entitled “The Merger Agreement—Termination.”
Termination Payments (page 136)
Termination Fee Payable by Knoll
The merger agreement provides for payment of a termination fee by Knoll to Herman Miller of $43 million in connection with a termination of the merger agreement under the following circumstances:
Herman Miller terminates the merger agreement due to a “Knoll recommendation change” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations”);
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either Herman Miller or Knoll terminates the merger agreement due to Knoll stockholder approval not being obtained at a time when Herman Miller had the right to terminate the merger agreement due to a Knoll recommendation change;
Knoll terminates the merger agreement to enter into a definitive agreement with respect to a superior proposal; or
(i) (A) Herman Miller or Knoll terminates the merger agreement due to Knoll stockholder approval not being obtained, and on or before the date of the Knoll stockholders meeting a Knoll alternative transaction was publicly announced or publicly disclosed and had not been publicly withdrawn at least four business days prior to the Knoll stockholders meeting or (B) Herman Miller or Knoll terminates the merger agreement due to the merger not having been consummated prior to the end date and following the execution of the merger agreement and on or before the date of any such termination a Knoll alternative transaction was publicly announced or publicly disclosed or otherwise communicated to the Knoll Board and not withdrawn at least four business days prior to the date of such termination and (ii) within 12 months after the date of such termination, Knoll or any of its subsidiaries enters into a definitive agreement with respect to a Knoll alternative transaction or consummates a Knoll alternative transaction (with any reference in the definition of Knoll alternative transaction to “20%” deemed to be a reference to “50%”).
Termination Fee Payable by Herman Miller
The merger agreement provides for payment of a termination fee by Herman Miller to Knoll of $74 million in connection with a termination of the merger agreement under the following circumstances:
Knoll terminates the merger agreement due to a “Herman Miller recommendation change” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations”);
either Herman Miller or Knoll terminates the agreement due to Herman Miller shareholder approval not being obtained at a time when Knoll had the right to terminate the merger agreement due to a Herman Miller recommendation change;
Herman Miller terminates the merger agreement to enter into a definitive agreement with respect to a superior proposal; or
(i) (A) Herman Miller or Knoll terminates the merger agreement due to Herman Miller shareholder approval not being obtained, and on or before the date of the Herman Miller shareholders meeting a Herman Miller alternative transaction was publicly announced or publicly disclosed and had not been publicly withdrawn at least four business days prior to the Herman Miller shareholders meeting or (B) Herman Miller or Knoll terminates the merger agreement due to the merger not having been consummated prior to the end date and following the execution of the merger agreement and on or before the date of any such termination a Herman Miller alternative transaction was publicly announced or publicly disclosed or otherwise communicated to the Herman Miller Board and not withdrawn at least four business days prior to the date of such termination and (ii) within 12 months after the date of such termination, Herman Miller or any of its subsidiaries enters into a definitive agreement with respect to a Herman Miller alternative transaction or consummates a Herman Miller alternative transaction (with any reference in the definition of Herman Miller alternative transaction to “20%” deemed to be a reference to “50%”).
Knoll No Vote Payment
The merger agreement requires Knoll to pay Herman Miller the Knoll no vote payment of $7.5 million if either Knoll or Herman Miller terminates the merger agreement due to Knoll stockholder approval of the Knoll merger proposal not being obtained upon a vote at the Knoll stockholders meeting (other than in a circumstance where the Knoll termination fee is payable). In no event will Herman Miller be entitled to receive more than one payment of the Knoll no vote payment. If Herman Miller receives the Knoll termination fee, then Herman Miller will not be entitled to also receive the Knoll no vote payment. Upon the payment of any Knoll termination fee, any previously paid Knoll no vote payment will be credited against the amount of such termination fee.
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Herman Miller No Vote Payment
The merger agreement requires Herman Miller to pay Knoll the Herman Miller no vote payment of $15 million if either Knoll or Herman Miller terminates the merger agreement due to Herman Miller shareholder approval of the Herman Miller share issuance proposal not being obtained upon a vote at the Herman Miller shareholders meeting (other than in a circumstance where the Herman Miller termination fee is payable). In no event will Knoll be entitled to receive more than one payment of the Herman Miller no vote payment. If Knoll receives the Herman Miller termination fee, then Knoll will not be entitled to also receive the Herman Miller no vote payment. Upon the payment of any Herman Miller termination fee, any previously paid Herman Miller no vote payment will be credited against the amount of such termination fee.
For a more complete description of each party’s termination rights and the related termination payment obligations, see “The Merger Agreement—Termination” and “The Merger Agreement—Termination Payments and Expenses.”
Appraisal Rights (page 197)
Under the DGCL, if the merger is completed, record holders of Knoll capital stock who do not vote in favor of the Knoll merger proposal and who otherwise properly exercise and perfect their appraisal rights will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of capital stock, in lieu of receiving the merger consideration. The “fair value” could be higher or lower than, or the same as, the merger consideration. The relevant provisions of the DGCL are included as Annex F to this proxy statement/prospectus. Knoll stockholders are encouraged to read these provisions carefully and in their entirety. Moreover, due to the complexity of the procedures for exercising and perfecting the right to seek appraisal, Knoll stockholders who are considering exercising and perfecting that right are encouraged to seek the advice of legal counsel. Failure to comply strictly with these provisions may result in loss of the right of appraisal.
All of the outstanding shares of Knoll preferred stock are held by Investindustrial. Under the voting agreement, Investindustrial has irrevocably and unconditionally waived, and agreed not to exercise, all appraisal rights under Section 262 of the DGCL (and any other appraisal, dissenters’ or similar rights) related to the transactions contemplated by the merger agreement with respect to the Knoll capital stock subject to the voting agreement, to the fullest extent permitted by law.
For a more complete description of Knoll stockholders’ appraisal rights, see “Appraisal Rights” beginning on page 197.
Voting Agreement (page 140)
Concurrently with the execution of the merger agreement, Furniture Investments Acquisitions S.C.S., an Investindustrial entity, entered into a voting and support agreement (which we refer to as the “voting agreement”), with Herman Miller, pursuant to which, among other things, and subject to the terms and conditions of the voting agreement, Investindustrial has agreed to vote all of the shares of Knoll preferred stock beneficially owned by it, and any shares of Knoll common stock beneficially owned by it at the time of the Knoll special meeting, in favor of the Knoll merger proposal. The voting agreement terminates upon certain events, including a Knoll recommendation change and the termination of the merger agreement in accordance with its terms.
Investindustrial beneficially owns all of the outstanding shares of Knoll preferred stock, representing approximately 16.96% of the total aggregate voting power of the shares of Knoll capital stock issued and outstanding as of the record date for the Knoll special meeting.
For a more detailed description of the voting agreement, see the section entitled “The Voting Agreement.”
Preferred Stock Purchase Agreement (page 142)
Concurrently with the execution of the merger agreement, Herman Miller and Furniture Investments Acquisitions S.C.S., an Investindustrial entity, entered into a stock purchase agreement (which we refer to as the “preferred stock purchase agreement”), pursuant to which, among other things, and subject to the terms and conditions of the preferred stock purchase agreement, Herman Miller has agreed to purchase all of the shares of
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Knoll preferred stock held by Investindustrial immediately prior to, and conditioned upon the occurrence of, the effective time of the merger for $1,496.12 per share of Knoll preferred stock, in cash, without interest. The preferred stock consideration represents an equivalent price per share of $25.06 for each share of Knoll common stock underlying each share of Knoll preferred stock as of the date of execution of the preferred stock purchase agreement.
Under the terms of the preferred stock purchase agreement, Investindustrial has agreed not to transfer, sell, dispose of, encumber, or exercise any conversion rights with respect to, any shares of Knoll preferred stock held by it, whether held as of the date of the preferred stock purchase agreement or subsequently acquired.
For a more detailed description of the preferred stock purchase agreement, see the section entitled “The Preferred Stock Purchase Agreement.”
Material U.S. Federal Income Tax Consequences of the Merger (page 106)
The receipt of merger consideration in exchange for shares of Knoll common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. For U.S. federal income tax purposes, a U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) will generally recognize gain or loss equal to the difference, if any, between (i) the sum of the cash and the fair market value of the Herman Miller common stock received in the merger and (ii) the U.S. holder’s adjusted tax basis in the Knoll common stock surrendered in exchange therefor. Non-U.S. holders (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) that receive the merger consideration pursuant to the merger may be subject to U.S. withholding tax with respect to any cash received.
For a more detailed description of the U.S. federal income tax consequences of the merger, see the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” The tax consequences of the merger to a particular holder of Knoll common stock will depend on such holder’s particular facts and circumstances. Holders of Knoll common stock should consult their own tax advisors to determine the specific tax consequences of the merger to them, including the applicability and effect of any U.S. federal, state and local tax laws, as well as any non-U.S. tax laws.
Accounting Treatment (page 109)
Herman Miller and Knoll prepare their respective financial statements in accordance with GAAP. The transaction will be accounted for in accordance with FASB ASC Topic 805, Business Combinations, with Herman Miller considered as the acquiror and Knoll as the acquiree. Accordingly, consideration to be given by Herman Miller to complete the transaction with Knoll will be allocated to the identifiable tangible and intangible assets acquired and liabilities assumed of Knoll based on their estimated fair values as of the date of the completion of the transaction, with any excess merger consideration being recorded as goodwill.
Litigation Relating to the Merger (page 110)
As of June 9, 2021, two lawsuits had been filed in the United States District Court for the Southern District of New York and one lawsuit had been filed in the United States District Court for the District of New Jersey, each in connection with the merger.
On May 27, 2021, Shiva Stein, a purported Knoll stockholder, filed a complaint, Stein v. Knoll, Inc. et al., C.A. No. 1:21-cv-4759, in the United States District Court for the Southern District of New York, against Knoll and the members of the Knoll Board (which we refer to as the “Stein lawsuit”). The Stein lawsuit alleges claims under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder contending, among other things, that the registration statement on Form S-4 filed by Herman Miller on May 24, 2021 in connection with the merger is inaccurate or misleading, including in respect of the disclosures concerning the analyses performed by Knoll’s financial advisor in support of its fairness opinion. Among other relief, the Stein lawsuit seeks injunctive relief, including enjoining the merger unless and until the defendants disclose the allegedly omitted material information, rescinding the merger in the event the defendants consummate the merger (or awarding rescissory damages), damages, and an award of attorneys’ and experts’ fees and expenses.
On June 8, 2021, David Gatto Jr., also a purported Knoll stockholder, filed a complaint, Gatto v. Knoll, Inc. et al., C.A. No. 2:21-cv-12287, in the United States District Court for the District of New Jersey, against Knoll
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and the members of the Knoll Board (which we refer to as the “Gatto lawsuit”). In addition to allegations, claims and relief sought that are substantially similar to those in the Stein lawsuit, the Gatto lawsuit alleges that the registration statement on Form S-4 filed by Herman Miller on May 24, 2021 in connection with the merger omits material information concerning the sales process leading up to the merger and potential conflicts of interest involving Knoll’s financial advisor.
On June 9, 2021, Marc Waterman, also a purported Knoll stockholder, filed a complaint, Waterman v. Knoll, Inc. et al., C.A. No. 1:21-cv-05119, in the United States District Court for the Southern District of New York, against Knoll, the members of the Knoll Board, Herman Miller and Merger Sub (which we refer to as the “Waterman lawsuit”). The allegations, claims, and relief sought in the Waterman lawsuit are substantially similar to those in the Stein lawsuit and Gatto lawsuit.
For additional information, see the section entitled “The Merger—Litigation Relating to the Merger.”
Rights of Knoll Stockholders Will Change as a Result of the Merger (page 177)
Knoll stockholders will have different rights once they become Herman Miller shareholders due to differences between the organizational documents of Herman Miller and Knoll. These differences are described in more detail under “Comparison of the Rights of Herman Miller Shareholders and Knoll Stockholders.”
Risk Factors (page 33)
You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in this joint proxy statement/prospectus. In particular, you should carefully consider the risks that are described in the section entitled “Risk Factors.”
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF HERMAN MILLER
The following table presents selected historical consolidated financial data for Herman Miller as of and for the fiscal years ended May 30, 2020, June 1, 2019, June 2, 2018, June 3, 2017, May 28, 2016 and as of and for the nine months ended February 27, 2021 and February 29, 2020. The statement of operations data and cash flow data for the years ended May 30, 2020, June 1, 2019 and June 2, 2018 and the balance sheet data as of May 30, 2020 and June 1, 2019 have been obtained from Herman Miller’s audited consolidated financial statements incorporated by reference in Herman Miller’s Annual Report on Form 10-K for the year ended May 30, 2020, which is incorporated by reference into this joint proxy statement/prospectus. The statement of operations data for the years ended June 3, 2017 and May 28, 2016 and the balance sheet data as of June 2, 2018, June 3, 2017 and May 28, 2016 have been derived from Herman Miller’s audited consolidated financial statements for such years, which have not been incorporated by reference into this joint proxy statement/prospectus. The financial data as of and for the nine months ended February 27, 2021 and the statement of comprehensive income data and cash flow data for the nine months ended February 29, 2020 have been derived from Herman Miller’s unaudited condensed consolidated financial statements included in Herman Miller’s Quarterly Report on Form 10-Q for the quarter ended February 27, 2021, which is incorporated by reference into this joint proxy statement/prospectus. The balance sheet data as of February 29, 2020 has been derived from Herman Miller’s unaudited condensed consolidated financial statements for such quarter, which have not been incorporated by reference into this joint proxy statement/prospectus.
The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Herman Miller’s Annual Report on Form 10-K for the year ended May 30, 2020 and Herman Miller’s Quarterly Report on Form 10-Q for the nine months ended February 27, 2021, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. See the section entitled “Where You Can Find More Information.”
 
Nine Months Ended
Fiscal
(In millions, except ratio and per share data)
2/27/2021
2/29/2020
2020
2019
2018
2017
2016
Operating Results
 
 
 
 
 
 
 
Net sales
$1,843.6
$2,010.8
$2,486.6
$2,567.2
$2,381.2
$2,278.2
$2,264.9
Gross margin
725.2
744.9
910.7
929.9
873.0
864.2
874.2
Selling, general, and administrative(1)
451.7
514.5
669.7
649.5
621.0
592.9
585.6
Impairment charges
205.4
7.1
Design and research
52.0
57.4
74.0
76.9
73.1
73.1
77.1
Operating earnings (loss)
221.5
173.0
(38.4)
203.5
178.9
191.1
211.5
Earnings (loss) before income taxes and equity income
219.3
196.0
(13.4)
195.1
168.1
177.6
196.6
Net earnings (loss)
169.5
163.9
(14.4)
160.5
128.7
124.1
137.5
Net cash provided by operating activities
260.1
191.8
221.8
216.4
166.5
202.1
210.4
Net cash (used in) investing activities
(42.9)
(171.3)
(168.1)
(165.0)
(62.7)
(116.3)
(80.8)
Net cash (used in) provided by financing activities
(287.3)
(69.8)
244.0
(91.9)
2.5
(74.6)
(106.5)
Depreciation and amortization
64.8
59.7
79.5
72.1
66.9
58.9
53.0
Capital expenditures
42.8
56.5
69.0
85.8
70.6
87.3
85.1
Common stock repurchased plus cash dividends paid
24.3
62.3
63.0
93.5
88.9
63.1
49.0
Share and Per Share Data
 
 
 
 
 
 
 
Earnings (loss) per share-diluted
$2.80
$2.78
$(0.15)
$2.70
$2.12
$2.05
$2.26
Cash dividends declared per share
0.38
0.63
0.63
0.79
0.72
0.68
0.59
Book value per share at period end(2)
14.41
14.23
10.94
12.23
11.22
9.84
8.76
Market price per share at period end
38.35
34.21
23.02
35.49
32.85
32.70
31.64
Weighted average shares outstanding-diluted
59.2
59.3
58.9
59.4
60.3
60.6
60.5
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Nine Months Ended
Fiscal
(In millions, except ratio and per share data)
2/27/2021
2/29/2020
2020
2019
2018
2017
2016
Financial Condition
 
 
 
 
 
 
 
Total assets
$2,054.9
$1,985.8
$2,053.9
$1,569.3
$1,479.5
$1,306.3
$1,235.2
Working capital(3)
368.6
130.2
403.8
215.2
231.6
106.2
90.5
Interest-bearing debt and related swap agreements(4)
336.0
287.8
558.8
282.8
265.1
197.8
221.9
Stockholders’ equity
850.1
836.8
643.0
719.2
664.8
587.7
524.7
Total capital(5)
1,186.1
1,124.6
1,201.8
1,002.0
929.9
785.5
746.6
(1)
Selling, general, and administrative expenses include restructuring expenses in years that are applicable.
(2)
Calculated as total stockholders’ equity divided by common shares of stock outstanding.
(3)
Calculated using current assets less current liabilities.
(4)
Amounts shown include the fair market value of the Company’s interest rate swap arrangement(s).
(5)
Calculated as interest-bearing debt and related swap agreements plus stockholders’ equity.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF KNOLL
The following table presents selected historical consolidated financial data for Knoll as of and for the fiscal years ended December 31, 2020, 2019, 2018, 2017 and 2016 and as of and for the three months ended March 31, 2021 and March 31, 2020. The statement of operations data and cash flow data for the years ended December 31, 2020, 2019, 2018 and the balance sheet data as of December 31, 2020 and 2019 have been obtained from Knoll’s audited consolidated financial statements included in Knoll’s Current Report on Form 8-K dated May 12, 2021, which is incorporated by reference into this joint proxy statement/prospectus. The statement of operations data for the fiscal years ended December 31, 2017 and 2016 and the balance sheet data as of December 31, 2018, 2017, 2016 have been derived from Knoll’s audited consolidated financial statements for such years, which have not been incorporated by reference into this joint proxy statement/prospectus. The financial data as of and for the three months ended March 31, 2021 and the statement of operations data and cash flow data for the three months ended March 31, 2020 have been obtained from Knoll’s unaudited condensed consolidated financial statements included in Knoll’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which is incorporated by reference into this joint proxy statement/prospectus. The balance sheet data as of March 31, 2020 has been derived from Knoll’s unaudited condensed consolidated financial statements for such quarter, which have not been incorporated by reference into this joint proxy statement/prospectus.
The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Knoll's Current Report on Form 8-K dated May 12, 2021, Knoll’s Annual Report on Form 10-K for the year ended December 31, 2020 and Knoll’s Quarterly Report on Form 10-Q for the three months ended March 31, 2021, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein.” See the section entitled “Where You Can Find More Information.”
 
Three Months Ended
Fiscal
(in millions, except ratio and per share data)
3/31/2020
3/31/2021
2020
2019
2018
2017
2016
Operating Results
 
 
 
 
 
 
 
Sales
$340.0
$264.2
$1,236.4
$1,428.1
$1,302.3
$1,132.9
$1,164.3
Gross profit
122.3
95.7
442.7
549.0
481.5
414.6
446.0
Selling, general, and administrative expenses(1)
110.9
93.4
401.3
412.7
366.3
317.8
315.5
Impairment charges
0.0
0.9
1.4
6.5
0.0
16.3
0.0
Operating profit
11.4
2.3
27.6
129.8
115.2
80.5
130.5
Income before income tax expenses(benefit)
7.0
(1.7)
6.9
90.9
98.2
78.6
127.5
Net earnings (loss)
10.9
(1.9)
7.7
67.5
73.3
80.2
82.1
Net earnings (loss) available to common stockholders
10.9
(3.8)
4.4
67.5
73.3
80.2
82.1
Share and Per Share Data
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$0.22
$(0.08)
$0.09
$1.38
$1.51
$1.66
$1.71
Diluted
$0.22
$(0.08)
$0.09
$1.36
$1.49
$1.63
$1.68
Cash dividends declared per share
0.17
0.06
0.33
0.66
0.60
0.60
0.60
Weighted average shares
 
 
 
 
 
 
 
Basic
49.0
49.3
49.1
48.8
48.7
48.4
48.1
Diluted
49.7
49.3
49.5
49.5
49.2
49.2
48.9
Financial Condition
 
 
 
 
 
 
 
Working capital(2)
215.7
72.0
108.4
50.6
58.8
55.2
54.4
Total assets
$1,496.3
$1,451.3
$1,453.1
$1,357.9
$1,226.9
$861.0
$858.6
Total long-debt, including current portion
606.3
283.8
309.8
446.0
461.1
191.0
218.4
Total liabilities
$1,092.6
$847.9
$840.2
$930.3
$840.4
$502.3
$549.1
Total equity
403.7
436.5
447.8
427.6
386.5
358.7
309.5
(1)
Selling, general, and administrative expenses include restructuring expenses in years that are applicable.
(2)
Calculated using current assets less current liabilities.
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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following table shows selected unaudited pro forma combined financial information about the financial condition and results of operations of the combined company after giving effect to the transactions as described in the section entitled “Unaudited Pro Forma Combined Financial Information.” The selected unaudited pro forma combined balance sheet data as of February 27, 2021 give effect to the transactions as if they occurred on February 27, 2021. The selected unaudited pro forma combined statement of operations data for the year ended May 30, 2020 and for the nine months ended February 27, 2021 give effect to the transactions as if they occurred on June 2, 2019, the first day of Herman Miller’s 2020 fiscal year.
The selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma combined financial information of the combined company appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the pro forma financial information. Additionally, the unaudited pro forma combined financial information contains estimated adjustments, based upon available information and certain assumptions that we believe are reasonable under the circumstances. The summary unaudited pro forma condensed combined financial information set forth below has been presented for informational purposes only and is not necessarily indicative of what the combined financial condition or results of operations actually would have been had the transaction been completed as of the dates indicated. In addition, the summary unaudited pro forma condensed combined financial information presented below does not purport to project the combined financial condition or operating results for any future period.
The assumptions underlying the pro forma adjustments are described in greater detail in the section entitled “Notes to Unaudited Pro Forma Combined Financial Information.” In addition, the pro forma financial information was based on, and should be read in conjunction with, the historical consolidated financial statements and related notes of Herman Miller and Knoll for the applicable periods, which have been incorporated in this joint proxy statement/prospectus by reference. See the sections entitled “Unaudited Pro Forma Combined Financial Information” and “Where You Can Find More Information” for additional information.
(In millions, except per share amounts)
Twelve Months Ended
May 30, 2020
Nine Months Ended
February 27, 2021
Consolidated Statement of Operations Data
 
 
Total net sales
$3,808.7
$2,715.4
Total costs and expenses
$3,836.0
$2,567.5
Net (loss) earnings
$(27.3)
$147.9
Net earnings per common share:
 
 
Basic net (loss) earnings per share
$(0.29)
$1.92
Diluted net (loss) earnings per share
$(0.29)
$1.88
(In millions)
As of
February 27, 2021
Consolidated Balance Sheet Data
 
Cash and cash equivalents
$146.9
Total assets
$4,377.6
Total short and long-term debt
$1,277.7
Total liabilities
$2,750.0
Total redeemable noncontrolling interest
$59.1
Total stockholders’ equity
$1,568.5
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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table summarizes selected historical per share information of Herman Miller and Knoll and unaudited pro forma combined per share information giving effect to the merger as contemplated in the merger agreement.
The unaudited pro forma income from continuing operations per share for the year ended May 30, 2020 reflects the transactions as if they had occurred on June 2, 2019. The book value per share reflects the transactions as if they had occurred on February 27, 2021. The information in the table is based on, and should be read together with, the historical financial information of Herman Miller and Knoll which is incorporated by reference in this joint proxy statement/prospectus and the financial information contained under “Unaudited Pro Forma Combined Financial Information,” “Selected Historical Financial Data—Selected Historical Consolidated Financial Data of Herman Miller” and “Selected Historical Financial Data—Selected Historical Consolidated Financial Data of Knoll.” See the section entitled “Where You Can Find More Information.”
The unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of operations that would have been realized if the transactions had been completed as of the dates indicated or will be realized upon the completion of the transactions. The summary pro forma information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information regarding the fair values is obtained, which changes could be materially different than the initial estimates.
 
Herman Miller 12 Months Ended
5/30/2020
Knoll 12 Months Ended
6/30/2020
 
Historical
Pro Forma
Condensed
Combined
Historical
Pro Forma
Equivalent(i)
Basic net (loss) earnings per share
$(0.15)
$(0.29)
$0.59
$(0.09)
Diluted net (loss) earnings per share
(0.15)
(0.29)
0.58
(0.09)
Book value per share
10.94
N/A
7.98
N/A
Dividends per share(ii)
0.63
0.63
0.55
N/A
 
Herman Miller 9 Months Ended
2/27/21
Knoll 9 Months Ended
3/31/21
 
Historical
Pro Forma
Condensed
Combined
Historical
Pro Forma
Equivalent(i)
Basic net earnings (loss) per share
$2.81
$1.92
$(0.01)
$0.61
Diluted net earnings (loss) per share
2.80
1.88
(0.01)
0.60
Book value per share
14.41
N/A
8.59
N/A
Dividends per share(ii)
0.38
0.38
0.18
N/A
(i)
The Knoll unaudited pro forma equivalent data was calculated using an exchange ratio of 0.32. The exchange ratio does not include the cash consideration.
(ii)
The pro forma dividends per share are based solely on Herman Miller’s historical dividends. The dividend per share for the combined company will be determined by the Herman Miller Board following the completion of the transaction.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus, and the documents to which Herman Miller and Knoll refer you to in this joint proxy statement/prospectus, may include certain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to future events and anticipated results of operations and business strategies, statements regarding the merger, including the anticipated benefits of the merger, the anticipated impact of the merger on the combined company’s business and future financial and operating results, the expected amount and timing of synergies from the merger, and the anticipated closing date for the proposed transaction and other aspects of operations or operating results. These forward-looking statements generally can be identified by phrases such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of the combined company or the price of Herman Miller or Knoll common stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond the parties’ control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to:
the impact of public health crises, such as pandemics (including coronavirus (COVID-19)) and epidemics, and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets;
the effect of the announcement of the merger on the ability of Herman Miller or Knoll to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom Herman Miller or Knoll does business, or on Herman Miller’s or Knoll’s operating results and business generally;
risks that the merger disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger;
the outcome of any legal proceedings related to the merger;
the ability of the parties to consummate the transactions contemplated by the merger agreement and preferred stock purchase agreement on a timely basis or at all;
the satisfaction of the conditions precedent to consummation of the proposed transactions, including the ability to secure regulatory approvals on the terms expected, at all or in a timely manner;
the ability of Herman Miller to successfully integrate Knoll’s operations;
the ability of Herman Miller to implement its plans, forecasts and other expectations with respect to Herman Miller’s business after the completion of the transactions and realize expected synergies;
business disruptions following the merger;
the ability to realize the anticipated benefits of the merger, including the possibility that the expected benefits from the merger will not be realized within the expected time period;
the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement or the preferred stock purchase agreement;
the amount of the costs, fees, expenses and charges related to the transactions;
unknown liabilities;
the impact of foreign currency exchange rate and interest rate fluctuations on Herman Miller’s or Knoll’s results;
the effect of general economic and market conditions;
the willingness of Herman Miller’s or Knoll’s customers to undertake capital expenditures;
the types of products purchased by Herman Miller’s and Knoll’s customers;
the competitive nature of the market in which the parties participate;
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the availability and pricing of raw materials;
Herman Miller’s ability to locate new retail studios, negotiate favorable lease terms for new and existing locations and implement our studio portfolio transformation;
the financial strength of Herman Miller’s or Knoll’s dealers and the financial strength of their customers;
Herman Miller’s or Knoll’s ability to integrate and benefit from acquisitions and investments;
the success of newly-introduced products;
changes in future tax legislation or interpretation of current tax legislation;
the pace and level of government procurement; and
the outcome of pending litigation or governmental audits or investigations.
All of the forward-looking statements Herman Miller and Knoll make in this joint proxy statement/prospectus are qualified by the information contained or incorporated by reference herein, including the information contained in this section and the information detailed in Herman Miller’s Annual Report on Form 10-K for the fiscal year ended May 30, 2020 and Herman Miller’s Quarterly Reports on Form 10-Q for the quarterly periods ended August 29, 2020, November 28, 2020 and February 27, 2021, Current Reports on Form 8-K and other filings Herman Miller makes with the SEC, which are incorporated herein by reference, and in Knoll’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Knoll’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, Current Reports on Form 8-K and other filings Knoll makes with the SEC, which are incorporated herein by reference. For additional information, see the sections entitled “Risk Factors” and “Where You Can Find More Information.”
Except as required by law, neither Herman Miller nor Knoll undertakes or assumes any obligation to update any forward-looking statements, whether as a result of new information or to reflect subsequent events or circumstances or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
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RISK FACTORS
Risks Related to the Transactions
The merger is subject to conditions, some or all of which may not be satisfied, on a timely basis or at all. Failure to complete the merger could have material adverse effects on Herman Miller and Knoll.
The completion of the merger is subject to a number of conditions, including the receipt of the Herman Miller shareholder approval and the Knoll stockholder approval and receipt of certain regulatory approvals, which make the completion and timing of the merger uncertain. See the section entitled “The Merger Agreement—Conditions to the Merger” for a more detailed discussion. The failure to satisfy all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring at all. There can be no assurance that the conditions to the completion of the merger will be satisfied or waived or that the merger will be completed.
If the merger is not completed, each of Herman Miller and Knoll may be materially adversely affected and, without realizing any of the benefits of having completed the merger, will be subject to a number of risks, including the following:
the market price of Herman Miller common stock or Knoll common stock could decline;
each of Herman Miller and Knoll could owe a termination fee or no vote payment to the other party in specified circumstances;
if the merger agreement is terminated and the Herman Miller Board or the Knoll Board seeks another business combination, Herman Miller shareholders or Knoll stockholders, as applicable, cannot be certain that Herman Miller or Knoll, as applicable, will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that the other party has agreed to in the merger agreement;
time and resources, financial and other, committed by Herman Miller’s and Knoll’s management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities;
Herman Miller or Knoll may experience negative reactions from the financial markets or from its customers, suppliers, dealers or employees; and
Herman Miller and Knoll will each be required to pay its costs relating to the merger, such as legal, accounting, financial advisory and printing fees, whether or not the merger is completed.
In addition, if the merger is not completed, each of Herman Miller and Knoll could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against such party to perform its obligations under the merger agreement. Any of these risks could materially and adversely impact Herman Miller’s or Knoll’s ongoing business, financial condition, financial results and stock price.
Similarly, delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with delay and uncertainty about completion of the merger and could materially and adversely impact Herman Miller’s and Knoll’s ongoing business, financial condition, financial results and stock price following the completion of the merger.
The merger is subject to the expiration or termination of the applicable waiting period under the HSR Act and the receipt of any required approvals, consents or clearances from certain regulatory authorities that may impose conditions that could have an adverse effect on Herman Miller, Knoll or the combined company or, if not obtained, could prevent completion of the merger.
Before the merger may be completed, any applicable waiting period (and any extension thereof) under the HSR Act relating to the completion of the merger must have expired or been terminated and any authorization or consent from a governmental authority required to be obtained with respect to the merger pursuant to the terms of the merger agreement must have been obtained, in each case, without the imposition of a burdensome condition. The applicable waiting period under the HSR Act expired at 11:59 p.m., Eastern Time, on June 2, 2021. The terms and conditions of the authorizations and consents that are granted, if any, may impose requirements, limitations or costs or place restrictions on the conduct of the combined company’s business or may materially delay the completion of the merger.
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Under the merger agreement, Herman Miller and Knoll have agreed to use their respective reasonable best efforts to obtain such authorizations and consents, and each of Herman Miller and, if requested by Herman Miller, Knoll, has agreed to take any and all steps necessary to avoid or eliminate each and every impediment under any antitrust law that may be asserted by any governmental authority so as to enable the completion of the merger as promptly as practicable. However, Herman Miller’s and Knoll’s obligations to take such actions are subject to limitations, including that Herman Miller will not be required to commit to or effect any action that, individually or in the aggregate, would or would reasonably be expected to have a materially adverse impact on Herman Miller and its subsidiaries after giving effect to the merger (calculated as if Herman Miller and its subsidiaries from and after the effective time of the merger were collectively the same size as Knoll and its subsidiaries prior to the effective time of the merger). For a more detailed description of Herman Miller’s and Knoll’s obligations to obtain required regulatory authorizations and approvals, see the section entitled “The Merger Agreement—Covenants and Agreements—Efforts to Complete the Merger.”
In addition, at any time before or after the completion of the merger, and notwithstanding the termination of applicable waiting periods, the applicable U.S. or foreign regulatory authorities or any state attorney general could take any action under antitrust or applicable foreign investment laws as such party deems necessary or desirable in the public interest. Such action could include, among other things, seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the parties. In addition, in some circumstances, a third party could initiate a private action challenging, seeking to enjoin, or seeking to impose conditions on the merger. Herman Miller and Knoll may not prevail and may incur significant costs in defending or settling any such action. For a more detailed description of the regulatory review process, see the section entitled “The Merger—Regulatory Approvals.”
There can be no assurance that the conditions to the completion of the merger set forth in the merger agreement relating to applicable regulatory laws will be satisfied.
The merger agreement contains provisions that limit Herman Miller’s and Knoll’s ability to pursue alternatives to the merger, could discourage a potential competing transaction counterparty of Herman Miller or Knoll from making a favorable alternative transaction proposal, and provide that, in specified circumstances, each of Herman Miller and Knoll would be required to pay a termination fee.
The merger agreement contains provisions that make it more difficult for each of Herman Miller and Knoll to be acquired by, or enter into certain combination transactions with, a third party. Subject to certain exceptions, the merger agreement contains certain provisions that restrict each of Herman Miller’s and Knoll’s ability to, among other things, solicit, initiate or knowingly encourage, or take any other action to facilitate any alternative transaction, or participate in any discussions or negotiations, or cooperate in any way with any person, with respect to any “alternative transaction.” In addition, following receipt by either Herman Miller or Knoll of any alternative transaction proposal that constitutes a “superior proposal,” the other party will have an opportunity to offer to modify the terms of the merger agreement before the Herman Miller Board or the Knoll Board, as applicable, may withdraw or qualify its recommendation with respect to the Herman Miller share issuance proposal or the Knoll merger proposal, as applicable, in favor of such superior proposal, or terminate the merger agreement in order to enter into a definitive agreement with respect to the superior proposal as described further under “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations” and “The Merger Agreement—Termination.”
These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in Herman Miller or Knoll or pursuing an alternative transaction from considering or proposing such a transaction.
In some circumstances, upon termination of the merger agreement, Knoll would be required to pay a termination fee of $43 million or make a no vote payment of $7.5 million to Herman Miller, and in some circumstances, upon termination of the merger agreement, Herman Miller would be required to pay a termination fee of $74 million or make a no vote payment of $15 million to Knoll, each as contemplated by the merger agreement. For further discussion, see the section entitled “The Merger Agreement—Termination—Termination Payments and Expenses.”
If the merger agreement is terminated and either of Herman Miller or Knoll determines to seek another business combination transaction, Herman Miller or Knoll may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.
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The merger consideration is fixed and will not be adjusted. Because the market price of Herman Miller common stock may fluctuate, Knoll stockholders cannot be sure of the market value of the stock consideration they will receive in exchange for their shares of Knoll common stock in connection with the merger.
In connection with the merger, each share of Knoll common stock issued and outstanding immediately prior to the effective time of the merger (other than any excluded shares, converted shares, dissenting shares and shares subject to Knoll option awards, Knoll restricted stock awards and Knoll PSU awards) will be converted into the right to receive (a) $11.00 in cash, without interest, and (b) 0.32 shares of Herman Miller common stock (with, if applicable, cash in lieu of fractional shares). Accordingly, the market value of the stock consideration that holders of Knoll common stock will receive will vary based on the price of Herman Miller common stock at the time such holders receive the merger consideration. The market price of Herman Miller common stock may decline after the date of this joint proxy statement/prospectus or after you exchange your shares at the closing.
A decline in the market price of Herman Miller common stock could result from a variety of factors beyond Herman Miller’s control, including, among other things, the possibility that Herman Miller may not achieve the expected benefits of the acquisition of Knoll as rapidly or to the extent anticipated, Herman Miller’s business may not perform as anticipated following the closing, the effect of Herman Miller’s acquisition of Knoll on Herman Miller’s financial results may not meet the expectations of Herman Miller, financial analysts or investors, or the addition and integration of Herman Miller’s business may be unsuccessful, may take longer or be more disruptive than anticipated, as well as numerous factors affecting Herman Miller and its businesses that are unrelated to Knoll.
If the merger is completed, there will be a lapse of time between each of the date of this joint proxy statement/prospectus, the date on which Herman Miller shareholders vote to approve the Herman Miller share issuance proposal at the Herman Miller special meeting, the date on which Knoll stockholders vote to approve the Knoll merger proposal as the Knoll special meeting, and the date on which Knoll stockholders entitled to receive the merger consideration actually receive the merger consideration. The market value of shares of Herman Miller common stock may decline during and after these periods as a result of a variety of factors, and consequently, at the time Knoll stockholders must decide whether to approve the merger proposal, they will not know the actual market value of any merger consideration they will receive when the merger is completed. The actual value of any merger consideration received by Knoll stockholders at the completion of the merger will depend on the market value of the shares of Herman Miller common stock at that time.
You are urged to obtain current market quotations for shares of Knoll common stock and for shares of Herman Miller common stock.
Herman Miller may be unable to successfully integrate the businesses of Herman Miller and Knoll and realize the anticipated benefits of the merger.
The success of the merger will depend, in part, on Herman Miller’s ability to successfully combine and integrate the businesses of Herman Miller and Knoll, which currently operate as independent public companies, and realize the anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies, from the merger, in a manner that does not materially disrupt existing customer, payer, dealer, supplier, employee and other stakeholder relations nor result in decreased revenues due to losses of, or decreases in orders by, customers and payers. If Herman Miller is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of Herman Miller common stock may decline.
The integration of the two companies may result in material challenges, including, without limitation:
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the merger and related integration work;
managing a larger and more complex combined business;
maintaining employee morale, retaining key management and other employees and the possibility that the integration process and potential organizational changes may adversely impact the ability to maintain employee relationships;
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retaining existing business and operational relationships, including customers, dealers, suppliers, employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the merger, and attracting new business and operational relationships;
the integration process not proceeding as expected, including due to a possibility of faulty assumptions or expectations regarding the integration process or Herman Miller’s or Knoll’s operations;
consolidating corporate, administrative and compliance infrastructures and eliminating duplicative operations;
coordinating geographically separate organizations, including in international markets with differing business, legal and regulatory climates;
unanticipated issues in integrating information technology, communications and other systems; and
unforeseen expenses, costs, liabilities or delays associated with the merger or the integration.
Many of these factors will be outside of Herman Miller’s control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues or synergies and diversion of management’s time and energy, which could materially affect Herman Miller’s financial position, results of operations and cash flows.
Due to legal restrictions, Herman Miller and Knoll are currently permitted to conduct only limited planning for the integration of the two companies following the merger and have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized on a timely basis, if at all.
If the merger is completed, Knoll stockholders will receive shares of Herman Miller common stock as part of the merger consideration and will accordingly become Herman Miller shareholders. Herman Miller shareholders have different rights than Knoll stockholders.
Upon consummation of the merger, Knoll stockholders will receive shares of Herman Miller common stock as part of the merger consideration and will accordingly become Herman Miller shareholders. Following the completion of the merger, Knoll will be part of a larger company, so decisions affecting Knoll may be made in respect of the larger combined business as a whole rather than the Knoll business individually. For a discussion of the businesses of Herman Miller and Knoll and of some important factors to consider in connection with those businesses, see the section entitled “The Parties to the Merger” and the documents incorporated by reference in the section entitled “Where You Can Find More Information,” including, in particular, in the sections entitled “Risk Factors” in Herman Miller’s Annual Report on Form 10-K for the year ended May 30, 2020 and Quarterly Report on Form 10-Q for the quarter ended February 27, 2021 and Knoll’s Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
In addition, holders of shares of Herman Miller common stock will have rights as Herman Miller shareholders that differ from the rights they had as Knoll stockholders before the merger. For a comparison of the rights of Herman Miller shareholders to the rights of Knoll stockholders, see the section entitled “Comparison of the Rights of Herman Miller Shareholders and Knoll Stockholders.”
Each party is subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business and operations.
In connection with the pendency of the merger, it is possible that some customers, suppliers, dealers and other persons with whom Herman Miller and/or Knoll has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Herman Miller or Knoll, as the case may be, as a result of the merger or otherwise, which could negatively affect Herman Miller’s or Knoll’s respective revenues, earnings and/or cash flows, as well as the market price of Herman Miller common stock or Knoll common stock, regardless of whether the merger is completed.
Under the terms of the merger agreement, each of Herman Miller and Knoll is subject to certain restrictions on the conduct of its business prior to completing the merger which may adversely affect its ability to execute
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certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness, pay dividends, incur capital expenditures or settle claims. Such limitations could adversely affect each of Herman Miller’s and Knoll’s business and operations prior to the completion of the merger.
Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger. For further discussion, see the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Business.”
Knoll stockholders will be forfeiting all rights with respect to their shares of Knoll common stock other than the right to receive the merger consideration, including the right to participate directly in any earnings or future growth of Knoll.
If the merger is completed, Knoll stockholders will cease to have any equity interest in Knoll and will not participate in its earnings or any future growth, except indirectly through ownership of Herman Miller shares received as part of the merger consideration.
Knoll stockholders will have a reduced ownership and voting interest in Herman Miller as compared to their ownership and voting interest in Knoll and will exercise less influence over management.
Currently, Knoll stockholders have the right to vote in the election of the Knoll Board and the power to approve or reject any matters requiring stockholder approval under Delaware law and Knoll’s certificate of incorporation and bylaws. Upon completion of the merger, each Knoll stockholder who receives shares of Herman Miller common stock in the merger will become a shareholder of Herman Miller with a percentage ownership of Herman Miller that is smaller than the Knoll stockholder’s current percentage ownership of Knoll. Based on the number of outstanding shares of Herman Miller common stock and shares of Knoll common stock as of June 7, 2021 and the exchange ratio, after the merger, Knoll stockholders are expected to become owners of approximately 22% of the outstanding shares of Herman Miller common stock.
Consequently, even if all former Knoll stockholders voted together on all matters presented to Herman Miller shareholders from time to time, the former Knoll stockholders would exercise significantly less influence over Herman Miller after the completion of the merger relative to their influence over Knoll prior to the completion of the merger, and thus would have a less significant impact on the approval or rejection of future Herman Miller proposals submitted to a shareholder vote.
The merger may not be accretive, and may be dilutive, to Herman Miller’s earnings per share, which may negatively affect the market price of Herman Miller common stock.
In connection with the completion of the merger, based on the number of outstanding shares of Knoll common stock as of June 7, 2021, Herman Miller could issue up to approximately 16.3 million shares of Herman Miller common stock (not including shares issuable in connection with Knoll equity awards). The issuance of these new shares of Herman Miller common stock could have the effect of depressing the market price of Herman Miller common stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, Herman Miller’s earnings per share could cause the price of shares of Herman Miller common stock to decline or increase at a reduced rate.
There can be no assurance that Herman Miller will be able to secure the funds necessary to complete the transactions contemplated by the merger agreement and the preferred share purchase agreement, in a timely manner or at all.
Herman Miller anticipates that a portion of the funds needed to complete the transactions contemplated by the merger agreement and the preferred share purchase agreement will be derived from the debt financing. To this end, Herman Miller has entered into the debt commitment letter containing commitments as of the date of this joint proxy statement/prospectus for a senior secured term loan “B” facility in an aggregate principal amount of $725 million, a senior secured term loan “A” facility in an aggregate principal amount of $300 million and a senior secured revolving credit facility in an aggregate principal amount of $725 million. However, as of the date of this joint proxy statement/prospectus, neither Herman Miller nor any of its subsidiaries has entered into definitive agreements for the debt financing (or other financing arrangements in lieu thereof), and the obligation of the lenders to provide the debt financing under the debt commitment letter is subject to a number of conditions. There is a risk that these conditions will not be satisfied and the debt financing may not be available when required.
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In the event that the debt financing contemplated by the debt commitment letter is not available, there is a risk that other financing may not be available on acceptable terms, in a timely manner or at all. Although Herman Miller’s obligation to consummate the merger is not conditioned upon consummation of the debt financing, if Herman Miller is unable to obtain the debt financing, the merger may be delayed or not completed, in which case Herman Miller would be in breach of its obligations under the merger agreement. See the section entitled “The Merger Agreement—Financing Obligations” beginning on page 131 of this joint proxy statement/prospectus for more information.
The definitive documentation that will govern the indebtedness to be incurred in connection with the merger is expected to contain various covenants that impose restrictions on Herman Miller and certain of its subsidiaries that may affect their ability to operate their businesses.
The definitive documentation that will govern the indebtedness expected to be incurred in connection with the merger and preferred stock purchase is expected to contain various affirmative and negative covenants that will, subject to certain significant exceptions, restrict the ability of Herman Miller and certain of its subsidiaries to, among other things, incur liens on their property, incur additional indebtedness, enter into sale and lease-back transactions, make loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, and/or merge or consolidate with any other person or sell or convey certain of its assets to any one person, among other things. In addition, the definitive documentation governing the indebtedness expected to be incurred in connection with the transactions is expected to contain a financial maintenance covenant that will require Herman Miller to maintain a certain leverage ratio at the end of each fiscal quarter. The ability of Herman Miller and its subsidiaries to comply with these provisions may be affected by events beyond their control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate Herman Miller’s repayment obligations under the definitive documentation.
In connection with the merger, Herman Miller will incur significant additional indebtedness, which could adversely affect Herman Miller, including by decreasing Herman Miller’s business flexibility, and will increase its interest expense.
The consolidated long-term debt of Herman Miller as of February 27, 2021 was approximately $327 million. Herman Miller’s pro forma long-term debt as of February 27, 2021, after giving effect to the merger and the anticipated incurrence and extinguishment of indebtedness in connection therewith, will be approximately $1.3 billion. Herman Miller will have substantially increased indebtedness following completion of the merger in comparison to that of Herman Miller on a recent historical basis, which could have the effect, among other things, of reducing Herman Miller’s flexibility to respond to changing business and economic conditions and increasing Herman Miller’s interest expense. Herman Miller will also incur various costs and expenses associated with such indebtedness. The amount of cash required to pay interest on Herman Miller’s increased indebtedness levels following completion of the merger and thus the demands on Herman Miller’s cash resources will be greater than the amount of cash flows required to service the indebtedness of Herman Miller prior to the transaction. The increased levels of indebtedness following completion of the merger could also reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages for Herman Miller relative to other companies with lower debt levels. If Herman Miller does not achieve the expected benefits and cost savings from the merger, or if the financial performance of the combined company does not meet current expectations, then Herman Miller’s ability to service its indebtedness may be adversely impacted.
In addition, Herman Miller may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements. Herman Miller’s ability to arrange additional financing will depend on, among other factors, Herman Miller’s financial position and performance, as well as prevailing market conditions and other factors beyond Herman Miller’s control. Herman Miller cannot assure you that it will be able to obtain additional financing on terms acceptable to Herman Miller or at all.
Completion of the merger may trigger change in control or other provisions in certain agreements to which Knoll is a party.
The completion of the merger may trigger change in control and other provisions in certain agreements to which Knoll is a party. If Herman Miller and Knoll are unable to negotiate waivers of those provisions, the
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counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages or equitable remedies. Even if Herman Miller and Knoll are able to negotiate consents or waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Knoll.
Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company following completion of the merger.
Herman Miller and Knoll are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Each company’s success until the merger and Herman Miller's success after the completion of the merger will depend in part upon the ability of Herman Miller and Knoll to retain certain key management personnel and employees. Prior to the completion of the merger, current and prospective employees of Herman Miller and Knoll may experience uncertainty about their roles following the completion of the merger, which may have an adverse effect on the ability of each of Herman Miller and Knoll to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company, after the completion of the merger, will be able to attract or retain key management personnel and other key employees to the same extent that Herman Miller and Knoll have previously been able to attract or retain their own employees.
The unaudited pro forma condensed combined financial information and unaudited prospective financial information in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the combined company following completion of the merger. Future results of Herman Miller or Knoll may differ, possibly materially, from the unaudited pro forma condensed combined financial information and unaudited prospective financial information presented in this joint proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements and unaudited prospective financial information contained in this joint proxy statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of Herman Miller and Knoll prior to the merger or that of the combined company following the merger for several reasons. Specifically, the unaudited pro forma condensed combined financial statements do not reflect the effect of any potential divestitures that may occur prior to or subsequent to the completion of the merger, integration costs or any changes in Herman Miller’s debt to capitalization ratio following the completion of the merger. For additional information, see the section entitled “Selected Unaudited Pro Forma Combined Financial Statements.” In addition, the merger and post-merger integration process may give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of transaction-related litigation or other claims. Unexpected delays in completing the merger or in connection with the post-merger integration process may significantly increase the related costs and expenses incurred by Herman Miller. The actual financial positions and results of operations of Herman Miller and Knoll prior to the merger and that of the combined company following the merger may be different, possibly materially, from the unaudited pro forma condensed combined financial statements or unaudited prospective financial information included in this joint proxy statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial statements and forecasted financial information included in this joint proxy statement/prospectus may not prove to be accurate and may be affected by other factors. Any significant changes in the market price of Herman Miller’s common stock may cause a significant change in the purchase price used for Herman Miller’s accounting purposes and the unaudited pro forma financial statements contained in this joint proxy statement/prospectus.
Lawsuits have been filed against Knoll, the members of the Knoll Board, Herman Miller and Merger Sub in connection with the merger, and additional lawsuits arising out of the merger may be filed in the future. There can be no assurance that any of the defendants will be successful in the outcome of the pending or any potential future lawsuits. A preliminary injunction could delay or jeopardize the completion of the merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin the completion of the merger.
As of June 9, 2021, two lawsuits had been filed in the United States District Court for the Southern District of New York and one lawsuit had been filed in the United States District Court for the District of New Jersey, each in connection with the merger.
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On May 27, 2021, Shiva Stein, a purported Knoll stockholder, filed a complaint, Stein v. Knoll, Inc. et al., C.A. No. 1:21-cv-4759, in the United States District Court for the Southern District of New York, against Knoll and the members of the Knoll Board (which we refer to as the “Stein lawsuit”). The Stein lawsuit alleges claims under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder contending, among other things, that the registration statement on Form S-4 filed by Herman Miller on May 24, 2021 in connection with the merger is inaccurate or misleading, including in respect of the disclosures concerning the analyses performed by Knoll’s financial advisor in support of its fairness opinion. Among other relief, the Stein lawsuit seeks injunctive relief, including enjoining the merger unless and until the defendants disclose the allegedly omitted material information, rescinding the merger in the event the defendants consummate the merger (or awarding rescissory damages), damages, and an award of attorneys’ and experts’ fees and expenses.
On June 8, 2021, David Gatto Jr., also a purported Knoll stockholder, filed a complaint, Gatto v. Knoll, Inc. et al., C.A. No. 2:21-cv-12287, in the United States District Court for the District of New Jersey, against Knoll and the members of the Knoll Board (which we refer to as the “Gatto lawsuit”). In addition to allegations, claims and relief sought that are substantially similar to those in the Stein lawsuit, the Gatto lawsuit alleges that the registration statement on Form S-4 filed by Herman Miller on May 24, 2021 in connection with the merger omits material information concerning the sales process leading up to the merger and potential conflicts of interest involving Knoll’s financial advisor.
On June 9, 2021, Marc Waterman, also a purported Knoll stockholder, filed a complaint, Waterman v. Knoll, Inc. et al., C.A. No. 1:21-cv-05119, in the United States District Court for the Southern District of New York, against Knoll, the members of the Knoll Board, Herman Miller and Merger Sub (which we refer to as the “Waterman lawsuit”). The allegations, claims, and relief sought in the Waterman lawsuit are substantially similar to those in the Stein lawsuit and Gatto lawsuit.
Knoll and Herman Miller believe that the Stein lawsuit, Gatto lawsuit and Waterman lawsuit are without merit. For additional information, see the section entitled “The Merger—Litigation Relating to the Merger.”
The opinion of Herman Miller’s financial advisor and the opinion of Knoll’s financial advisor will not reflect changes in circumstances between the signing of the merger agreement and the completion of the merger.
Herman Miller and Knoll have received opinions from Goldman Sachs and BofA Securities, respectively, in connection with the merger (and, with respect to the opinion from Goldman Sachs, the preferred stock purchase), but have not obtained updated opinions from either financial advisor as of the date of this joint proxy statement/prospectus. Changes in the operations and prospects of Herman Miller or Knoll, general market and economic conditions and other factors that may be beyond the control of Herman Miller or Knoll, and on which each party’s financial advisor’s opinion was based, may significantly alter the value of Herman Miller or Knoll or the prices of the shares of Herman Miller common stock or of the shares of Knoll common stock by the time the merger is completed. The opinions do not speak as of the time the transactions will be completed or as of any date other than the date of such opinions. Because Herman Miller and Knoll do not currently anticipate asking their respective financial advisor to update its opinion, the opinions will not address the fairness of the merger consideration or the preferred stock purchase consideration, as applicable, from a financial point of view at the time the merger is completed. The Herman Miller Board’s recommendation that Herman Miller shareholders vote “FOR” approval of the Herman Miller share issuance proposal, and the Knoll Board’s recommendation that Knoll stockholders vote “FOR” approval of the Knoll merger proposal, however, are made as of the date of this joint proxy statement/prospectus.
For a description of the opinions that Herman Miller and Knoll received from their respective financial advisor, see the sections entitled “The Merger—Opinion of Goldman Sachs, Herman Miller’s Financial Advisor” and “The Merger—Opinion of BofA Securities, Knoll’s Financial Advisor.” A copy of the opinion of Goldman Sachs, Herman Miller’s financial advisor, is attached as Annex B to this joint proxy statement/prospectus and a copy of the opinion of BofA Securities, Knoll’s financial advisor, is attached as Annex C to this joint proxy statement/prospectus, and each is incorporated by reference herein in its entirety.
Herman Miller and Knoll will incur significant costs in connection with the transactions contemplated by the merger agreement and the preferred stock purchase agreement, which may be in excess of those anticipated by Herman Miller or Knoll.
Each of Herman Miller and Knoll has incurred and expects to continue to incur a number of non-recurring fees and costs associated with negotiating and completing the transactions, combining the operations of the
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two companies and achieving desired synergies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the merger and include, among others, the preferred stock purchase, employee retention costs, fees paid to financial, legal, strategic and accounting advisors, severance and benefit costs, proxy solicitation costs and filing fees.
Herman Miller and Knoll will also incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Herman Miller and Knoll will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses. Although Herman Miller and Knoll each expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Herman Miller and Knoll to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.
The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of Herman Miller following the completion of the transactions.
Many of these costs will be borne by Herman Miller or Knoll even if the transactions are not completed.
Knoll’s executive officers and directors have interests in the merger that may be different from, or in addition to, Knoll’s stockholders’ interests.
When considering the recommendation of the Knoll Board that the Knoll stockholders approve the Knoll merger proposal, Knoll stockholders should be aware that the directors and executive officers of Knoll have certain interests in the merger that may be different from, or in addition to, the interests of such stockholders. The Knoll Board was aware of the interests of Knoll’s directors and executive officers, and the Knoll Board considered such interests, among other matters, when it approved the merger agreement and in making its recommendations to Knoll’s stockholders. Additional interests of the directors and executive officers of Knoll include the treatment in the merger of Knoll option awards, Knoll restricted stock awards and Knoll PSU awards held by these directors and/or executive officers, as applicable, certain severance payments and other benefits that Knoll executive officers are entitled to receive upon a qualifying termination of employment following the completion of the merger, and indemnification and insurance for current and former directors and executive officers. See the section entitled “The Merger—Interests of Knoll’s Directors and Executive Officers in the Merger” for a more detailed description of these interests. As a result of these interests, these directors (as applicable) and executive officers might be more likely to support and to vote in favor of the proposals described in this joint proxy statement/prospectus than if they did not have these interests. Knoll stockholders should consider whether these interests might have influenced these directors (as applicable) and executive officers to recommend adopting the merger agreement.
As of the close of business on June 7, 2021, the most recent practicable date for which such information was available, Knoll directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 10,850,255 shares of Knoll common stock (including shares of Knoll preferred stock on an as-converted basis), or approximately 18.22% of the total voting power of the holders of Knoll capital stock as of June 7, 2021 voting as a single class, with the holders of Knoll preferred stock voting on an as-converted basis. As of such date, Investindustrial owned 169,165 shares of Knoll preferred stock, and was entitled to vote 10,099,402 shares of Knoll common stock on an as-converted basis, or approximately 16.96% of the total voting power of the holders of Knoll capital stock voting as a single class, with the holders of Knoll preferred stock voting on an as-converted basis, as of June 7, 2021. Pursuant to the voting agreement, Investindustrial has agreed to, among other things, vote all of its shares of Knoll preferred stock in favor of the Knoll merger proposal. Excluding Investindustrial’s shares of Knoll preferred stock, the remaining Knoll directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 750,853 shares of Knoll common stock, or approximately 1.23% of the total voting power of the holders of Knoll capital stock voting as a single class, with the holders of Knoll preferred stock voting on an as-converted basis as of June 7, 2021.
Risks Related to Herman Miller’s Business
You should read and consider the risk factors specific to Herman Miller’s business that will also affect the combined company after the closing. These risks are described in Herman Miller’s Annual Report on Form 10-K for the fiscal year ended May 30, 2020 and its Quarterly Reports on Form 10-Q for the quarterly periods ended
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August 29, 2020, November 28, 2020 and February 27, 2021, which are incorporated by reference into this document, and in other documents that are incorporated by reference into this document. For additional information, see the section entitled “Where You Can Find More Information.”
Risks Related to Knoll’s Business
You should read and consider the risk factors specific to Knoll’s business that will also affect the combined company after the closing. These risks are described in Knoll’s Annual Report on Form 10-K for the year ended December 31, 2020 and its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, which are incorporated by reference into this document, and in other documents that are incorporated by reference into this document. For additional information, see the section entitled “Where You Can Find More Information.”
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THE PARTIES TO THE MERGER
Herman Miller, Inc.
Herman Miller was incorporated in Michigan in 1905. Herman Miller’s purpose is design for the good of humankind. To this end, Herman Miller researches, designs, manufactures and distributes interior furnishings for environments where people live, learn, work, heal and play and provides related services that support organizations and individuals all over the world. Through research, Herman Miller seeks to understand, define and clarify customer needs and problems existing in its markets and to design products, systems and services that serve as innovative solutions to those needs and problems.
Herman Miller’s family of brands includes Herman Miller®, Design Within Reach®, Geiger®, Maharam®, Nemschoff®, Colebrook Bosson Saunders®, naughtone®, Maars® Living Walls and HAY®. Herman Miller products are sold primarily through the following channels: independent and owned contract furniture dealers, direct contract sales, retail studios, e-commerce platforms and direct-mail catalogs.
Herman Miller’s principal executive offices are located at 855 East Main Avenue, Zeeland, Michigan 49464, and its telephone number is (616) 654-3000. Herman Miller’s website address is www.hermanmiller.com. Information contained on Herman Miller’s website does not constitute part of this joint proxy statement/prospectus. Herman Miller’s stock is publicly traded on the NASDAQ, under the ticker symbol “MLHR.” Additional information about Herman Miller is included in documents incorporated by reference in this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”
Knoll, Inc.
Knoll designs, manufactures, markets and sells high-end commercial and residential furniture, lighting, accessories, textiles, fine leathers and designer felt for the workplace and residential markets, as well as modern outdoor furniture. Knoll works with clients to create inspired modern interiors. Knoll’s design-driven businesses share a reputation for high-quality and sophistication, offering a diversified product portfolio that endures throughout evolving trends and performs throughout business cycles. Knoll’s products are targeted at the middle to upper-end of the market where it reaches customers primarily through a broad network of independent dealers and distribution partners, its direct sales force, its showrooms, and its online presence.
Knoll focuses on two distinct markets, commercial and residential. Knoll targets commercial workplace clients through its direct sales force that is focused on furnishing offices by working with independent dealers, designers, architects and decorators. Knoll serves residential consumers directly and through “to the trade” specifiers including designers and architects, through Knoll’s online marketspace, retail shops and showrooms.
Knoll’s principal executive offices are located at 1235 Water Street, East Greenville, Pennsylvania 18041 and its telephone number is (215) 679-7991. Knoll’s website address is www.Knoll.com. Information contained on Knoll’s website does not constitute part of this joint proxy statement/prospectus. Knoll’s stock is publicly traded on the NYSE, under the ticker symbol “KNL.” Additional information about Knoll is included in documents incorporated by reference in this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”
Heat Merger Sub, Inc.
Heat Merger Sub, Inc., a wholly owned subsidiary of Herman Miller, is a Delaware corporation incorporated on April 16, 2021 for the purpose of effecting the merger. Heat Merger Sub, Inc. has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Heat Merger Sub, Inc. are located at 855 East Main Avenue, Zeeland, Michigan 49464, and its telephone number is (616) 654-3000.
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THE MERGER
The following is a discussion of the merger between Herman Miller and Knoll. The description of the merger agreement in this section and elsewhere in this joint proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A, and is incorporated by reference into this joint proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement in its entirety. This section is not intended to provide you with any factual information about Herman Miller or Knoll. Such information can be found elsewhere in this joint proxy statement/prospectus and in the public filings Herman Miller and Knoll make with the SEC that are incorporated by reference into this joint proxy statement/prospectus, as described in the section entitled “Where You Can Find More Information.”
Background of the Transactions
The following is a summary of the events leading up to, including the key meetings, negotiations, discussions and actions between Knoll and Herman Miller and their respective advisors that preceded, the public announcement of the merger.
The Herman Miller Board and members of Herman Miller management regularly evaluate the strategic opportunities that might be available to Herman Miller, with a view towards enhancing shareholder value. As part of this ongoing process, Herman Miller has evaluated and considered from time to time various potential strategic transactions with other participants in Herman Miller’s industry.
As part of the Knoll Board’s ongoing efforts to strengthen Knoll’s business and enhance stockholder value, the Knoll Board and management regularly review and assess Knoll’s performance, strategy, financial position, leverage, opportunities and risks in light of current business and economic conditions, and developments in the industries in which Knoll participates, across a range of scenarios and potential future industry developments. These regular reviews have included evaluation of a variety of potential strategic combinations and acquisition opportunities. As part of these reviews, the Knoll Board has considered various factors, including potential cost and revenue synergies, product and geographic diversification, integration with operations and sales and marketing channels, asset quality, execution risk and likelihood of being value enhancing for Knoll’s stockholders. In connection with these reviews, the Knoll Board has received periodic updates from management and certain of its advisors regarding the general landscape of mergers and acquisitions, potential acquirers and acquisition candidates.
As part of its reviews and periodic assessments, the Knoll Board has discussed with management from time to time the status of the workplace and home furniture industries, including the secular decline in the workplace furniture industry in recent years. The workplace furniture industry had benefitted from a nearly two-decade expansion prior to 2000 without a down year. However, the workplace market has experienced a steady secular decline since 2001, punctuated by intermittent cyclical peaks and valleys, as the space allocated to office workers has compressed and furniture sales per office worker have declined due to changes in work processes, technology and real estate costs. The Knoll Board and management considered that certain innovations in Knoll’s product offerings helped expand Knoll’s reach into the office furniture industry, but could not offset the impact of the ongoing secular downtrend on Knoll’s sales and earnings.
From time to time, as part of Knoll’s long-standing efforts to expand its business in Europe and its residential furniture portfolio, senior executives of Knoll, including Andrew Cogan, the Chairman and Chief Executive Officer of Knoll, have had informal and preliminary conversations about potential strategic opportunities with senior executives of other companies in the furniture and design industry and also financial sponsors. These included conversations that Mr. Cogan had from time to time with representatives of Investindustrial. Mr. Cogan first became acquainted with Investindustrial in 2015 in connection with Knoll’s evaluation of a business subsequently acquired by Investindustrial. Periodic discussions regarding Knoll’s and Investindustrial’s shared interest in creating a global design-led furniture business continued over the years. Mr. Cogan updated the Knoll Board regarding these interactions with representatives of Investindustrial and other companies and financial sponsors during regularly scheduled and special meetings of the Knoll Board.
In January 2019, Mr. Cogan and Jeffrey Harris, the lead director of the Knoll Board, met in New York with representatives of Investindustrial and another financial sponsor (“Sponsor A”). Investindustrial and Sponsor A submitted a written proposal to acquire Knoll through a jointly controlled entity (“Company A”) in an all-cash
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transaction. During February 2019, the Knoll Board held several meetings with members of Knoll management and representatives of Goldman Sachs, who Knoll management preliminarily had requested advise Knoll in connection with its evaluation of certain strategic alternatives, in attendance. Based on discussions among the Knoll Board, Knoll management and representatives of Goldman Sachs, and preliminary financial analyses performed by Goldman Sachs, the Knoll Board determined that there was compelling logic behind a business combination of Knoll and Company A, but that the offer from Investindustrial and Sponsor A was lower than Knoll’s perceived intrinsic value. At the direction of the Knoll Board, Messrs. Harris and Cogan made a non-binding counterproposal to the representatives of Investindustrial and Sponsor A for Knoll to instead acquire Company A in an all-stock transaction. Following a meeting in Milan, Italy on February 25, 2019, Investindustrial and Sponsor A rejected Knoll’s counterproposal but expressed their continued interest in a business combination of Knoll and Company A. As authorized by the Knoll Board, Messrs. Harris and Cogan continued the dialogue with representatives of Investindustrial and Sponsor A over the following weeks. These discussions resulted in two further written proposals from Investindustrial and Sponsor A for the acquisition of Knoll by Company A in an all-cash transaction. During special meetings of the Knoll Board, at which members of Knoll senior management and representatives of Goldman Sachs and Sullivan & Cromwell LLP (which we refer to as “Sullivan & Cromwell”), Knoll’s outside legal counsel, were in attendance, the Knoll Board considered the proposals. Representatives of Goldman Sachs reviewed with the Knoll Board Goldman Sachs’s preliminary financial analyses of the proposals from Investindustrial and Sponsor A. The Knoll Board also considered whether to solicit other potentially interested acquirers. The Knoll Board’s consensus was that the potential leak and other risks associated with such solicitations were not warranted given the low likelihood that any other party would pay a higher value for Knoll than that proposed by Investindustrial and Sponsor A and that no third party had approached Knoll with a proposal regarding a potential acquisition of Knoll in the previous 10 years. The Knoll Board ultimately determined to move forward with negotiations with Investindustrial and Sponsor A on the basis of the second revised written proposal. However, prior to an exclusivity agreement being executed, the Knoll Board learned that Sponsor A had not obtained internal approval with respect to the second revised proposal delivered to Knoll. The Knoll Board determined in April 2019 that it was in the best interests of Knoll and its stockholders to terminate discussions with Investindustrial and Sponsor A with respect to a transaction with Company A.
In March 2020, at the outset of the COVID-19 pandemic, the Knoll Board began considering various financial scenarios, including with respect to Knoll’s leverage, liquidity, operating expenses and capital expenses in light of the significant impact of the pandemic on Knoll’s manufacturing operations, customers and revenues and the trading price of Knoll’s common stock. Throughout March and April 2020, the Knoll Board and senior management recognized that the pandemic was accelerating secular trends that might permanently alter the workplace and residential furniture industries. During this time, the Knoll Board split its focus between implementing mitigation techniques to ensure the safety of Knoll employees and considering and implementing measures to address Knoll’s worsening profitability and cash flow resulting from the pandemic, including, among other things, implementing employee furloughs and reducing employee benefits, modifying payment terms to incentivize faster payments by dealers, reducing the amount of Knoll’s quarterly dividend and the Knoll Board members agreeing to take director compensation in shares in lieu of cash.
On April 6, 2020, the Knoll Board convened a regular meeting, with members of Knoll senior management in attendance. At the meeting, among other things, Mr. Cogan provided an update to the Knoll Board regarding Knoll’s current operations in the context of the COVID-19 pandemic. Mr. Cogan and Charles Rayfield, Knoll’s Chief Financial Officer, reviewed with the Knoll Board various financial scenarios and measures taken to reduce operating expenses and capital expenses to date, including management’s downside scenario model which indicated that Knoll could be in an uncomfortable liquidity position and in violation of the financial covenants contained in Knoll’s credit agreement later that year as a result of the pandemic’s impact on, among other things, Knoll’s operations and worsening demand in Knoll’s workplace business. Knoll management also reviewed with the Knoll Board an analysis of dealer collections, which showed that collections were dragging out as a result of dealers requesting extended payment terms during the pandemic, thereby lengthening the total time for Knoll’s sales to convert to cash and further worsening Knoll’s liquidity position.
On April 12, 2020, Mr. Cogan received a telephone call from a representative of Investindustrial, informing Mr. Cogan that Investindustrial had purchased approximately 4% of the outstanding shares of Knoll’s common
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stock and that Investindustrial continued to believe in Knoll’s strategy. Further, the representative of Investindustrial indicated to Mr. Cogan that Investindustrial had interest in being a source of financing for Knoll if the need were to arise. Mr. Cogan promptly informed Mr. Harris of this conversation.
On April 21, 2020, the Knoll Board convened a regular meeting, with members of Knoll senior management and representatives of Goldman Sachs in attendance. At the meeting, among other things, Mr. Cogan reviewed with the Knoll Board management’s then-current business outlook and some of the measures taken to date in response to the COVID-19 pandemic. Mr. Cogan also informed the Knoll Board of Investindustrial’s statement that it had recently purchased approximately 4% of the outstanding shares of Knoll’s common stock. Mr. Rayfield then reviewed with the Knoll Board various financial scenarios, including the financial covenants under Knoll’s credit agreement in the context of each of the different planning scenarios. Under the downside scenario, Knoll was projected to be in sustained breach of the net leverage covenant under Knoll’s credit agreement beginning in the third quarter of 2020. Representatives of Goldman Sachs then reviewed with the Knoll Board various alternatives to address Knoll’s potential liquidity issues, including approaching the administrative agent under Knoll’s credit agreement regarding an amendment to, and limited waiver of, the financial covenants contained therein, suspending the Knoll dividend, and raising additional capital through one of various financing options presented by representatives of Goldman Sachs. The meeting concluded with the members of the Knoll Board determining to take director compensation in shares in lieu of cash for at least the remainder of calendar year 2020 in an effort to help preserve Knoll’s liquidity.
On April 23, 2020, the Knoll Board convened a special meeting, with members of Knoll senior management in attendance. At the meeting, Mr. Cogan provided a more detailed update to the Knoll Board regarding the conversation he had with the representative of Investindustrial on April 12th. Mr. Cogan reminded the Knoll Board that Investindustrial indicated it had claimed to have purchased approximately 4% of the outstanding shares of Knoll’s common stock and that it continued to believe in Knoll’s strategy and had interest in being a source of financing for Knoll if the need arose in the future. There had not been any specific transaction proposed by Investindustrial at that time and, therefore, the discussion was preliminary and preparatory. The Knoll Board discussed whether to engage a financial advisor in order to be prepared if Investindustrial were to submit a proposal that the Knoll Board desired to consider, with the consensus being that proposals should be requested from each of Goldman Sachs and BofA Securities.
Following the April 23, 2020 board meeting, Knoll management solicited proposals from each of Goldman Sachs and BofA Securities to act as financial advisor in connection with the Knoll Board’s evaluation of potential strategic alternatives.
On May 5, 2020, the Knoll Board convened a regular meeting, with members of Knoll senior management in attendance. At the meeting, among other things, Mr. Cogan provided an update to the Knoll Board regarding the business’s condition and Knoll management’s then-current strategic thinking, including in light of actions being taken by competitors to address the impact of the pandemic. Mr. Rayfield then provided an update to the Knoll Board regarding the various financial planning scenarios discussed at the prior regular meeting, including that the downside scenario appeared to be the most likely outcome. Mr. Rayfield also explained that, given Knoll’s worsening financial condition and as a result of management’s projection that Knoll would breach certain financial covenants in Knoll’s credit agreement later that year, Knoll’s independent auditors planned to include a going concern warning in Knoll’s upcoming quarterly report. Mr. Rayfield then summarized for the Knoll Board the cash management measures taken by Knoll to date, including a reduction in the amount of the Knoll dividend, reductions in capital expenditures, alternative dealer payment terms to incentivize faster payments, extending the payment terms of Knoll’s accounts payable, negotiated rent deferrals, and suspension of Knoll’s matching of employee contributions under Knoll’s retirement savings plan.
On May 17, 2020, Knoll retained BofA Securities pursuant to an engagement letter between Knoll and BofA Securities. Goldman Sachs and Knoll did not enter into an engagement letter, and Knoll did not pay any fees to Goldman Sachs for any of its abovementioned advice to Knoll.
On June 4, 2020, the Knoll Board convened a regular meeting, with members of Knoll senior management and representatives of BofA Securities in attendance. At the meeting, among other things, Mr. Cogan provided a business update to the Knoll Board and also discussed the potential amendment to Knoll’s credit agreement. Representatives of BofA Securities then reviewed with the Knoll Board illustrative terms of the proposed credit agreement amendment, including proposed amendments to pricing terms, financial covenants and other negative
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covenants. Representatives of BofA Securities then reviewed Knoll’s capital structure, liquidity and leverage, and presented various capital raising alternatives to the Knoll Board, including an additional term loan, a high yield bond, a convertible debt instrument, a broad equity offering, and a private placement equity investment. Mr. Cogan also informed the Knoll Board that there had not been any further outreach from Investindustrial since the phone call of April 12th. A representative of BofA Securities then reviewed certain considerations regarding a potential financing transaction with Investindustrial. A discussion ensued among the members of the Knoll Board regarding pros and cons associated with the different capital raising strategies discussed, with the consensus being that a potential convertible debt instrument or a private placement equity investment were the most attractive alternatives. The Knoll Board also discussed the strategy for approaching Investindustrial. The meeting concluded with the Knoll Board directing management to work with BofA Securities on an amendment to Knoll’s credit agreement and a potential convertible debt offering. The Knoll Board also directed Mr. Harris to reach out to Investindustrial and inquire of their continued interest in an investment in Knoll.
Shortly following the meeting of the Knoll Board on June 4th, Mr. Harris had a conversation by telephone with a representative of Investindustrial during which the representative indicated to Mr. Harris that Investindustrial was interested in consummating a potential financing transaction with Knoll and that Investindustrial planned to submit a proposal soon. The representative of Investindustrial also indicated to Mr. Harris that Investindustrial was flexible regarding the size and structure of the potential investment and that it would be open to listening to terms Knoll wished to propose.
On June 8, 2020, the Knoll Board convened a special meeting, with members of Knoll senior management and representatives of BofA Securities in attendance. At the meeting, Mr. Harris updated the Knoll Board that Investindustrial was interested in a potential financing transaction and was working on a proposal to submit for the Knoll Board’s consideration. Representatives of BofA Securities then reviewed with the Knoll Board an updated overview of pricing terms to consider proposing in connection with the potential credit agreement amendment and an updated analysis regarding the capital raising alternatives being considered, namely a potential convertible debt offering and a potential private placement transaction with Investindustrial. A discussion ensued among the members of the Knoll Board regarding the terms of a potential convertible debt offering and the potential private placement transaction with Investindustrial, including, among other things, the amount of the financing in each case, the applicable coupon or dividend, the proposed conversion premium, and certain governance matters related to the potential equity investment by Investindustrial. Representatives of BofA Securities also reviewed with the Knoll Board an illustrative dual-track process timeline for simultaneously progressing both capital raising alternatives. After discussing the options in detail, including the pros and cons associated with each, the Knoll Board directed management and Mr. Harris to prepare a term sheet to send to Investindustrial for a potential private placement transaction based on the terms discussed at the meeting. The Knoll Board agreed that Knoll would continue to work on the potential convertible debt offering and credit agreement amendment in parallel.
Following the meeting of the Knoll Board on June 8th, Mr. Harris delivered to representatives of Investindustrial the term sheet prepared by Knoll management for a potential private placement transaction. The term sheet proposed a $175 million purchase by Investindustrial of a Knoll convertible preferred security, the terms of which would include, among other things, a quarterly dividend payable in cash or in kind at Knoll’s option for two years and in cash thereafter, a right to convert at any time, certain call and redemption rights of Knoll, certain redemption rights of Investindustrial, registration rights, and one additional member being added to the Knoll Board who would be designated by Investindustrial so long as it held 50% of the amount of the preferred security initially purchased.
On June 10, 2020, representatives of Investindustrial delivered to Knoll a counterproposal to the Knoll proposal, which included, among other things, a preferred quarterly dividend that would be paid prior to any dividends to common stockholders, participation on an as-converted basis with dividends paid to common stockholders in excess of a specified threshold, and certain changes to the redemption rights of Knoll and Investindustrial.
Later that day, the Knoll Board convened a special meeting, with members of Knoll senior management and representatives of BofA Securities in attendance. At the meeting, Mr. Harris updated the Knoll Board on the counterproposal delivered by Investindustrial, which was discussed in detail by the Knoll Board. Mr. Harris also informed the Knoll Board that Investindustrial was willing to move quickly to consummate the potential financing transaction. Representatives of BofA Securities reviewed with the Knoll Board certain considerations
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relevant to determining whether the private sale to Investindustrial of a preferred equity security or the potential convertible debt offering should be pursued. The Knoll Board considered, (i) on the one hand, the benefits associated with the potential private placement transaction with Investindustrial, including that (a) Knoll would not be adding additional debt to its already significantly leveraged balance sheet, (b) the equity security would not be treated as debt for purposes of the financial covenants in Knoll’s credit agreement, thereby likely obviating the need for an amendment to the credit agreement, (c) Investindustrial’s operating expertise and capabilities and familiarity with Knoll’s business would provide value to Knoll beyond the injection of capital, and (d) there would be speed and certainty if Knoll pursued the potential transaction with Investindustrial given Investindustrial’s limited due diligence requirements and willingness to move on an expedited timeline, and (ii) on the other hand, the negative considerations associated with the potential private placement transaction with Investindustrial as compared to the potential convertible debt offering, including (x) an inability to hedge the conversion premium in a similar way that a public convertible note could be hedged, (y) the governance rights, including a seat on the Knoll Board, that Investindustrial would require and (z) that Investindustrial would become a large shareholder with significant influence. The Knoll Board also considered BofA Securities’s analyses regarding the impact of a potential convertible debt instrument on Knoll’s public common stock and the deteriorating market for the convertible debt option, which was a significant concern of the Knoll Board. After further extensive discussion, the Knoll Board determined that a private sale to Investindustrial of a preferred equity security would be the most beneficial capital raising opportunity for Knoll and its stockholders. The Knoll Board also considered whether to approach any other potentially interested sources of financing regarding the contemplated transaction, with the consensus being that a transaction with Investindustrial would be most beneficial to Knoll given the speed and certainty such a transaction would bring, Investindustrial’s understanding of Knoll’s business and the value it could deliver to Knoll as a strategic partner and large shareholder relative to a financial sponsor unfamiliar with Knoll’s business and management team, and the low likelihood that any third party would be willing to provide financing on more beneficial terms. The meeting concluded with the Knoll Board authorizing Mr. Harris and Knoll management to negotiate the terms of the potential private placement transaction with Investindustrial further within the parameters discussed at the meeting.
Following further discussions and negotiations between representatives of Investindustrial and the Knoll Board and their respective advisors to finalize definitive investment documentation, and completion of Investindustrial’s due diligence, Knoll entered into an investment agreement with Investindustrial on June 22, 2020, pursuant to which Knoll subsequently issued and sold to Investindustrial 164,000 shares of Knoll’s Series A Convertible Preferred Stock, par value $1.00 per share (which we refer to as the “Knoll preferred stock”) for an aggregate purchase price of $164 million, which amount was downsized from the initial $175 million proposed. The Knoll Board believed the investment by Investindustrial fortified Knoll’s balance sheet and enhanced Knoll’s ability to continue to execute its strategic plan in the face of an uncertain macroeconomic environment, and also explore future strategic opportunities should they arise. Pursuant to the terms of the investment agreement, Knoll increased the size of its board as of the closing date of the investment by Investindustrial in order to elect an individual designated by Investindustrial to fill the resulting vacancy. Knoll and Investindustrial also entered into a registration rights agreement.
On July 21, 2020, the sale to Investindustrial of shares of Knoll preferred stock closed.
During July through October 2020, the Knoll Board continued to focus on Knoll’s response to the COVID-19 pandemic, Knoll’s strategy in light of the industry outlook and the management of Knoll’s financial position.
On October 12, 2020, the Herman Miller Board held a regularly scheduled meeting, with representatives of Herman Miller management and representatives of Goldman Sachs, Herman Miller’s long-time financial advisor, in attendance for portions of the meeting. Members of Herman Miller management and representatives of Goldman Sachs presented a financial analysis of a potential acquisition of Knoll by Herman Miller. Following discussion, the Herman Miller Board requested that Herman Miller management attempt to ascertain whether Knoll would be open to exploring a transaction in order to determine whether Herman Miller should devote additional resources to consideration of the acquisition. The Herman Miller Board discussed the establishment of an ad hoc subcommittee of the Herman Miller Board (the “Herman Miller Subcommittee”) to consider matters relating to a potential acquisition of Knoll, to discuss related matters with Herman Miller management and to
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facilitate communication with the remaining members of the Herman Miller Board, in each case between meetings of the Herman Miller Board and during the preliminary exploration of a transaction. In early November, the Herman Miller Subcommittee was constituted.
On October 20, 2020, in connection with their engagement by Herman Miller, Goldman Sachs provided Herman Miller with a letter disclosing certain of its investment banking relationships with Knoll and Investindustrial. The members of the Goldman Sachs team advising Herman Miller did not include any of the same individuals that had provided preliminary advice to Knoll during 2019 or 2020.
Accordingly, on November 5, 2020, a representative of Goldman Sachs contacted Mr. Cogan by telephone to discuss the willingness of the Knoll Board to consider a proposal for a business combination of Herman Miller and Knoll. Mr. Cogan responded that Knoll was not currently for sale, but that the Knoll Board would of course listen to any proposals that Herman Miller might present. Mr. Cogan promptly informed Mr. Harris of this conversation.
On November 13, 2020, the Knoll Board convened a special meeting, with members of Knoll senior management in attendance. At the meeting, Mr. Cogan updated the Knoll Board regarding his discussion with the representative of Goldman Sachs. After a preliminary discussion of the benefits of and hurdles to a potential combination of Herman Miller and Knoll, the Knoll Board unanimously agreed to request that BofA Securities conduct preliminary financial analyses pursuant to the existing engagement letter between Knoll and BofA Securities. Given the prior discussions between Investindustrial and Knoll with respect to a potential acquisition of Knoll, the Knoll Board requested that Roberto Ardagna, the director designated by Investindustrial, abstain from sharing with Investindustrial the preliminary information discussed at the board meeting about a potential business combination of Herman Miller and Knoll, and Mr. Ardagna agreed to abstain from sharing any such information. Mr. Ardagna also recused himself from all future meetings of the Knoll Board related to the potential combination of Knoll and Herman Miller.
Also on November 13, 2020, the Herman Miller Subcommittee met, with representatives of Herman Miller management, Goldman Sachs and Boston Consulting Group (“BCG”), an advisor to Herman Miller, in attendance, to further discuss the strategic rationale for the potential transaction, review potential deal terms, and discuss financial analyses related to the potential transaction. On November 18, 2020, Andi Owen, the President and Chief Executive Officer of Herman Miller, contacted Mr. Cogan by telephone to discuss a potential business combination of Knoll and Herman Miller. Ms. Owen indicated to Mr. Cogan that she had great respect for Knoll and that she believed there was compelling strategic logic to bring the two companies together given their complementary product portfolios, similar digital initiatives, and shared commitment to design, and the need for structural change given secular, industry and macroeconomic trends. No specific terms of a transaction were discussed at this time. Mr. Cogan promptly informed Mr. Harris of this conversation.
On November 30, 2020, the members of the Knoll Board other than Mr. Ardagna (who had recused himself, as noted above) convened a special meeting, with members of Knoll senior management in attendance. At the meeting, Mr. Cogan updated the Knoll Board regarding his discussion with Ms. Owen. The Knoll Board and senior management also discussed the preliminary financial analyses that BofA Securities had undertaken since the prior board meeting regarding Knoll and Herman Miller based on forecasts prepared by Sidoti & Company, LLC, an analyst firm that follows both Knoll and Herman Miller (which we refer to as “Sidoti”), and additional potentially interested parties and their respective ability to make a competitive offer for an acquisition of Knoll. The Knoll Board engaged in an extensive discussion of, among other things, Knoll’s business, current industry and market conditions, Knoll’s valuation, potential transaction structures and potential synergies in a transaction. There was no specific offer then currently pending from Herman Miller and, therefore, the discussion was preliminary and preparatory. The Knoll Board told Mr. Cogan that it was supportive of these discussions and asked Mr. Cogan to continue to keep the Knoll Board apprised of any material developments, including through Mr. Harris.
On December 1, 2020, at a regularly scheduled meeting of the Knoll Board at which Knoll management was in attendance, the Knoll Board approved the Knoll 2021 financial and operating plan, including the financial projections included therein.
On December 7, 2020, the Herman Miller Subcommittee met, with members of Herman Miller management and representatives of Goldman Sachs, BCG, and Herman Miller’s outside counsel, Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”) in attendance. The attendees reviewed and discussed strategic options that might be
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available to Herman Miller, including the potential acquisition of Knoll, reviewed financial analyses of the potential transaction, and discussed matters relating to the businesses of each of Herman Miller and Knoll that might be relevant to a potential combination of the two, including integration matters. The attendees discussed potential consideration that might be offered to Knoll in any transaction, including whether consideration consisting solely of Herman Miller common stock or of a mix of Herman Miller common stock and cash would be most beneficial to Herman Miller and/or attractive to Knoll, and options to structure a potential exchange ratio for the stock component of the consideration. The Herman Miller Subcommittee met again on December 9, 2020, with members of Herman Miller management in attendance, to further review financial and strategic information related to a potential transaction with Knoll and to discuss options that might be available for the treatment of the outstanding Knoll preferred stock in connection with any such transaction.
On December 11, 2020, the Herman Miller Board held a special meeting, with members of Herman Miller management and representatives of Goldman Sachs, BCG and Wachtell Lipton in attendance. Management and Herman Miller’s advisors presented an overview of the analyses that had been conducted to date on the potential acquisition of Knoll, including the strategic rationale, information about Knoll’s business derived from public information, and potential synergies that might result. The parties also discussed options for the treatment of the Knoll preferred stock in a transaction. Following discussion, the Herman Miller Board requested that additional analysis be conducted on the potential to structure a transaction to include a combination of cash and Herman Miller common stock, and approved management approaching Knoll with a non-binding proposal for an acquisition of Knoll in exchange for consideration of no greater than 0.50 shares of Herman Miller common stock per share of Knoll common stock (with the specific exchange ratio to be proposed to be set following further discussions by the Herman Miller Subcommittee), based on an assumption that the Knoll preferred stock would receive all cash consideration. The Herman Miller Subcommittee met on December 17, 2020, with members of Herman Miller management in attendance, and, following discussion of additional financial and strategic options relating to a potential transaction, approved the making of a non-binding proposal to Knoll for a transaction at an exchange ratio of 0.50 shares of Herman Miller common stock per share of Knoll common stock.
On December 18, 2020, Mr. Cogan and Ms. Owen spoke by telephone to discuss exploring further a potential business combination of Herman Miller and Knoll. Ms. Owen indicated to Mr. Cogan that she viewed the potential business combination as a great opportunity for both companies and that she expected the potential transaction to yield significant synergies for the combined company. Mr. Cogan promptly informed Mr. Harris of this conversation.
Later that day, Ms. Owen delivered a non-binding written proposal to Mr. Cogan for the acquisition of Knoll, which provided for a fixed exchange ratio of 0.50 Herman Miller shares of common stock per Knoll share of common stock, representing an implied value of $17.61 per Knoll share based on the closing share price of Herman Miller’s common stock on December 17, 2020, a premium of approximately 25.7% to the December 17, 2020 closing price of Knoll’s common stock, a premium of approximately 26.9% to the 30-day volume-weighted average price of Knoll’s shares of common stock, and an implied enterprise value for Knoll of approximately $1.42 billion. The proposal indicated that the consideration would consist entirely of Herman Miller stock, and that Knoll common stockholders would own approximately 30% of the combined company, assuming that Knoll’s preferred stock would be redeemed for approximately $219 million in cash. The proposal further indicated that Herman Miller believed the proposed business combination would have estimated annual run rate synergies in the range of $80 to $100 million resulting from, among other things, procurement benefits, rationalization of the combined company’s manufacturing and the reduction of duplicative operating expenses and corporate costs. The proposal also indicated that a transaction would be subject to a period of mutual due diligence and mutually acceptable documentation.
On December 21, 2020, the members of the Knoll Board other than Mr. Ardagna convened a special meeting, which was attended by members of Knoll senior management and a representative of Sullivan & Cromwell. The representative of Sullivan & Cromwell reviewed with the Knoll Board its fiduciary duties in connection with its consideration of any potential sale transaction, including Herman Miller’s proposal. The representative of Sullivan & Cromwell also advised Knoll management to not engage in any discussions with Herman Miller or its representatives regarding employment or executive compensation unless and until specifically authorized to do so by the Knoll Board. During the meeting, Mr. Cogan updated the Knoll Board regarding his discussions with Ms. Owen and the written proposal received from Ms. Owen the same day.
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Mr. Cogan reviewed some of the synergies considerations he had discussed with Ms. Owen and how those considerations related to the proposal submitted by Herman Miller. A discussion ensued among the members of the Knoll Board, including regarding BofA Securities’ preliminary financial analyses that had been provided to the Knoll Board prior to the receipt of Herman Miller’s December 18th proposal letter. The consensus of the Knoll Board was that the proposal from Herman Miller understated the fair value of Knoll. After discussing the matter further in an executive session, the Knoll Board authorized Mr. Harris to respond to Herman Miller’s proposal in writing on the Knoll Board’s behalf, consistent with the Knoll Board’s discussions.
On December 28, 2020, Mr. Harris delivered to Ms. Owen a letter stating that Knoll appreciated the hard work and analysis underlying the December 18th proposal from Herman Miller, but that after consideration the Knoll Board concluded that its sense of the fair value of Knoll was sufficiently distant from the economic terms set out in the proposal letter such that it would not be productive to engage in further discussions at that time. Ms. Owen promptly shared the letter with the members of the Herman Miller Subcommittee.
On January 8, 2021, a representative of Goldman Sachs contacted Mr. Harris by telephone to discuss the letter sent by Mr. Harris on December 28th. The representative of Goldman Sachs reiterated to Mr. Harris that Herman Miller saw a strong opportunity for meaningful synergies that could be realized in a business combination of Knoll and Herman Miller. Mr. Harris thanked the representative of Goldman Sachs and emphasized that the Knoll Board was open-minded to considering strategic alternatives, but that Knoll was not going to engage in further discussions without a compelling price, given that the Knoll Board was not looking to sell the company and had full confidence in Knoll’s senior management to continue delivering value to Knoll stockholders. Mr. Harris indicated that while the Knoll Board was not proposing a price, he thought Herman Miller should be aware that the Knoll Board was unlikely to find a price not in the $20+ per share range to be sufficiently compelling. The representative of Goldman Sachs indicated that he would confer with his client further.
On January 14, 2021, the Herman Miller Board held a regularly scheduled meeting, with members of Herman Miller management in attendance. Ms. Owen provided the directors with an update on the status of discussions with Knoll, including Knoll’s response to the December 18th proposal letter and the subsequent discussions with Goldman Sachs. It was agreed that management would discuss potential next steps further with the Herman Miller Subcommittee prior to further outreach to Knoll.
On January 26, 2021, the Herman Miller Subcommittee met, with members of Herman Miller management in attendance. Based on feedback from Knoll, members of management provided analyses of the potential for a transaction in which Herman Miller would acquire Knoll for a mix of stock and cash (including the potential to acquire the Knoll preferred stock either for cash or for equity), and management’s view as to the value that Herman Miller would be required to offer in order for Knoll to agree to engage. The management representatives reviewed detailed financial information with the Herman Miller Subcommittee, including potential options to finance the cash portion of the purchase price. Following discussion, the Herman Miller Subcommittee approved Herman Miller management approaching Knoll with a revised non-binding proposal for a cash and stock transaction, subject to an agreed limit that management would not exceed prior to further discussion with the Herman Miller Subcommittee or the Herman Miller Board.
On February 1, 2021, Ms. Owen delivered a revised non-binding proposal to Mr. Harris for the acquisition of Knoll, which provided for $11.00 in cash and 0.32 Herman Miller shares of common stock per share of Knoll common stock, representing an implied value of $21.96 per Knoll share of common stock based on the closing share price of Herman Miller’s common stock on January 29, 2021, a premium of approximately 46.8% to the January 29, 2021 closing price of Knoll’s shares of common stock, a premium of approximately 46.9% to the 30-day volume-weighted average price of Knoll’s common stock, and an implied enterprise value for Knoll of approximately $1.65 billion. The proposal indicated that Knoll common stockholders would own approximately 22% of the combined company, that Knoll’s preferred stock would be redeemed for approximately $219 million in cash, and that Herman Miller believed the proposed business combination would have estimated run rate synergies in the range of $80 to $100 million for the reasons described in Herman Miller’s December 18th proposal. The proposal also indicated that Herman Miller was prepared to move expeditiously to complete mutual due diligence and reach a mutually acceptable definitive agreement.
On February 4, 2021, the members of the Knoll Board other than Mr. Ardagna convened a special meeting, which was attended by members of Knoll senior management and representatives of Sullivan & Cromwell and
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BofA Securities. The representatives of Sullivan & Cromwell reminded the members of the Knoll Board of their fiduciary duties in the context of a potential business combination, and also discussed with the Knoll Board certain process and substantive issues in the context of an unsolicited offer to acquire Knoll. During the meeting, Messrs. Harris and Cogan updated the Knoll Board on Herman Miller’s February 1st cash and stock proposal. Representatives of BofA Securities also reviewed in detail with the Knoll Board, among other things, its preliminary financial analyses of Knoll and Herman Miller based on the Knoll forecasts prepared by Knoll management and forecasts for Herman Miller based on analyst estimates from Sidoti and Thompson Research Group, the other analyst firm that follows both Knoll and Herman Miller (which we refer to as “street forecasts”), an overview of other potentially interested acquirers and illustrative analyses of their respective ability to make a competitive bid for an acquisition of Knoll based on public information, and potential next steps. The disclosure letter delivered by BofA Securities to the Knoll Board earlier that day regarding certain of BofA Securities’ relationships with Herman Miller, Knoll and Investindustrial was also discussed. After discussing various topics, including financial projections, valuation considerations, risks to the business during a sale process, potential leaks and related employee retention issues, mutual due diligence, timing of a potential transaction and stockholder approval considerations, the Knoll Board determined that it would be in the best interests of Knoll and its stockholders to continue engaging in discussions with Herman Miller regarding a potential transaction. The Knoll Board directed Mr. Harris to communicate to representatives of Goldman Sachs that Knoll was willing to move forward with discussions in order to develop a better understanding of Herman Miller’s rationale for the proposed transaction, including anticipated synergies, but that the Knoll Board did not view the economic terms in Herman Miller’s February 1st proposal as sufficient.
On February 10, 2021, Mr. Harris contacted the representative of Goldman Sachs by telephone to convey the Knoll Board’s position. During the call, Mr. Harris made clear to the representative of Goldman Sachs that the Knoll Board would need to develop a better understanding of the anticipated synergies resulting from a potential business combination in order for the Knoll Board to properly evaluate Herman Miller’s proposal. Mr. Harris and the representative of Goldman Sachs accordingly agreed to seek to schedule a discussion the following week among members of the Knoll and Herman Miller teams to further discuss Herman Miller’s strategic rationale for, and the anticipated synergies resulting from, a business combination with Knoll. Following this discussion, representatives of Sullivan and Cromwell sent a draft confidentiality agreement, including a “standstill” provision, to representatives of Wachtell Lipton.
On February 16, 2021, the Herman Miller Subcommittee met, with members of Herman Miller management in attendance. Members of Herman Miller management updated the members of the Herman Miller Subcommittee on Knoll’s response to the most recent transaction proposal, including the upcoming planned meeting, and the attendees discussed potential responses to Knoll, and the scope and format of information to be shared and the approach the Herman Miller attendees would employ at the meeting with Knoll.
On February 25, 2021, Messrs. Harris and Cogan, along with several other members of the Knoll Board, met with Ms. Owen, other representatives of Herman Miller and representatives of Goldman Sachs through a video teleconference to further discuss a potential business combination, including Herman Miller’s strategic rationale for a business combination with Knoll, overall industry trends and synergies expected to result from a business combination of Knoll and Herman Miller. The meeting ended with the parties agreeing they would each go back to their respective boards to continue considering a potential transaction, but with no firm commitment regarding next steps.
On February 26, 2021, the members of the Knoll Board other than Mr. Ardagna convened a special meeting, which was attended by members of Knoll senior management and representatives of Sullivan & Cromwell, to discuss the status of conversations with Herman Miller. The Knoll Board discussed Herman Miller’s February 1st proposal, including the pros and cons of a potential transaction in light of the industry outlook. Mr. Cogan reviewed with the Knoll Board the cost and revenue synergies, opportunities and challenges he saw in the proposed business combination with Herman Miller. The Knoll Board discussed management’s standalone five-year business plan and Knoll’s standalone value. The Knoll Board also discussed BofA Securities’ preliminary financial analyses of Knoll based on Knoll management’s five-year business plan, of Herman Miller based on street forecasts for Herman Miller, and of the combined company based on Knoll management’s five-year business plan and street forecasts for Herman Miller, and BofA Securities’ analysis regarding the willingness and ability of Investindustrial to make a competitive bid for the acquisition of Knoll. Further, the Knoll Board discussed Herman Miller’s ability and potential willingness to increase its offer price, and the fact
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that the Knoll Board viewed Herman Miller’s proposal as not reflecting the best offer on an implied deal equity value basis that Herman Miller could put forward in light of the synergies contemplated to result from the proposed business combination. A further discussion among the members of the Knoll Board ensued regarding the possibility of leaks and management distraction and the preference to move quickly to minimize those risks, mutual due diligence, the timing and pros and cons of potentially contacting other potential bidders, the requirement for Herman Miller and Knoll stockholder approval of the transaction, and financing and regulatory risks. Representatives of Sullivan & Cromwell responded to questions from the Knoll Board regarding timing and process, transaction structure and potential material merger agreement terms. The Knoll Board also discussed the likelihood that Herman Miller would require a voting agreement with Investindustrial, which held approximately 21% of the total voting power of Knoll capital stock voting as a single class (with Investindustrial voting its shares of Knoll preferred stock on an as-converted basis). After further discussing the BofA Securities overview of additional potentially interested acquirers, including the illustrative analysis of Investindustrial’s ability to pay, the Knoll Board determined that no potential acquirers other than Investindustrial should be solicited at that time in light of various considerations, including the Knoll Board’s belief as to (i) the low likelihood of significant interest in a transaction with Knoll by alternative strategic counterparties that would be willing to provide Knoll stockholders with greater value than the proposed business combination with Herman Miller, given the anticipated synergies in a business combination with Herman Miller, (ii) the risk of jeopardizing a compelling proposal from Herman Miller if Knoll contacted other potential acquirers other than Investindustrial in regards to a potential business combination, and (iii) the significant risk of potential leaks if Knoll or its representatives were to contact other potential bidders. The meeting concluded with the Knoll Board authorizing and directing Messrs. Harris and Cogan and Michael Pollner, SVP, Chief Administrative Officer & General Counsel of Knoll, to work with Sullivan & Cromwell to prepare a term sheet of material merger agreement terms to be sent to Herman Miller which addressed the issues discussed at the meeting, and to also work with representatives of BofA Securities to develop a Knoll price counterproposal to Herman Miller’s February 1st price proposal. Consistent with the Knoll Board’s discussion at the meeting, the Knoll Board directed that the Knoll price counterproposal seek for Knoll even more of the synergies value expected to result from the potential transaction than the substantial synergies value already reflected in Herman Miller’s February 1st proposal.
From February 27, 2021 to March 1, 2021, Messrs. Cogan, Harris and Pollner worked with representatives of Sullivan & Cromwell and BofA Securities to draft a term sheet regarding a potential business combination of Knoll and Herman Miller.
On March 2, 2021, as authorized by the Knoll Board, Mr. Harris contacted a representative of Goldman Sachs by telephone to discuss Herman Miller’s February 1st proposal. Mr. Harris indicated to the representative of Goldman Sachs that the Knoll Board viewed the proposal as not reflecting the best offer that Herman Miller could put forward in light of the synergies contemplated to result from the proposed business combination. Mr. Harris also explained that the Knoll Board did not want to engage in transaction negotiations and assume the associated risks, including distraction of Knoll management and potential negative impact on employee and customer relationships in the event of a leak, unless the value to Knoll stockholders was sufficiently compelling. Mr. Harris informed the representative of Goldman Sachs that Knoll would be delivering a term sheet reflecting Knoll’s counterproposal, and would expect Herman Miller’s response to address the points raised in the term sheet.
Later that day, Mr. Harris delivered the term sheet prepared by Knoll and Sullivan & Cromwell, with input from BofA Securities, to a representative of Goldman Sachs, which included a non-binding counter-proposal of $13.00 in cash and 0.35 shares of Herman Miller common stock per share of Knoll common stock as the consideration to be paid by Herman Miller, representing an implied value of $27.12 per Knoll share of common stock based on the closing share price of Herman Miller’s common stock on March 1, 2021, a premium of approximately 59.6% to the March 1, 2021 closing price of Knoll’s shares of common stock, a premium of approximately 69.8% to the 30-day volume-weighted average price of Knoll’s common stock, and an implied enterprise value for Knoll of approximately $1.91 billion. The term sheet also included additional terms that the Knoll Board considered to be especially important with respect to a potential transaction with Herman Miller, including: (i) the absence of a financing condition, (ii) mutual non-solicitation provisions that would be subject to customary “fiduciary out” exceptions, (iii) reciprocal match rights, (iv) a termination fee payable in certain circumstances by (A) Herman Miller in an amount equal to 2.5% of Herman Miller’s equity value at signing and (B) Knoll in an amount equal to 2.5% of Knoll’s implied deal equity value at signing, (v) a requirement for Herman Miller to pay Knoll an amount in cash equal to 1.0% of Herman Miller’s equity value at signing if the
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merger agreement were terminated as a result of a failure to obtain the requisite approval of Herman Miller’s stockholders, (vi) a requirement for Knoll to reimburse Herman Miller for expenses in an amount up to $5 million if the merger agreement were terminated as a result of a failure to obtain the requisite approval of Knoll’s stockholders and (vii) a requirement that two members of the Knoll Board join the Herman Miller Board at the time of closing of a transaction. The term sheet also indicated that the parties would sign a definitive agreement two weeks thereafter and that Investindustrial’s shares of preferred stock would be redeemed for cash, as previously indicated in Herman Miller’s proposal letters.
On March 5, 2021, the Herman Miller Subcommittee met, with members of Herman Miller management in attendance, to consider Knoll’s response and proposal as embodied in the March 2nd term sheet, and discuss potential next steps. Ms. Owen updated the members of the Subcommittee with respect to the recent discussions between Herman Miller and Knoll, including Mr. Harris’s statement that Knoll would be willing to move forward with discussions subject to an increased offer and a satisfactory response to the March 2nd term sheet. The members of Herman Miller management discussed with the members of the Herman Miller Subcommittee potential responses to Knoll, including financial analyses of a potential proposal range in response to Knoll’s proposal of $13.00 in cash and 0.35 shares of Herman Miller common stock per share of Knoll common stock. The members of the Herman Miller Subcommittee concluded in executive session that the Herman Miller Subcommittee would not support Herman Miller making a proposal that exceeded the terms of the February 1st proposal.
On March 8, 2021, a representative of Goldman Sachs contacted Mr. Harris and informed him that Herman Miller was unwilling to increase the economic terms of its proposal, but that Herman Miller generally agreed with the procedural framework and certain of the other non-economic terms proposed in the Knoll term sheet. The representative of Goldman Sachs also told Mr. Harris that Herman Miller believed its February 1st offer had become more valuable in light of recent increases in Herman Miller’s stock price.
On March 9, 2021, the members of the Knoll Board other than Mr. Ardagna convened a special meeting to discuss Mr. Harris’s conversation with the representative of Goldman Sachs, with members of Knoll senior management in attendance. At the meeting, Mr. Harris informed the Knoll Board that Herman Miller was unwilling to increase the economic terms of its proposal. A discussion ensued among the members of the Knoll Board regarding valuations, cost and revenue synergies, Knoll’s standalone options, Knoll’s office business and the current state of the workplace market as a whole, next steps and potential negotiating strategies. After further discussion, the Knoll Board directed Mr. Cogan to reach out to Ms. Owen to attempt to assess how far apart the parties were regarding the economic terms of a potential business combination and to indicate that the Knoll Board may be willing to consider economic terms that were between the February 1st terms proposed by Herman Miller and Knoll’s March 2nd counter-proposal.
On March 10, 2021, Mr. Cogan contacted Ms. Owen. After discussing conceptually what Mr. Cogan and Ms. Owen each believed was required to produce a successful value-creating transaction for both companies’ stockholders, Mr. Cogan conveyed to Ms. Owen the Knoll Board’s position that it may be willing to consider economic terms for a potential business combination that were between the February 1st terms proposed by Herman Miller and Knoll’s March 2nd counter-proposal.
On March 12, 2021, following discussions with members of the Herman Miller Subcommittee, Ms. Owen contacted Mr. Cogan by telephone to discuss the reaction of the Herman Miller Subcommittee, on behalf of the Herman Miller Board, to the conversation Ms. Owen and Mr. Cogan had on March 10th. Mr. Cogan promptly informed Mr. Harris of this conversation.
Later that day, Ms. Owen delivered a revised non-binding written proposal to Mr. Cogan. The revised proposal provided for $11.50 in cash and 0.33 shares of Herman Miller common stock per share of Knoll common stock, representing an implied value of $25.35 per Knoll share of common stock based on the closing share price of Herman Miller’s common stock on March 11, 2021, a premium of approximately 38.9% to the March 11, 2021 closing price of Knoll’s shares of common stock, a premium of approximately 54.1% to the 30-day volume-weighted average price of Knoll’s common stock, and an implied enterprise value for Knoll of approximately $1.82 billion.
Later that day, the members of the Knoll Board other than Mr. Ardagna convened a special meeting to discuss Herman Miller’s revised proposal, with members of Knoll senior management and representatives of Sullivan & Cromwell in attendance. During the meeting, Mr. Cogan updated the Knoll Board regarding his
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conversation with Ms. Owen and the revised written proposal received from Herman Miller. A discussion ensued among the members of the Knoll Board, with the consensus being that it would be in the best interests of Knoll and Knoll’s stockholders to move forward with negotiations with Herman Miller on the terms proposed. The Knoll Board instructed Mr. Cogan to contact Ms. Owen and convey the Knoll Board’s willingness to engage further on the expedited timeline previously suggested. The Knoll Board also discussed the timing and process for approaching Investindustrial, both to solicit whether Investindustrial might be interested in acquiring Knoll and, to the extent it was not, its willingness to support a potential business combination of Knoll and Herman Miller by entering into a voting agreement with Herman Miller. The Knoll Board also discussed the risks of a transaction agreement not being executed and the transaction not closing even if one were executed, the importance of retaining Knoll management and employees through the negotiation and closing of a transaction, and the importance of change-in-control, retention and severance provisions applicable to Knoll’s key employees. The Knoll Board then directed the Compensation Committee of the Knoll Board to consider the treatment of equity compensation awards and other retention and severance matters in the potential transaction and directed Knoll management to work with representatives of Sullivan & Cromwell to prepare a term sheet to be sent to Herman Miller setting out key proposals regarding the treatment of equity compensation awards and other change-in-control, retention and severance matters.
That evening, following the Knoll Board meeting, Mr. Cogan contacted Ms. Owen to convey that the Knoll Board was willing to move forward with discussions on the basis of Herman Miller’s March 12th proposal and on the expedited timeline previously suggested.
Over the following two days, representatives of Sullivan & Cromwell, at the direction of the Knoll Board, negotiated the terms of the mutual confidentiality agreement with representatives of Wachtell Lipton, which included a mutual “standstill” provision.
On March 13, 2021, Mr. Cogan sent a message to Ms. Owen regarding finalization of the confidentiality agreement, the importance to the Knoll Board of both sides getting aligned on the high level terms of a transaction beyond price before moving forward to negotiation of a definitive agreement, and the timing of exchanging due diligence request lists.
Also on March 13, 2021, Knoll management, at the direction of the Knoll Board, delivered to Herman Miller a term sheet setting out key compensation and benefits proposals that had been developed with representatives of Sullivan & Cromwell, including the treatment of equity compensation awards and other change-in-control, retention and severance matters in the potential transaction.
On March 14, 2021, Mr. Cogan and Ms. Owen spoke regarding finalizing the confidentiality agreement and timing of Herman Miller’s due diligence request list. Ms. Owen told Mr. Cogan that Herman Miller would send its due diligence request list to Knoll later that day and that she expected Herman Miller would be able to send Knoll and its representatives comments on the transaction term sheet by mid-week. Mr. Cogan reiterated to Ms. Owen that no confidential information would be shared until the parties were sufficiently aligned on the high level terms contained in both the transaction and compensation and benefits term sheets previously delivered to Herman Miller. The timeline for a transaction was discussed, with both Mr. Cogan and Ms. Owen agreeing that early to mid-April would be the desired timing for signing a definitive agreement. Mr. Cogan promptly informed Mr. Harris of this conversation.
Later that day, Herman Miller and Knoll executed the confidentiality agreement. Following execution of the confidentiality agreement, representatives of Wachtell Lipton sent a due diligence request list and a preliminary transaction timeline to representatives of Sullivan & Cromwell.
On March 16, 2021, the Herman Miller Subcommittee met, with members of Herman Miller management in attendance, to discuss the recent communications with Knoll and its representatives, the elements of the term sheets that had been delivered by Knoll, and discuss potential next steps, including with respect to negotiations with Knoll, the due diligence process, and future communications to the Herman Miller Board. Following discussion, the attendees aligned on a planned response to Knoll.
On March 16, 2021, Ms. Owen sent a message to Mr. Cogan indicating that Wachtell Lipton would shortly be delivering to Sullivan & Cromwell a revised draft of the transaction term sheet. Ms. Owen also indicated that
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she understood getting aligned on the terms of the treatment of equity compensation awards and other change-in-control, retention and severance matters in the potential transaction was important to the Knoll Board, and that it would be helpful if Mr. Cogan could provide further details regarding its proposed terms in the compensation and benefits term sheet.
Later that day, representatives of Wachtell Lipton delivered a revised transaction term sheet to representatives of Sullivan & Cromwell. The revised transaction term sheet indicated, among other things, that (i) Herman Miller expected Investindustrial to enter into a voting agreement, (ii) Herman Miller agreed to the absence of any financing condition, (iii) Herman Miller agreed to the inclusion of mutual non-solicitation provisions subject to customary “fiduciary out” exceptions, (iv) the amount of the termination fees payable in certain circumstances proposed by Herman Miller would be (A) in the case of a termination fee payable by Herman Miller, 3.5% of Herman Miller’s equity value at signing and (B) in the case of a termination fee payable by Knoll, 3.5% of Knoll’s implied deal equity value at signing, (v) there would be no fees payable by either party as a result of the failure by such party to obtain the required approval of such party’s stockholders in the absence of events relating to an alternative transaction that would trigger a termination fee, (vi) no Knoll directors would be added to the Herman Miller Board and (vii) the parties would seek to announce the transaction during the first week of April.
On March 17, 2021, the Compensation Committee of the Knoll Board convened a meeting, which was attended by members of Knoll senior management and representatives of Sullivan & Cromwell. At the meeting, the members of the Compensation Committee discussed Knoll’s current equity plans and the change-in-control provisions contained therein. There was a discussion regarding severance arrangements being considered and retention and incentive considerations associated with the potential treatment of equity incentive awards and existing severance arrangements. There was also a discussion regarding change-in-control severance arrangements applicable to Knoll’s peers, including Herman Miller, and the Compensation Committee’s desire to align severance with market benchmarks and Herman Miller practice.
Later that day, representatives of Sullivan & Cromwell and Wachtell Lipton discussed the revised transaction term sheet delivered by representatives of Wachtell Lipton on March 16th.
On March 18, 2021, representatives of Sullivan & Cromwell, at the direction of the Knoll Board, sent a counterproposal regarding certain terms contained in the transaction term sheet to representatives of Wachtell Lipton. In particular, the counterproposal provided that the termination fees payable in certain circumstances would be, in the case of a termination fee payable by Herman Miller, 2.8% of Herman Miller’s equity value at signing, and, in the case of a termination fee payable by Knoll, 2.8% of Knoll’s implied deal equity value at signing, and also that Herman Miller would be obligated to pay $20 million to Knoll in the event that Herman Miller failed to obtain the required approval of its stockholders.
Also on March 18, 2021, Mr. Cogan sent a message to Ms. Owen indicating that he understood the two sides were close to agreement on the term sheet.
Later that evening, the members of the Knoll Board other than Mr. Ardagna convened a special meeting, which was attended by members of senior management of Knoll and representatives of Sullivan & Cromwell and BofA Securities. At the outset of the meeting, Mr. Cogan briefly discussed Herman Miller’s recently reported quarterly financial results. Representatives of Sullivan & Cromwell then updated the Knoll Board on the status of negotiations with Herman Miller regarding the term sheets and that a confidentiality agreement had been negotiated and signed. Mr. Cogan then reviewed with the Knoll Board management’s five-year business plan for Knoll, including financial projections, which, after extensive discussion regarding the overall plan and individual segment portions of the plan, was unanimously approved and adopted by the Knoll Board (with Mr. Ardagna having recused himself). Representatives of BofA Securities then reviewed with the Knoll Board Herman Miller’s March 12th proposal, including various illustrative valuation metrics and a review of the evolution of the proposed transaction terms to date, and preliminary financial analyses of Knoll based on Knoll management’s five-year business plan, of Herman Miller based on street forecasts for Herman Miller, and of the combined company based on Knoll management’s five-year business plan and street forecasts for Herman Miller. The representatives of BofA Securities also reviewed with the Knoll Board other potentially interested acquirers and a detailed illustrative analysis of their respective ability to make a competitive proposal for an acquisition of Knoll. A discussion then ensued among the members of the Knoll Board regarding transaction timing, the other potentially interested acquirers discussed by the representatives of BofA Securities, and the pros and cons of
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soliciting such other potential acquirers, including the strategy for approaching Investindustrial. The Knoll Board directed Messrs. Harris and Cogan to reach out to Investindustrial the following week to inquire as to its interest in an acquisition of Knoll or, alternatively, its willingness to support the potential transaction with Herman Miller. The Knoll Board reconfirmed its previous determination that no other potential acquirers should be solicited because, in addition to the reasons previously discussed, the Knoll Board also believed there would be a post-signing opportunity for other potentially interested acquirers to approach Knoll given the “fiduciary out” provisions that the parties agreed to in the transaction term sheet.
Notwithstanding the few remaining open points in the term sheet, the Knoll Board determined to move forward with a mutual due diligence process.
On March 19, 2021, Mr. Cogan contacted Ms. Owen to discuss the Knoll Board’s need, as part of the mutual due diligence process, for a better understanding of the synergies Herman Miller anticipated to result from the potential transaction in order for the Knoll Board to better understand the economic terms proposed by Herman Miller on March 12th. Mr. Cogan and Ms. Owen agreed to arrange a teleconference among the senior management teams of Knoll and Herman Miller and representatives of BCG, Goldman Sachs and BofA Securities in order to facilitate the Knoll Board’s development of a better understanding of the synergies Herman Miller anticipated to result from the potential transaction.
Beginning the weekend of March 20 and 21, 2021, Herman Miller and Knoll made available to each other in virtual data rooms various documents for mutual due diligence review, including financial projections prepared by management of Knoll and Herman Miller, respectively. Management teams from each of Knoll and Herman Miller and the parties’ respective advisors reviewed the materials provided in the virtual data rooms and had a significant number of due diligence discussions on an ongoing basis. Knoll and Herman Miller and their respective legal advisors also analyzed the regulatory approvals that would be required in connection with the potential transaction.
On March 22, 2021, Messrs. Harris and Cogan spoke by telephone with representatives of Investindustrial to inform them that Knoll was evaluating a potential stock and cash transaction in which there would be expected to be significant synergies and that the Knoll Board (with Mr. Ardagna having recused himself) had unanimously determined to move forward with negotiating the terms of a definitive agreement. Messrs. Harris and Cogan did not identify Herman Miller or the specific price or other terms of the potential transaction. Messrs. Harris and Cogan also inquired as to Investindustrial’s interest in making a proposal to acquire Knoll.
On March 23, 2021, Mr. Harris again spoke with representatives of Investindustrial by telephone regarding Investindustrial’s interest in acquiring Knoll or, alternatively, its willingness to support the potential transaction currently being considered by the Knoll Board. The representatives of Investindustrial told Mr. Harris that it would be difficult to submit a bid competitive with the bid of a strategic industry player that would realize significant synergies as a result of the transaction, but that Investindustrial, as Knoll’s largest shareholder, would be supportive of the potential transaction being considered by the Knoll Board if it were consistent with Investindustrial’s view of Knoll’s fair value. The representatives of Investindustrial inquired as to the identity of the potential acquirer, but Mr. Harris indicated that Investindustrial would need to enter into a confidentiality agreement prior to more specific information being shared. Mr. Harris also indicated to the representatives of Investindustrial that Investindustrial’s entry into a voting agreement was a condition of the potential acquirer to entry into definitive agreements providing for the transaction.
Also on March 23, 2021, representatives of Goldman Sachs and BofA Securities had a discussion regarding the process for addressing outstanding priority due diligence requests of each party and desired timing regarding announcement of the potential transaction.
On March 24, 2021, the Compensation Committee of the Knoll Board convened a meeting, which was attended by members of Knoll senior management and representatives of Sullivan & Cromwell. At the meeting, the members of the Compensation Committee discussed the treatment of equity incentive awards and severance arrangements in connection with the potential transaction and the desire to keep the Knoll management team and other key employees in place through the closing of the potential transaction.
On March 25, 2021, representatives of Goldman Sachs and BofA Securities had a discussion regarding additional due diligence requests submitted by both parties and process and timing for exchanging materials responsive to such requests.
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Also on March 25, 2021, representatives of Sullivan & Cromwell and Wachtell Lipton had a preliminary discussion regarding the financing components of the potential transaction, including Herman Miller’s proposal that Knoll’s currently outstanding indebtedness would be paid off in connection with the potential transaction, Herman Miller’s proposed transaction debt financing and the anticipated capital structure of the combined company going forward.
On March 26, 2021, Knoll entered into a confidentiality agreement with Investindustrial in order to engage in more detailed discussions regarding Investindustrial’s potential interest in an acquisition of Knoll or, alternatively, its willingness to support the potential transaction being considered by the Knoll Board. Following entry into the confidentiality agreement and obtaining Herman Miller’s approval, Knoll disclosed Herman Miller’s identity and details regarding the proposed terms of the potential transaction to Investindustrial.
On the same day, as part of the ongoing due diligence effort, the senior management teams of Herman Miller and Knoll spoke, with representatives of Goldman Sachs and BofA Securities in attendance, to further discuss Knoll’s long-term business plan, a summary of which had previously been made available in Knoll’s virtual data room. Two days following the meeting, Knoll management, at the request of Herman Miller, made available in Knoll’s virtual data room a document containing a quarterly breakdown of Knoll’s actual financial results for fiscal year 2020 and quarterly forecasts for Knoll’s fiscal year 2021, the latter of which did not reflect an update to the Knoll five-year business plan previously adopted by the Knoll Board, but provided a view of recent business performance relative to the Knoll long-term business plan to provide Herman Miller with additional information in connection with Herman Miller’s ongoing due diligence review of Knoll. The quarterly forecasts provided by Knoll management indicated that Knoll’s sales for the first two fiscal quarters of 2021 were expected to be lower than projected in the Knoll five-year business plan previously adopted by the Knoll Board, but that Knoll was on track to meet or slightly outperform the Adjusted EBITDA projection for fiscal year 2021 contained in the Knoll five-year business plan.
On March 28, 2021, representatives of Goldman Sachs and BofA Securities had a follow-up discussion by telephone regarding the additional due diligence requests submitted by both parties and the anticipated timing for exchanging materials responsive to such requests.
On March 29, 2021, the senior management teams of Herman Miller and Knoll spoke, with representatives of Goldman Sachs and BofA Securities in attendance, to further discuss Herman Miller’s long-term business plan, a summary of which had also previously been made available in Herman Miller’s virtual data room.
Also on March 29, 2021, Herman Miller entered into a confidentiality agreement with Investindustrial in order to engage directly with Investindustrial regarding the treatment of Investindustrial’s shares of preferred stock in connection with a potential transaction with Knoll and the willingness of Investindustrial to enter into a voting agreement with Herman Miller to support the potential transaction.
On March 30, 2021, the executive committee of the Herman Miller Board met, with members of Herman Miller management and representatives of BCG in attendance. The attendees reviewed the status of discussions with Knoll, including the progress of the due diligence effort, status of draft transaction agreements, and potential strategies for engagement with Investindustrial with respect to the voting commitment and the treatment of its shares of Knoll preferred stock in a potential transaction. In addition, the attendees discussed the compensation-related proposals that had been made by Knoll, and agreed on a responsive counterproposal to be made to Knoll.
Also on March 30, 2021, representatives of Sullivan & Cromwell and BofA Securities and members of Knoll senior management discussed the merits and feasibility of structuring the potential merger in order to provide for tax-free treatment of the stock portion of the merger consideration. During the meeting, Knoll management requested that BofA Securities conduct an analysis regarding the Knoll stockholder base and the cost basis of the shares held by Knoll’s stockholders in order to provide a view to Knoll management as to whether structuring the potential transaction in this way would provide material, incremental value to Knoll stockholders.
Also on March 30, 2021, representatives of Sullivan & Cromwell and Wachtell Lipton discussed Herman Miller’s feedback on the key proposals contained in the compensation and benefits term sheet initially delivered by representatives of Sullivan & Cromwell on March 13th.
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On March 31, 2021, the senior management teams of Herman Miller and Knoll spoke with representatives of BCG, with representatives of Goldman Sachs and BofA Securities also in attendance, to discuss Herman Miller’s and Knoll’s cost structures and business initiatives in order for BCG to continue developing its existing synergies analysis.
On April 1, 2021, following introductions by Mr. Cogan, a representative of Goldman Sachs spoke with a representative of Investindustrial in order to begin direct discussions between the advisors to Herman Miller and Investindustrial regarding the treatment of Investindustrial’s shares of Knoll preferred stock in connection with the potential transaction and the willingness of Investindustrial to enter into a voting agreement with Herman Miller to support the transaction. The representatives of Investindustrial and Goldman Sachs discussed the currently proposed transaction consideration, with the representative of Goldman Sachs conveying Herman Miller’s strong view that any consideration to be paid for the Knoll preferred stock would need to be fixed at signing, and that Herman Miller was unwilling to enter into a transaction in which Investindustrial either retained flexibility to decide to convert its Knoll preferred stock into Knoll common stock or would receive cash consideration in an amount that could vary between signing and closing. In addition, the representative of Goldman Sachs stressed the importance to Herman Miller of maintaining an appropriate mix of cash and stock consideration in the overall transaction, taking into account both the consideration to the Knoll common stock and to the Knoll preferred stock.
Also on April 1, 2021, representatives of Wachtell Lipton provided an initial draft of the merger agreement to representatives of Sullivan & Cromwell that was generally consistent with the terms contained in the term sheets. The draft merger agreement delivered by Wachtell Lipton included a marketing period for Herman Miller to be able to obtain and syndicate debt financing. The initial draft of the merger agreement also contemplated that Herman Miller would enter into a voting agreement with Investindustrial and structured the transaction as a taxable reverse triangular merger. The draft merger agreement did not include proposed figures for termination fees or the payment to be made by each party to the other if the requisite approval of its stockholders were not obtained. The draft merger agreement also included feedback on Knoll’s key compensation and benefits proposals consistent with prior discussions between representatives of Sullivan & Cromwell and Wachtell Lipton. From this point until the merger agreement was finalized, the parties negotiated the terms of the merger agreement, including with respect to the items described in this paragraph, consistent with the authorizations and parameters provided by the Knoll Board and Herman Miller Board.
Also on April 1, 2021, a representative of Goldman Sachs spoke with a representative of Investindustrial regarding the potential transaction. The representative of Investindustrial indicated Investindustrial’s reluctance to commit to a voting and support arrangement, despite believing that the deal was generally attractive to Knoll stockholders, and indicating that Investindustrial’s preference would be to receive Herman Miller capital stock (potentially in the form of a newly issued preferred instrument) in exchange for their Knoll investment. The representative of Goldman Sachs communicated Herman Miller’s strong view that unanimous support from the Knoll Board, and the support of Investindustrial in its capacity as a Knoll stockholder, was a prerequisite to entry into any transaction. Further, the representative of Goldman Sachs communicated that Herman Miller was very focused on limiting the dilution to existing Herman Miller shareholders by maintaining the overall mix of cash and stock consideration in the transaction, which had been modeled assuming that the Knoll preferred stock would be receiving cash consideration, and that any change in that assumption would require an adjustment to the merger consideration being offered to holders of Knoll common stock. The parties agreed to consider their discussions at a later date.
From April 1, 2021 until the execution of the merger agreement on April 19, 2021, the parties and their respective legal and financial advisors exchanged numerous drafts of, and engaged in numerous discussions and negotiations concerning the terms of, the merger agreement. Significant areas of discussion and negotiation included the scope and degree of reciprocity of the representations, warranties and covenants, including the interim operating restrictions and the “no shop” provisions, the terms governing Herman Miller’s proposed debt financing process, including whether the merger agreement would provide for a marketing period or an “inside date” concept (and if an inside date, the appropriate date), provisions relating to the regulatory approval process and associated conditions to closing the transaction, and the circumstances under which either party would be permitted to terminate the merger agreement and the termination-related fees payable in connection therewith. Documentary and other due diligence, including legal due diligence discussions, by both parties also continued in parallel with the negotiation of the transaction documentation.
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On April 2, 2021, as previously agreed, the senior management teams of Herman Miller and Knoll spoke with representatives of BCG, with representatives of Goldman Sachs and BofA Securities also in attendance, to review in detail BCG’s cost synergies analysis.
Later that day, as a follow-up meeting to the March 26th session, the senior management teams of Herman Miller and Knoll spoke, with representatives of Goldman Sachs, BCG and BofA Securities in attendance, to further discuss Knoll’s business plan and financial projections as part of the ongoing due diligence effort.
On April 5, 2021, representatives of Sullivan & Cromwell and Wachtell Lipton discussed the terms of the merger agreement and their respective clients’ areas of focus. A representative from Wachtell Lipton reaffirmed Herman Miller’s continued belief that the previously expressed timing was achievable, and also provided an update regarding Herman Miller’s ongoing discussions with Investindustrial.
Also on April 5, 2021, a representative of Lazard Ltd. (“Lazard”), financial advisor to Investindustrial, spoke with a representative of Goldman Sachs regarding Investindustrial’s desire to have the ability to convert their ownership of Knoll capital stock into Herman Miller preferred stock (in whole or in part) in connection with a potential acquisition of Knoll by Herman Miller, and the suggestion that the merger consideration to be paid to holders of Knoll common stock could be adjusted in order to maintain the overall mix of cash and Herman Miller stock to be paid by Herman Miller for a 100% acquisition of Knoll. The representative of Lazard indicated that it was not consistent with Investindustrial’s business model to own significant amounts of common stock in a company at which it did not have any board representation or management influence, and accordingly that Investindustrial would not be interested in receiving the contemplated mix of merger consideration. The representative of Goldman Sachs informed the representative of Lazard that Herman Miller was unlikely to find such a proposal acceptable, given the anticipated terms of a preferred stock instrument and Herman Miller’s other options to raise capital, and expressed reservations that Knoll would agree to any adjustment to the overall merger consideration as suggested by Lazard. The parties agreed to speak again.
Later that day, the members of the Knoll Board other than Mr. Ardagna convened a special meeting, with Knoll senior management and representatives of Sullivan & Cromwell and BofA Securities in attendance. Mr. Cogan updated the Knoll Board on the status of discussions with H